A 7% increase in suburban condo prices contributes to a 3.4% year-on-year increase in Singapore's Q3 private house prices: URA

Oct 03, 2022

Private residential property prices increased by 3.4% in the third quarter, owing mostly to strong sales at new launches in the suburbs, which set new benchmark prices, but price growth is likely to decelerate for the rest of the year.

Private residential property prices grew 7.8 percent in the first nine months of 2022, above the 5.3 percent gain in the same period last year. This follows a 10.6% year-on-year growth in 2021. Since the start of the Covid-19 epidemic in Q1 2020, private housing prices have soared by 23%.

The Urban Redevelopment Authority (URA) announced flash estimates on Monday (Oct 3) that show broad-based price increases across all categories in Q3, with a high increase in the non-landed sector, which grew 4.1 percent quarter on quarter (qoq), while the landed segment rose 1.2 percent qoq.

The increase in home prices was led by a 7% qoq increase in non-landed property prices in the outer central region (OCR), the strongest rate of price growth since the third quarter of 2009. This subindex has increased by 2.1% in the previous quarter.

Price rise in the OCR was aided last quarter by three significant launches AMO Residence, Lentor Modern, and Sky [email protected] all of which received positive market feedback.

According to Wong Xian Yang, head of research, Singapore, at Cushman & Wakefield, AMO Residence, Lentor Modern, and Sky [email protected] achieved an average price of around S$2,110 per square foot (psf), S$2,108 psf, and S$2,118 psf, respectively, and accounted for approximately 81% of Q3 OCR new sales as of Monday.

"This drove median OCR new sale non-landed prices to around S$2,092 psf in Q3, compared to about S$1,774 psf in Q2," Wong explained, adding that the Q3 increase in OCR new sales prices is believed to be a one-time occurrence because the aforementioned OCR developments have mainly sold out.

According to Christine Sun, senior vice-president of research and analytics at OrangeTee & Tie, a total of 939 new non-landed residences were transferred in OCR at a median price of at least S$2,000 psf, with 21 going for more than S$2,400 psf.

"Last quarter, a 463 square foot (sq ft) freehold condominium sold for S$2,556 psf at The Gazania in Serangoon, followed by a 732 sq ft leasehold apartment transacted for S$2,513 psf at Lentor Modern in Lentor Central," she added.

The URA's flash estimates come after the government announced new property cooling measures last week to guarantee responsible financing and limit demand, particularly for public housing resale units.

According to consultants, the stated tougher limitations on property loans were widely anticipated, and they foresee a downturn in demand for private property as affordability is impacted.

As part of the newest cooling measures, private property owners must now wait 15 months before purchasing non-subsidised HDB resale flats. This is projected to have the greatest impact on mass market developments, as this category is most reliant on HDB upgraders, who will now find it more difficult to profit from increasing HDB resale prices.

According to Ong Teck Hui, JLL's senior director of research and consultancy, the 0.5 percentage point increase in the floor interest rate used to assess potential homebuyers' repayment ability may weed out highly leveraged buyers from the private home market, resulting in price momentum slowing in Q4.

Nonetheless, numerous experts predict a 7% to 9% increase in overall private residential prices for 2022, owing to a low inventory of unsold new private houses, fewer releases, and tighter resale stock.

"Developers do not have much room to lower prices, given the rising building costs, high land costs for some sites, and the fact that many of them have relatively low unsold inventory," said Ismail Gafoor, CEO of PropNex Realty.

According to Leonard Tay, Knight Frank Singapore's head of research, 2022 will likely end with a 10% price increase because, despite cooling measures, homebuyers who are looking for new homes under construction and hoping to make a purchase before interest rates rise further will likely remain active.

According to Tricia Song, CBRE's head of research for South-east Asia, new sales volume is likely to fall sharply in Q4.

"With the majority of big new launches completed for the year, the December holiday seasonal slump, and new residential property limits, both purchasers and developers are expected to take a wait-and-see attitude in Q4 2022 to absorb and determine the impact of the new measures," Song said.

Analysts predict that roughly 8,000 new private residences will be sold this year, a 39% decrease from the 13,027 units sold in 2021, according to Song.

Executive condominium (EC) launches, on the other hand, are expected to occur, according to Huttons Asia's senior research director Lee Sze Teck.

He anticipates strong demand from purchasers in Bukit Batok, Choa Chu Kang, Jurong East, and Jurong West for Copen Grand, the first EC launch in Tengah on Oct 22. In December, another EC initiative, Tenet, will be launched.

"EC buyers can choose the delayed payment arrangement, which allows them to ride out the current high interest rates," he explained. "They can save during the building phase to satisfy the reduced loan limit."

According to URA's flash estimates, condo prices in the rest of the central region (RCR) gained 2.5 percent in Q2, after rising 6.4 percent in Q1.

The core central region (CCR) subindex increased by 2.3 percent, compared to 1.9 percent in the previous quarter.

This was due to the fact that several developments, such as Hyll On Holland, Perfect Ten, and Leedon Green, sold more units at a higher average price during the quarter, according to PropNex. With housing prices growing faster in other submarkets, some purchasers are finding value in the CCR market, particularly for freehold homes, according to the report.

Huttons' Lee also saw a narrowing of the pricing differential between the RCR and the CCR.

"As of Q3 2022, the expected median price per square foot of new residences in the RCR is S$2,428, 13.5 percent cheaper than the median price per square foot in the CCR," he added. "Because of the diminishing price disparity, more purchasers are acquiring properties in the CCR."

Despite expecting a 10% increase in overall private residential prices in 2022, Knight Frank's Tay believes that the combination of cooling measures, a possible recession in 2023, widespread inflation, and how private home prices have risen in the last two and a half years will "inevitably start to take a toll and shift the sentiment of some homebuyers into tentative territory as interest rates progressively rise in each succeeding month from now and into 2023."