Q2 home prices show signs of bottoming out

EARLY signs of a bottoming-out in the private residential market surfaced in official quarterly data on Friday, indicating that the declines in the prices of private non-landed homes have eased, and HDB resale prices stayed flat in the second quarter.

A rebound in resale transactions may also be setting the stage for prices to stabilise, market watchers say. But a convincing price recovery is unlikely to take place yet, given pockets of weakness in the market.

JLL national director of research and consultancy Ong Teck Hui said: “With improvements in transaction volumes and prices of different market segments showing a mix of mild increases or decreases generally, the private home sales market appears headed towards a bottoming in the next few quarters, provided sentiment remains positive and barring major external shocks.”

Data from the Urban Redevelopment Authority (URA) showed a more moderate price fall of 0.4 per cent for private residential units, compared to the 0.7 per cent decline a quarter ago.

The continued decline, now into the 11th straight quarter, was mainly dragged by landed homes, which slipped a further 1.5 per cent quarter on quarter after a 1.1 per cent decline in the preceding quarter.

But prices of non-landed properties fell by a smaller 0.1 per cent in the second quarter after a 0.6 per cent drop in the previous quarter. The moderating price decline in private non-landed homes came on the back of a quarter-on-quarter rise in property prices in the prime and city-fringe areas.

Non-landed home prices in the Core Central Region (CCR) rose 0.3 per cent, after a 0.3 per cent rise in the first quarter. Prices in the Rest of Central Region (RCR) rose by 0.2 per cent after being flat in the first quarter. But prices in the Outside Central Region (OCR) dipped 0.5 per cent compared to the 1.3 per cent fall in the first quarter.

In the public housing market, resale prices of HDB flats were unchanged in the second quarter compared to the first, said the Housing & Development Board.

Resale transactions increased by 31.2 per cent from the first quarter to 5,838 cases in the second quarter. HDB does not have an index to track HDB rents.

The rise in private housing transactions came amid rising vacancies and softening rents.

Vacancy rates of private residential units inched up 1.4 percentage points in the quarter to 8.9 per cent, the highest since the 9.1 per cent recorded in the second quarter of 2000. Rents dipped 0.6 per cent during the quarter, from the 1.3 per cent drop in Q1 2016.

For non-landed private homes, the vacancy rate rose 1.7 percentage points in the quarter to 10.4 per cent. Rents of such homes dropped 0.4 per cent in the second quarter, after a 1.2 per cent drop in the first quarter.

Despite a moderated decline in rents, analysts are not expecting an improvement in the leasing market, because supply far outweighs the pool of tenants.

Yet, buyers may be piling into real estate amid greater uncertainties in the financial markets.

Savills Singapore research head Alan Cheong said: “There is physical evidence that many condominiums are empty, and yet there are still people are buying into it. They are moving from the yield standpoint to having more faith in the brick and mortar.”

A total of 4,550 private residential homes were transacted in the second quarter, up 10.9 per cent from the corresponding period last year.

Developers sold 2,256 private homes in the second quarter, a 6.6 per cent increase from a year ago. From January to June, they sold 3,675 units, 7.2 per cent more than in the first half of last year, URA data shows.

There were 2,140 resale transactions during the quarter, 17.1 per cent more than a year ago. JLL noted that this was the highest in resale transactions, before the total debt servicing ratio (TDSR) was imposed, pointing to a marked improvement in sentiment among buyers.

In the CCR, resales of private homes jumped 33.7 per cent from a year ago to 599 units. Sales in delicensed projects such as OUE Twin Peaks and Ardmore Three also contributed to resales in this region, since delicensed projects fall under resales in URA’s terminology.

If sentiment remains positive and sales volume continues to improve in the second half, total developers’ sales for 2016 is likely to exceed the 7,440 units in 2015; a figure closer to 8,000 units may be possible, going by JLL’s projections.

As at the end of the second quarter, there were 47,250 uncompleted private homes with planning approvals (the Q1 figure was 53,512 units) in the project supply pipeline, of which 45 per cent or 21,489 remained unsold.

According to URA, this is a historical low since 2001.

There are another 11,554 uncompleted EC units in the supply pipeline, of which 5,471 units remained unsold.

Citing an improvement in sentiment in the primary sales market, OrangeTee analysts said: “We believe that there is ample liquidity accumulating on the sideline. With no changes to cooling measures in sight and the market experiencing waiting fatigue, the ‘pent-up’ liquidity may continue to seep into the market.”

Such an environment bodes well for developers gearing up for launches in the second half of this year.

MCL Land opens sales of its Lake Grande condo today at an average price of S$1,350 psf. EL Development plans to launch Parc Riviera, a 752-unit condo along West Coast Vale, in September at around S$1,250 psf on average, said its managing director Lim Yew Soon.

Around August or September, HY Realty is expected to launch the 736-unit Queens Peak at Dundee Road; MCC Land is slated to launch The Alps Residences, which will house 626 units, in Tampines in the fourth quarter.

Next Saturday, OUE will release 93 units in Tower 1 of OUE Twin Peaks for sale at above S$2,400 psf. CDL, which has sold 30 units at Gramercy Park for an average S$2,600 psf, is slated to launch another of its developments in Lorong Lew Lian in the second half of this year.

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