Highest spike in private property prices since 2014

Private home prices jumped to the highest in four years, based on flash estimates from the Urban Redevelopment Authority (URA) released on Monday (July 2).

URA data showed that prices went up 3.4 per cent between April and June, following a 3.9 per cent increase in the previous quarter.

Overall, the private residential property index increased 4.9 points from 144.1 points in the first quarter to 149 points in the second quarter. This is the highest since the second quarter of 2014, when the index was 149.7 points.

Prices of non-landed private residential properties in the Rest of Central Region (RCR) led the way — increasing by 5.7 per cent in the second quarter, compared to 1.2 per cent in the previous quarter. Over the same period, price increases slowed down in the Core Central Region (CCR) and the Outside Central Region.

Prices in CCR rose 1.4 per cent in CCR, compared to 5.5 per cent in the previous quarter while those in OCR increased by 2.9 per cent, following a 5.6 per cent spike between January and March.

The flash estimates are compiled based on transaction prices given in contracts submitted for stamp duty payment, and data on units sold by developers up till mid-June. The statistics will be updated on July 27.

Ms Christine Li, senior director of research at Cushman & Wakefield Singapore, noted that prices are now only 3.6 per cent below the last peak in 2013. “The sentiment is inching us towards another peak. Singapore property prices are likely to recover to the 2013 peak levels in one or two quarters,” she said.

She added that the strong recovery in the residential prices could be attributed to the strong liquidity in the market, with sellers who sold their units during the en bloc frenzy entering the market. “The recycling of capital is pushing up the prices now,” Ms Li added.

Although private home prices are approaching peak levels on a per square foot basis, analysts felt that it is premature for Government intervention.

Noting that several cooling measures as well as the Total Debt Servicing Ratio rules remain in place, Ms Li said the higher prices at property launches “may also lower affordability and slow the pace of take-up”. She added: “The impact of an increase in interest rates has also have substantial impact on affordability.”

Ms Tricia Song, who heads research at Colliers International, reiterated that there is “little need” for new cooling measures. Among other things, property developers are offering smaller-sized units to maintain price levels, she noted.

Since 2011, a few rounds of cooling measures have been introduced, although some were rolled back in 2016.

Mr Desmond Sim, head of research for Singapore and Southeast Asia at CBRE, said the main reasons for the measures were to ensure that home buyers were not biting off more than they can chew.

He added that developers are currently selling most residential units for S$1 million or lower, and this is within reach of first-time home buyers.

The analysts also pointed out that the market could correct itself, rendering it unnecessary for the Government to intervene. With the surge in en bloc sales over the past two years, new projects by developers would increase the supply of private residential units in the market, which would in turn put some pressure on prices.

Nevertheless, analysts are expecting prices to continue rising for the second half of this year, on the back of an improving economy among other factors.

Ms Song said she has revised her 2018 forecast for private home prices to increase by 12 per cent, up from an initial forecast of 8 per cent. Other analysts were more bullish, with Mr Sim expecting prices to increase by 12 to 15 per cent for the year and Century 21 executive director C S Chong predicting prices to go up by slightly above 15 per cent.

Source: Today – 2 Jul 2018

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