Private home prices recovered to hit a new high in the second quarter, rising on the back of an increase in the prices of resale units rather than those at developer sales, a permutation that helps to allay concerns over the sustainability of the market.
According to the Urban Redevelopment Authority’s (URA) flash estimates, overall private residential property prices rose by 0.4 per cent in the second quarter, rebounding from the 0.1-per-cent decline in the previous three months.
The revival in resale activity that began in March extended well into May. According to the Singapore Residential Property Index published by the National University of Singapore, prices of resale properties rose 0.7 per cent in April and another 1.5 per cent in May. Thus, prices of non-landed completed units are likely to register at least a 2-per-cent price increase when the URA publishes the final second-quarter price index at the end of this month.
In previous quarters, developer sales led the overall price rally, and indeed, buoyant new home sales in the first quarter had seen some record prices set in the Outside Central Region. The overall price increase in the second quarter has thus assumed a different permutation and helps to ease concerns over sustainability in the context of high residential prices.
Home buyers at developer sales are mainly those who have limited financing capability while resale purchasers often have more robust finances. Hence, there is less concern over whether buyers who committed to the increased prices are behaving rationally. The resale price appreciation has also allowed some owners to cash out on their profitable property purchases.
In the second half of the year, overall prices of private homes are likely to be fairly stable. The dichotomy in prices may persist between resale and developer sales, where the latter will see little or no price increase, probably due to competitive pricing. But resale properties may continue to garner interest as the price gap between resale and developer sales, now about 15 per cent, is too pronounced.
By Ong Kah Seng – Director at R’ST Research, an independent property market research company in Singapore.