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Full-year forecasts double after 3.1% jump in Q1 home prices

03 Apr, 2018

THE 3.1 per cent quarter-on-quarter increase in the Urban Redevelopment Authority's private home price index based on its first quarter flash estimate has shocked most property consultants, who were expecting a rise of 1 to 2 per cent.

The rise is the steepest quarter-on-quarter hike since Q2 2010, when the index rose 5.3 per cent.

A check by The Business Times among seven property consultants on Monday found that they have raised their forecasts for the whole of this year; where they had previously predicted a rise of between 3 and 8 per cent in the benchmark property price index, they now peg their forecasts for a rise of between 7 and 15 per cent.

The upward charge in URA's price index came from both developers' sales and secondary market deals. The bullish land prices paid by developers over the past 15 months or so have been used as a basis for higher asking prices by both individuals selling their homes on the resale market, as well as developers.

And buyers who have been waiting on the sidelines have been quick to commit - for fear of being priced out amid prices rising even further.

Some market insiders say the final Q1 private home price data, which URA will release on April 27, could show an even bigger jump than the 3.1 per cent clocked in the flash estimate.

This is because the flash estimates are compiled based on transactions data only up to mid-March.

In the weekend of March 24, City Developments moved 315 units at its 99-year leasehold The Tapestry condo in Tampines Avenue 10 at an average price of S$1,310 per sq ft (psf) - significantly higher than that for units in nearby projects sold last year.

The jump in the Q1 2018 index was much bigger than the gains of 0.8 per cent in the fourth quarter of 2017 and 0.7 per cent in Q3; the index had bottomed in the second quarter of last year.

URA's flash estimates data also showed that prices of non-landed private homes island wide rose 3.4 per cent quarter on quarter in Q1 2018, a much bigger increase than the 0.8 per cent rise in Q4 2017.

Leading the increase was the prime area or Core Central Region (CCR), which posted a 5 per cent price jump for non-landed homes in Q1, compared with the 1.4 per cent increase in the previous quarter.

This was followed by a 3.8 per cent price rise in the suburbs or Outside Central Region (again, higher than the 0.8 per cent increase in the previous quarter). In the city fringe or Rest of Central Region (RCR), prices climbed 1.1 per cent, after having risen 0.4 per cent in the previous quarter.

Prices of landed residential properties island wide went up 1.8 per cent in the first quarter, after having risen 0.5 per cent in the previous quarter.

JLL national director Ong Teck Hui noted that in the high-end segment in the prime districts, New Futura in Leonie Hill Road, launched in Q1 this year, reportedly moved 48 units at an average price of above S$3,200 psf.

In his analysis of URA Realis data, he noted that the average price of Gramercy Park in Grange Road was S$3,185 psf in Q1 2018, up 9.1 per cent from the average of S$2,920 psf in Q4 2017.

Likewise, the average price of Martin Modern, off River Valley Road, was S$2,697 psf in Q1 2018, or 14.5 per cent higher than its average of S$2,356 psf in Q4 2017.

Other examples of CCR developments recording significant quarter-on-quarter price rises in the first quarter include Reflections at Keppel Bay (up 5.7 per cent ) and The Interlace (up 11.8 per cent).

Mr Ong said: "Singapore's prime residential market has appeared to be more attractive relative to other global cities. It is still in the early stages of recovery while ... Hong Kong, Sydney, Melbourne and Tokyo are nearer the top end of their market cycles or peaking, while the prime London market is in decline. Viewed from this perspective, Singapore seems to offer better prospects of an upside in prices."

Cushman & Wakefield research director Christine Li suggested that the Q1 price jump in the CCR came largely from an increase in purchases by foreigners (including Singapore permanent residents) as well as companies.

In the OCR segment, JLL's Mr Ong highlighted examples of developments recording price gains. For example, Grandeur Park Residences in Bedok recorded a 7.8 per cent increase in average price from S$1,416 psf in Q4 2017 to S$1,526 psf in Q1 2018; in Symphony Suites in Yishun, the average price rose 3.9 per cent from S$1,046 psf in Q4 2017 to S$1,087 psf in Q1 2018.

While the CCR was the star performer in terms of price gains in the first quarter, Desmond Sim, head of Singapore and South-east Asia at CBRE Research, reasoned that on a full-year basis, price increases will be driven largely by the suburbs, where most of this year's new launches are, and to a certain extent, the city-fringe.

Colliers International head of research for Singapore, Tricia Song, said: "With a slew of new projects - from public land tenders and collective sales - due to be launched later this year, we can expect bullish land rates paid by developers to put an upward pressure on prices of mass market homes."

She predicts an 8 per cent gain in non-landed private home prices in the suburbs for the whole of this year, slightly below a projected 10 per cent hike in the CCR.

A BT article last Friday, based on Edmund Tie & Co's caveats analysis, showed that resale prices of existing condos and private apartments in Districts 15 and 10 have gone up signficantly following news of the Amber Park and Royalville collective sales respectively last year.

Resale prices of existing homes are being driven up by strong demand for replacement homes by cash-flush individuals and families who have sold their homes through collective sales in the nearby areas, among other factors.

Another factor causing resale prices to go up is that most sellers have upped their asking prices - benchmarking them against bullish land bids in the vicinity, said Lee Nai Jia, head of research at the property consulting group.

Adapted from: The Business Times, 3 Apr 2018