The private residential market seems to have turned the corner in the third quarter, with prices heading higher after almost four years of decline.
Overall prices rose 0.7 per cent in the three months to Sept 30, compared with the previous quarter. This trumped earlier flash estimates of a 0.5 per cent rise and ended 15 quarters of decline, according to Urban Redevelopment Authority (URA) data out yesterday.
The agency also said that the recent flurry of collective sales could eventually deliver an additional 9,300 units to the market - the first time that it has publicly put a number to the impact of the deals.
Coupled with a further 7,400 units from government land sales in the years ahead, the yield from collective sales could nearly double the number of unsold private homes in the pipeline, assuming that planning approval is obtained. There are already 17,178 units that have received approval on the way.
"As en bloc sales of existing sites have been very active over the past one to two years, the redevelopment... will add a significant number of housing units to the existing supply pipeline," URA said in a report that accompanied the quarterly figures.
But industry analysts do not expect the impact of collective sales to be felt so soon. These potential new homes are expected to hit the market in the next one to two years, and will be ready for moving in only from 2021 onwards.
As one of them puts it, what we see is that URA is definitely monitoring this situation, especially for collective sales, and with that in mind would tweak the supply coming for government land sales. Developers are also eyeballing one another. They do not want to over-cannibalise one another.
The price recovery took the overall year-on-year growth in private home prices to 0.3 per cent in the first nine months of the year, against a 2.6 per cent decrease in the same period last year.
Values rose for both landed properties and apartments across the island, so the price recovery appears to be broad-based, supporting the likelihood of prices continuing to rise.
While the private residential market tends to be slower in the third quarter (owing) to the Chinese Seventh Month, the uptick in prices suggests that the market has bottomed out.
But home prices are not expected to shoot up overnight, said Mr Eugene Lim, the key executive officer at ERA Realty Network.
"This may be a strong indication that the market is finally turning, after stabilising over the last four years. However, buyers need not be overly worried that prices will see a robust spike, as the market recovery is expected to be gradual."
Mr Lim pointed to cooling measures, such as the total debt servicing ratio and additional buyer's stamp duty, that remain in play.
The rise in home values looks likely to be driven by an inflation in land prices rather than an exuberance in demand.
Adapted from: The Straits Times, 28 October 2017