It's a Goldilocks market a year after property cooling measures

Tue, Aug 06, 2019


IT HAS been a year since the government imposed fresh curbs to cool the hot property market, so it is perhaps a good time to take stock of the private residential property market.

All the more so in the light of fresh data that shows that the private residential price index rose 1.5 per cent in the second quarter, steeper than the preliminary estimate of 1.3 per cent.

The quick turnaround has surprised market watchers. After the government introduced total debt servicing ratio framework into the home financing equation in June 2013, private home prices went into a tailspin, chalking up 15 straight quarters of decline from Q4 2013 before rising 0.7 per cent in Q3 2017.

This time around, prices post-cooling measures dropped marginally and for only two consecutive quarters - in Q4 2018 and Q1 2019 - before rebounding. The strong second quarter showing means the index has overturned the first quarter's decline, and was up by 0.8 per cent in the first half of this year.

Taking into account the 7.9 per cent rise in 2018, private home prices are just 2.5 per cent below the peak in Q3 2013. Just as one swallow does not a summer make, it would be premature to conclude that the market has shrugged off the impact of the last cooling measures.

The Q2 performance may have been exacerbated by developers' activity. For example, the strongest price growth by segment - 3.5 per cent in the city fringe - was where developers had major launches in attractive localities that enabled them to achieve new price benchmark levels. For example, the freehold Sky Everton, on the fringe of the central business district, sold 134 units at a median price of S$2,523 per square foot (psf); Riviere, on the site of the former nightspot Zouk, set high price points for a 99-year leasehold condo in the city fringe, with the sale of 32 units at S$2,875 psf.

But beyond the headline number and high prices achieved in a few exceptional sites, the indicators do not paint a rosy picture of the broader market, as seen from the demand and supply sides.

Home transactions, particularly those in the secondary market, are down. Developers sold 2,350 new homes in the second quarter, 5.1 per cent lower than the 2,476 units in the corresponding quarter in 2018. In contrast, resale transactions fell by about half from 4,820 units in Q2 2018 to 2,416 units in Q2 2019.

This is supported by Monetary Authority of Singapore data, which last week showed that residential mortgages fell again as at the end of June, making for the sixth straight month of decline.

Supply-wise, the government has seen fit to cut the pipeline of private residential housing in confirmed sites under its land sales programme for the second half this year. The collective sale market, which in 2018 yielded an extraordinary number of additional units outside of government land sales, remains in limbo.

The situation could change quickly, of course, as it did when collective sales exploded at the start of 2017 up until the July 2018 curbs. One market changing factor could be foreign buying.

Trade tensions between the United States and China and, more recently, the unrest in Hong Kong, could be prompting some investors to move their assets, or even uproot themselves to Singapore. For these high-net-worth individuals, Singapore residential properties may be an attractive proposition, notwithstanding the 20 per cent additional buyer's stamp duty foreigners have to pay.

At this point, the property market is neither too hot nor too cold.