Uptick in 3Q2017 private home prices suggests market has bottomed

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October 27, 2017 3:00 PM SGT
Prices in the private residential market rose 0.7% q-o-q in 3Q2017, compared to a 0.1% decline in 2Q2017, according to data released by URA. “Even though the rise was modest, it ended a long 15 quarters of price decline,” notes Nicholas Mak, executive director of ZACD Group.
According to Lee Nai Jia, head of research at Edmund Tie & Co. (ET&Co), “the uptick in prices suggests that the market has bottomed out. The private residential market is likely to trend upwards unless there are external shocks or new shifts in policies that disrupt the market.”
Prices of non-landed properties in the CCR rose 0.1% q-o-q in 3Q2017, compared to a 0.5% decline in 2Q2017, which was “still relatively weak among the three market segments,” says Mak.
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Price growth in Rest of Central Region (RCR) was the most robust among the three market segments. It has expanded for three consecutive quarters, with 1.4% growth in total in the first nine months of 2017.
In the Outside Central Region (OCR), prices fell 0.3% in 2Q2017 and rose 0.8% in 3Q2017.
Take-up of private residential units exceeded launches in 3Q2017, with 1,183 units launched by developers and 2,663 units sold.
“The total number of unsold private residential units in the pipeline is only 16,031 units, which is low compared to the inventory in 2015,” notes ET&Co’s Lee. “The private residential market is likely to trend upwards unless there are external shocks or new shifts in policies that disrupt the market.”
There are 9,300 units in the pipeline from awarded en-bloc sites and another 7,400 units from GLS sites. The bulk of the supply will enter the market over the next two years. “However, the impact of supply tends to be lagged, and it should have marginal impact on prices in 2018,” says Lee.
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Rents for private residential properties remained unchanged in 3Q2017, compared to a 0.2% decline in 2Q2017. Landed properties saw rents rising 0.6% in 3Q2017 while rents for non-landed properties slipped 0.1%, following a 0.2% decline in 2Q2017. “The rate of decline has slowed down from 0.7% in 1Q2017,” notes ZACD’s Mak.
The vacancy rate of all private residential properties increased from 8.1% in 2Q2017 to 8.4% in 3Q2017. However, this is not at an “alarming level,” says Mak. The highest vacancy rate was 9.7% in 3Q1998, during the Asian Financial Crisis, recounts Mak.
Separately, HDB released data for the HDB resale market, which continued to weaken in 3Q2017 with a 0.7% decline.
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Prices of older HDB flats continued to ease, notes ET&Co’s Lee. Many of the owners of older HDB flats are seeking to sell their homes, as there are concerns that the value will continue to depreciate, according to Lee. Among buyers, the interest for older homes has also dipped, he adds.
“However, prices of newer HDB flats in prime estates, especially those with more than 90 years remaining on their lease continued to be supported,” says Lee. “We forecast HDB prices to fall by 1% to 1.5% for the whole of 2017.”
Lee expects the HDB market to improve in 2018, driven by a spill-over effect from the en bloc fever as some families downsize to a HDB flat. “This will also start another wave of purchases from HDB upgraders,” he adds.
HDB will offer about 4,800 Build-To-Order (BTO) flats in Geylang, Punggol, Sengkang and Tampines in the upcoming November 2017 exercise. This will bring the total BTO flat supply for 2017 to about 17,500 units. There will also be a concurrent Sale of Balance Flats exercise.