Private home prices in steepest fall since 2009

SINGAPORE — Private home prices in the Republic fell at their fastest pace in seven years in the third quarter, as weak investor sentiment, a slowing economy and continued enforcement of cooling measures added further pressure on the property market.

With little respite seen for private home prices, which have now declined for 12 consecutive quarters, analysts said bargain hunters sitting on the sidelines could come into the market, potentially bumping up transaction volumes. 

The private residential property index fell 1.5 per cent in the July to September period from the previous quarter, according to a flash estimate by the Urban Redevelopment Authority (URA) on Monday (Oct 3), accelerating from the second quarter’s 0.4 per cent decline. The latest drop was also the steepest quarterly decline since prices plunged 4.7 per cent in the second quarter of 2009.

Since the peak in the third quarter of 2013, private home prices have dropped 10.8 per cent.

“The market is finally feeling the brunt of the economic slowdown as well as the downward pressure from the supply spike in 2015-2017,” said Ms Christine Li, director of research at Cushman & Wakefield. 

Coupled with a subdued rental market, existing home owners with weaker holding power could let go of their properties at a lower prices, continuing to weigh on the market over the next few quarters, she added. 

“(This) presents a good opportunity for buyers in such a climate as those who have stayed on the sidelines are ready to come into the market.”

The latest price decline was led by the city centre, or Core Central Region (CCR), where prices fell 1.8 per cent, reversing a 0.3 per cent increase in the previous quarter. 

Home prices in the Rest of Central Region (RCR), or city fringes, declined 1.3 per cent after rising 0.2 per cent in the previous quarter, while those in the Outside Central Region (OCR), or suburbs, fell by 1.2 per cent, extending the second quarter’s 0.5 per cent decline. 

This decline came after prices surged more than 60 per cent after the global financial crisis in 2009, which prompted the Government to implement repeated rounds of cooling measures and loan restrictions. 

The Government has repeatedly said that it is too early to lift the measures, despite calls from developers and agents to do so.

The third quarter price drop was also partly attributed to a tweak in the methodology URA uses to compute its private-property price indices. 

URA announced last month it would begin including the net prices of delicensed projects in the property price index data, instead of their overall transacted price, which may include discounts and other incentives given by developers to buyers.

Delicensed developments are those that have completed construction, obtained their Certificates of Statutory Completion and issued individual strata titles to buyers. 

As developers of those projects were previously not mandated to submit sales data with the breakdown of incentives such as rebates and vouchers, prices previously collated by the URA to calculate its quarterly indices could have been inflated.

“In the current market, such a change could result in a one-off larger than normal decline in the price index,” said Mr Nicholas Mak, head of research and consultancy at SLP International Property Consultants. 

“As most delicensed projects which offer incentives and discounts are located in the Core Central Region and some in the Rest of Central Region, this has contributed to the relatively sharper fall in prices of non-landed properties in the Core Central Region prices,” he said.

Going forward, analysts expect private home prices to continue to decline, bringing the overall drop for 2016 to about 2 to 4 per cent. 

“There seems to be little respite for the private residential property market at least in the short term. This is due to the continued enforcement of the property measures and a large oncoming supply of homes … Developers will continue to adjust launch prices to match the current inertia in the market, but will not drop prices too much due to the high price in which they have secured the land,” said PropNex Realty CEO Ismail Gafoor.

“Similarly, resale prices will take cue from the primary market in a bid to attract buyers.”