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0.6% rise in SRX resale condo price index draws divided views

One view is that prices this year have hit an inflection point; another is that overall prices have not bottomed out yet

By Kalpana Rashiwala

[email protected]

@KalpanaBT

Feb 12, 2016


A 0.6 PER CENT month-on-month increase in SRX Property's flash estimate for its resale price index for non-landed private homes in January has drawn varying views on the outlook for this market.

Savills Singapore research head Alan Cheong said it could suggest that 2016 is a year which captures the inflection point, price wise. However, ERA Realty key executive officer Eugene Lim argued that the overall price trend for the year is still downwards.

SRX Property's January flash estimate translates to a year-on-year drop of 1.7 per cent, as well as a fall of 7.2 per cent from the recent peak in January 2014.

The 0.6 per cent gain in the index last month contrasted with a 0.5 per cent month-on-month drop in December 2015. The December decline was a revision from the 0.8 per cent drop SRX Property had indicated earlier based on its flash estimates for that month.

Going by SRX Property's analysis, prices in all three geographical regions were higher month on month in January. Prices appreciated one per cent in Core Central Region, 0.1 per cent in the city-fringe or Rest of Central Region and 0.8 per cent in the suburbs or Outside Central Region.

Mr Cheong of Savills commented: "Although monthly statistical releases for the private residential market incorporate a lot of noise, January's price rise was still notable because it came from all three regions. In a way, the price increase last month was not unexpected, as feedback from our agency team pointed in the same direction as well.

"Barring unforeseen circumstances, we believe that private home prices in both the resale and new-sale markets may have stabilised. On an overall basis, as well as by the three regions, prices in the resale market in 2016 may random walk about a mean of zero per cent to possibly a one per cent year-on-year price increase."

But ERA's Mr Lim thinks the overall price trend for 2016 should still be headed south.

He pointed to economic headwinds and downward pressure on private residential rents amid a mismatch between supply and demand. While there has been a step-up in the number of new private home completions, Singapore's economy is undergoing a restructuring to reduce reliance on foreign manpower.

"In addition, in view of rising interest rates and the weak rental market, owners of multiple properties bought before the imposition of the TDSR (total debt servicing ratio) framework might find themselves forced to dispose of some properties if they are unable to continue servicing their mortgages," he added.

SRX Property estimated that 364 non-landed private homes were resold last month - a decrease of 20 per cent from the 455 units resold in December last year. That said, last month's resale volume was up 3.7 per cent from the 351 units transacted in January 2015.

ERA's Mr Lim said that fewer new private residential units are slated for launch this year, following the tapering in state land sales. "Coupled with stabilising prices, we can expect that more buyers will turn to the resale market to purchase a private home," he added.

SRX Property's data showed that the overall median transaction over X-Value (TOX) fell to negative S$10,000 in January, from negative S$5,000 in December 2015. In November 2015, it was zero.

The median TOX measures how much people are overpaying or underpaying against the computer-generated estimated market value, or the so-called X-Value.

"The negative TOX value indicates that buyers have the upper hand in the market today," said Mr Lim.