The property cooling measures will tame the upswing in private residential prices in the first half of the year and moderate growth in the rest of the year, but as the pipeline of units eases in the near term, rentals and occupancy rates will find firmer footing, analysts said.
Private residential prices in Q2 rose 3.4 per cent, its fourth straight quarter of increase. Transaction volumes soared to a five-year high, according to second-quarter real estate statistics released on Friday by the Urban Redevelopment Authority (URA).
With that, private home prices rose by a cumulative 7.4 per cent in the first half of 2018.
Landed properties led the way by rising by 4.1 per cent, compared with the 1.9 per cent increase in the previous quarter, while prices of non-landed properties rose by 3.2 per cent, compared with the 4.4 per cent increase in the previous quarter.
Transaction volumes of private homes excluding executive condominiums (ECs) jumped 34.9 per cent from Q1 to hit 7,186 units, the highest level since the first quarter of 2013, when 7,811 units were sold.
This was driven by the resale market, which has been buoyant since the beginning of the year, in part from more interest by owner-occupiers in upgrading, said Christine Li, senior director of research at Cushman & Wakefield.
Rising prices and a more buoyant market during the second quarter led developers to step up launches during the second quarter, said Ong Teck Hui, national director for Research & Consultancy for JLL.
Q2 recorded 2,437 units launched for sale by developers, the highest since Q4 2016, while new-sale units sold by developers, at 2,366, were the highest since the third quarter of last year's 2,663.
Analysts agreed that the cooling measures will result in a slowdown in price growth for the rest of the year.
Lee Nai Jia, senior director & head of research at Knight Frank Singapore, said: "Sales are likely to be slower as more buyers, especially those buying a second home to invest, are likely to wait on the sidelines. Notwithstanding this, buyers will still purchase if the project offers a value proposition."
The luxury market will be the hardest hit due to the larger quantum involved, said Eugene Lim, key executive officer at ERA Realty. He is now projecting a seven to 10 per cent increase in prices this year, down from his previous 10 to 12 per cent estimate.
OrangeTee & Tie's head of research and consultancy Christine Sun adjusted her overall price projection for the full year to eight to 10 per cent, from the company's original eight to 12 per cent.
"Although new launch prices may now be slightly lower than expected, we may still observe benchmark prices in selected locations, as some developers have acquired land parcels at high prices and are probably not willing to sell their units at a loss," she said.
Executive director of ZACD Group Nicholas Mak said the residential price property index is expected to rise by 8 to 12 per cent year-on-year for this year.
Ms Li of Cushman & Wakefield thinks transaction volumes in Q3 will face the double whammy of cooling measures and the hungry ghost festival, when superstitious buyers tend to hold back on buying.
Resale transaction volumes could also go down, she added, as such units are typically more expensive than new launches, and displaced en bloc owners may downgrade to the HDB resale market.
But analysts also pointed out low completed supply in the near-term, and its impact on vacancy and rents.
Vacancy among completed private residential units (excluding ECs) fell by 0.3 percentage points to 7.1 per cent at the end of Q2. Rents posted a one per cent increase, compared with the 0.3 per cent rise in the previous quarter.
This likely came from low new home completion in Q2 at 1,327, down 32.9 per cent from last quarter, leading to net new supply of 1,152 falling short of new demand of 1,994 this quarter, said JLL's Mr Ong.
Rents are likely to be supportive in the near term, with this year's completed private homes excluding ECs to reach 9,930, a sharp drop from 2017's 16,449 completed units, suggested Tricia Song, head of research at Colliers International Singapore.
"Given the easing supply going forward, we expect occupancy to continue to improve and rents could recover by another two per cent in H2 2018, and five per cent in 2019, barring any external shocks," she said.
As at the end of the quarter, there was a total supply of 45,003 uncompleted private residential units (excluding ECs) in the pipeline with planning approvals, compared with the 40,330 units in the previous quarter.
Of this 45,003, 60 per cent are expected to be completed in 2021 or after; 26,943 units remained unsold as at the end of Q2 2018, up from 23,514 units in the previous quarter. There were 26,961 unsold units with planning approvals, up from 24,193 units as at the end of the first quarter.
On top of that, there is a potential supply of 19,500 units (including ECs) from Government Land Sales (GLS) sites and awarded en-bloc sale sites that have not been granted planning approval yet. A large portion of these 19,500 units could be made available for sale this year or the next, and will be completed from 2021, URA said.
Adapted from The Business Times, 28 July 2018.