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Explainer: What could be driving private home prices to an estimated five-year high?

SINGAPORE — Despite talk of a possible recession and the global economic uncertainty, private property prices in Singapore have hit a five-year high. This is based on second quarter flash estimates published on Monday (July 1) by the Urban Redevelopment Authority (URA).

The Urban Redevelopment Authority's private property price index now stands at its highest level since the first quarter of 2014.

The Urban Redevelopment Authority's private property price index now stands at its highest level since the first quarter of 2014.

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SINGAPORE — Despite talk of a possible recession and the global economic uncertainty, private property prices in Singapore have hit a five-year high.

This is based on second quarter flash estimates published on Monday (July 1) by the Urban Redevelopment Authority (URA).

The jump follows two straight quarters of falling prices. Industry analysts attribute the rise to factors such as large sums of en-bloc sale money filtering into the market, and Singapore’s reputation as a safe haven in troubled times pulling in some foreign investment money.

Overall, the URA’s private residential property index rose 1.3 per cent — from 148.6 points in the first three months of the year to 150.5 points in the April-to-June period. The index fell 0.7 per cent in the first quarter.

The index recorded falls in the previous two consecutive quarters as last July’s property market cooling measures began to bite.

The URA index now stands at its highest level since the first quarter of 2014, when it was 151.3 points. 

The flash estimates cover transactions up until mid-June. Final figures for the second quarter will be published later this month.

Beyond the headline figures, however, some property analysts said that the rebound should be no surprise. This is even though Singapore’s economic growth — a fundamental factor underpinning property prices — is expected to weaken in the coming months.


One reason for the rise is that the massive amount of money landing in sellers’ pockets from successful collective sales last year has yet to “fully manifest itself in the market”, one analyst said.

Mr Colin Tan, director of research consultancy at Suntec Real Estate Consultants, added: “Over a billion dollars in sales from collective sales. One must ask where did all the money go? At least half of the beneficiaries need replacement homes.” 

Mr Tan highlighted that the rental of private residential properties increased by 1 per cent in the first quarter, in part due to collective sale beneficiaries.

The latest trend may indicate that these tenants are now entering the market as buyers, he said.

Mr Alan Cheong, executive director of research and consultancy at real estate service provider Savills, also said that the “weight of money” from those who benefited from collective sales could not be ignored.


Several analysts said that while last July’s cooling measures dampened demand, developers needed to launch new private projects at above-market valuations as their break-even prices are higher, especially if they bought land at high prices in 2017 and 2018.

This, in turn, drove up the prices of non-landed transactions in the neighbourhoods of those new projects, they added.

ERA Realty’s key executive officer Eugene Lim noted that the cooling measures included a 5 per cent non-remissible Additional Buyer’s Stamp Duty. This effectively increased the price of residential development land by at least 5 per cent, he said.

Mr Cheong said he would expect a “see-saw” in the URA price index in the next few quarters, with a "positive upside bias".

“Only when developers have fully launched their projects derived from collective sales’ sites will we see prices go sideways,” he added, predicting that this is likely to happen some time in the second quarter of 2020.


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Ms Christine Li, head of Singapore and South-east Asia research at real estate services firm Cushman and Wakefield, also said that developers have “no leeway” to price their new projects lower because they paid high costs for the land during the property boom in 2017 and 2018.

As buyers are still willing to pay at current prices, sales momentum in the primary market has kept up, she pointed out.

Ms Li noted that 12 units at the Orchard Road area’s 3 Cuscaden condominium continued to sell at a median price of S$3,568 psf in May — a dizzying price level not seen in recent years. Some 60 per cent of units in the project were sold despite having launched only last November, she added.


Some analysts argued that Singapore’s status as a safe haven may have resulted in some foreign funds being rerouted here in the form of property investments.

This would help to explain why the price recovery was led by price increases in the prime districts and city fringe, they said.

Monday’s flash estimates showed that prices of non-landed properties located just outside the core central region shot up by 3 per cent, while prices of these units in the core central region went up by 1.5 per cent.

Ms Li said this shows that investors and buyers “are still positive on the long-term prospects of the residential market, and take the short-term volatility in their stride”. They look at how Singapore continues to rank among the the most liveable cities among the top international financial hubs around the globe, she added.

Still, Mr Cheong said that the increase in the price index was mostly driven by domestic buying.

He said that even if Singapore enters a recession, Singaporeans would turn to investing in “hard assets” such as property. This applied especially to middle-aged buyers and baby boomers who are “jaded” with traditional investments such as equity and bonds that had proved disappointing in both performance and capital preservation.

“In the worst-case scenario, they still own it even if (the property) remains unoccupied,” he said.


Another factor is market expectations of an interest rate cut by the United States Federal Reserve (Fed) this year, which would prop up prices, analysts said.

Singapore mortgage rates generally follow the trend of US Fed rates.

Ms Li said that some prospective buyers had deferred their purchases because mortgage rates have shot up quite aggressively in the last few quarters.

However, with the latest signals from the Fed that interest rates might go down later this year, property buyers are now ready to commit in a low-interest-rate environment, she pointed out.

“Property investment is always seen to be a hedge against inflation,” Ms Li said.


To put things in context, it is worth noting that last quarter’s price increase is more subdued than the 3.9 per cent and 3.4 per cent jumps seen in the first and second quarters of 2018 respectively.

Those hefty rises came on the back of two modest price increases of 0.7 and 0.8 per cent seen in the second half of 2017, after the market saw 15 consecutive quarters of price drops that bottomed out in the second quarter of 2017.

Last July’s cooling measures brought the exuberance down, with a 0.5 per cent rise, in the third quarter of last year, before prices started dropping by a total of 0.8 per cent in the next six months.


The price increase for the full year of 2018 was 7.9 per cent. At the start of 2019, analysts had generally predicted a year-on-year price increase of between 1 per cent and 3 per cent, in line with economic growth.

The net price increase of 0.6 per cent already seen in the first half of this year puts the projection on track, they noted.

For the whole of 2019, Mr Lim expects prices to rise by between 1.5 per cent and 2.5 per cent from last year. 

While faced with high land and construction costs, most developers still adopt a “practical approach”, pricing their new launches at realistic prices as they look to gain the sales momentum needed to sell more units, he said.  Similarly, PropNex Realty chief executive officer Ismail Gafoor is expecting a 2 per cent increase in prices for the full year. 

Some analysts believed that prices will remain relatively stable, including Mr Desmond Sim, head of South-east Asia research at CBRE, who noted that downward pressure on private home prices could come in the mid- to long-term as more launches come onstream. Also, developers would at some point be compelled to slash prices as they race to sell all units within five years of being awarded a site, Mr Sim said. 

Ms Tricia Song, head of Singapore research for Colliers International, said prices would likely remain flat in the next two quarters, and rise by 1 per cent for the whole of 2019. 

Mr Cheong, however, predicted that prices could rise by as much as 8 per cent year-on-year, largely owing to the push factor of land costs. He said the rise would not be a result of a herd mentality or developers profiteering.


CORRECTION: An earlier version of this story stated that the second half of 2017 saw price increases of 1 and 1.1 per cent. This is incorrect. The actual figures are 0.7 and 0.8 per cent. We are sorry for the errors.

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