Singapore home prices rise at slower pace in first quarter

Prices of HDB resale flats rose 3.4 percent in the January to March period over the previous three months, according to flash estimates released by the HDB. The increase was lower than the 5.7 percent pace in the fourth quarter.

The slower rise in resale flat prices comes as no surprise to industry watchers who attribute it to the cautious sentiment in the overall property market.

They say buyers are not willing to fork out high cash over valuation, in view of the additional supply of flats in the pipeline.

So going by the current market sentiments, property agents say a 10 percent price increase for HDB resale flats this year is unlikely. Prices for HDB resale flats rose 17.5 percent last year.

But the showing for the first quarter isn’t bad, say property agents.

Ku Swee Yong, Savills’ director for international marketing, said: “Year on year, it (Q1 2008 Resale Price Index) is still up about 21 points, which is about 20% growth… that’s pretty strong. Buyers are still willing to pay above S$10,000 cash over valuation. That also represents very solid real demand…”

The slowdown in price increases in the private residential sector is also more noticeable in the first quarter this year. Prices rose 4.2 percent, compared to 6.8 percent in the last quarter.

The dip in private home price gains is the biggest quarterly drop in more than seven years since the third quarter of 2000 when prices fell by over 4 percent.

Market watchers say thin sales volumes in the quarter and developers’ resistance to cutting prices may have helped sustain the price increases.

Cushman & Wakefield’s Donald Han said: “It’s quite encouraging on the basis that we had very low volume in terms of transaction numbers for the first quarter, something like over 800 units were transacted in the first quarter compared to the average of 3,000 to 4,000 sold in 2007 on a per quarter basis.”

The slowdown in price gains was seen across all districts in Singapore, covering the high-end as well as the mass market segments.

According to the URA, prices of non-landed private residential properties increased by 4.4% on quarter in the core central region in the first quarter, slower than a 7.5% increase in the previous three months.

Prices of properties in the rest of the central region increased by 3.9% in the quarter, compared with a 7.7% increase in the previous period. Outside the central region, prices increased by 4.8%, slower than a 7% rise previously.

Analysts expect transaction volume of residential properties to be thin for the next three to six months and price increases to be moderate in the next quarter.

Donald Han, managing director of Cushman & Wakefield (Singapore), forecasts a 3% to 4% rise in the next quarter.

He expects the property market to be active again, probably towards the later half of this year when stability returns to the credit crunch market.

On the rental market, analysts say it will continue to perform well in view of the large influx of foreign workers to be expected in Singapore when the two integrated resorts are ready in the next two years. – CNA/ir

Source : Channel NewsAsia – 1 Apr 2008