Looming supply, interest rates concerns weigh on private home prices in Q1 #sgbayhomes

CONCERN about the looming supply in the private residential market and uncertainty over interest rates have kept homebuyers on the sidelines, sending overall private home prices slipping one per cent in the first quarter. Rents also fell 1.7 per cent in a soft leasing market.

The latest quarterly data from the Urban Redevelopment Authority (URA), which showed a sixth straight quarter of decline for both private home price and rental indices, reinforced views that the downcycle will persist.

Amid subdued interest from homebuyers, some developers offered discounts to lure them back into the market, said Colliers International director of research and advisory Chia Siew Chuin.

Among them, GuocoLand dangled discounts of up to 19 per cent from the original price list at Sims Urban Oasis during Chinese New Year, and CapitaLand offered a 10 per cent discount at Marine Blue from listed prices during its preview.

“As both home sellers and developers direct their strategies towards an increasingly price-sensitive group of homebuyers, private home prices are anticipated to soften by about 5-8 per cent in 2015,” she said.

“This is also taking into consideration developers’ measured bids in recent land tenders that give them more flexibility in adjusting prices downwards where necessary,” said Ms Chia.

URA’s data released on Friday showed price weakness across all segments of the private residential market.

Prices of non-landed properties fell 0.4 per cent in the Core Central Region (CCR), 1.7 per cent in the Rest of Central Region (RCR) and 1.1 per cent in the Outside Central Region (OCR). Prices of landed properties also slipped 0.9 per cent.

Chua Yang Liang, JLL head of research for Singapore and South-east Asia, noted that the slower pace of price decline in CCR over the past three quarters suggests that prices of higher-end condos are now closer to the bottom.

The steeper price fall in the OCR, however, suggests “a lack of support from HDB upgraders as resale prices and volume in the HDB market continued to soften by one per cent and 10.8 per cent quarter on quarter respectively”.

Overall rents of private homes also fell 1.7 per cent in the first quarter, with the decline seen across all segments. Rents of non-landed homes in CCR fell the most by 1.9 per cent, followed by 1.8 per cent in OCR, and 1.6 per cent in RCR. Rents of landed properties fell 1.2 per cent.

The vacancy rate of completed private residential units (excluding executive condominiums or ECs) eased to 7.2 per cent at end-Q1, from 7.8 per cent at end-Q4. Vacancy rate for available non-landed units came down to 8.3 per cent from a peak of 9.1 per cent in Q4 2014.

SLP International executive director Nicholas Mak observed that rents in the RCR and OCR are falling at faster clips than previous quarters, dragged by declining rental budgets of some tenants and the growing supply of private and HDB housing units for lease.

The impending supply of non-landed homes in the RCR and OCR is expected to weigh on rents in the next two years, and in turn keep prices of units in these localities soft, Mr Mak said. He is expecting a 4-7 per cent fall in overall rents in 2015 and a 3.5-6 per cent fall in prices for non-landed units islandwide.

From the first quarter, URA started using a new index methodology for price and rental indices to better control for finer details of the property attributes. It also expanded its data coverage to capture all private home transactions by supplementing its existing data with stamp duty data from the tax authority.

Amid market caution, developers also launched fewer units in the first quarter – 1,189 uncompleted private homes, excluding ECs, compared to 1,592 units in Q4. They sold 1,311 units, down from 1,376 units in Q4.

This marked the lowest quarterly launch and sales volumes since Q4 2008, during the onset of the global financial crisis, Colliers’ Ms Chia noted.

In addition, developers launched 378 EC units in the first quarter, and sold 326 EC units over the same period.

As at end-Q1, there was a total supply of 68,201 uncompleted private homes (excluding ECs) in the pipeline, of which 27,061 units remained unsold at end-Q1. There were another 15,441 EC units in the supply pipeline.

Alice Tan, Knight Frank head of research and consultancy, cautioned that “a looming supply glut could heighten vacancy rates” as some 19,000 private residential units are expected to be completed this year. “This is likely to exert further downward pressure on prices in the upcoming quarters.”

Overall, private home prices and rents are expected to drop 3.5-4.5 per cent and 3-5 per cent for the full year, she projected.



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