Private home prices rebound in Q3, but price resistance setting in as overall sales drop

Overall sales excluding ECs shrank 3.5 per cent in the third quarter from the second quarter to 5,201 units. PHOTO: ST FILE

SINGAPORE – Private home prices rebounded 0.8 per cent in the third quarter, above the 0.5 per cent flash estimate by the Urban Redevelopment Authority earlier in October.

But there are signs of growing price resistance as overall resale volumes fell, and new condo sales shrank even as developers launched more units.

Even though private home prices rebounded from a 0.2 per cent drop in the previous quarter, this is the second straight quarter where price gains are less than 1 per cent and below a quarterly average growth of 2.1 per cent in the past three years, according to real estate firm OrangeTee & Tie.

Year to date, the price index grew at a slower pace of 3.9 per cent, compared with 8.2 per cent in the same period in 2022 and 5.3 per cent in 2021. This is due in part to a 3.6 per cent drop in landed property prices, reversing a 1.1 per cent jump in the second quarter.

Ms Christine Sun, senior vice-president of research and analytics at OrangeTee & Tie, noted that there are signs of price resistance as overall sales excluding executive condominiums (ECs) shrank 3.5 per cent in the third quarter to 5,201 units from 5,388 units in the second quarter.

Year on year, overall sales fell 15.4 per cent from 6,148 units in the third quarter of 2022, as buyers turn cautious in the face of higher-for-longer interest rates, slowing economic growth and geopolitical tensions, she added.

Resale volume fell 2.6 per cent to 2,900 units from 2,976 units in the second quarter, as some demand was diverted to new project launches in the third quarter.

They include Grand Dunman, Lentor Hills Residences, Altura EC, Orchard Sophia, Pinetree Hill, The Arden, The LakeGarden Residences, The Myst, The Shorefront and TMW Maxwell.

But even as developers launched more units in the third quarter – 2,805 (excluding ECs), compared with 2,374 units in the second quarter, new sales shrank 8.5 per cent to 1,946 units from 2,127 units.

Cushman & Wakefield head of research Wong Xian Yang noted that due to a larger launch pipeline, the average take-up rate at projects with more than 100 units in the initial launch month has slowed to 32 per cent in the third quarter, from 57 per cent in the previous quarter.

But it remains higher than the pre-pandemic average initial take-up rate of 24 per cent, he said.

Upcoming new launches in the suburbs could be well supported – the 368-unit J’den on the site of the former JCube mall in Jurong East, 474-unit Hillock Green in the new Lentor Hills estate, 341-unit Hillhaven in Hillview Rise, and 440-unit Sora in Yuan Ching Road, he added.

But dampening overall sales volumes in 2023 is a growing mismatch in buyer-seller expectations, Mr Wong said.

Weaker sentiment, higher interest rates and the year-end holiday season may push some developers to delay launches to 2024, said Ms Tricia Song, CBRE’s head of research for Singapore and South-east Asia.

If so, developer sales could remain subdued in the fourth quarter, with new home sales potentially dropping to between 6,500 and 7,000 units for the whole of 2023, below the 7,099 units in 2022, which was a 14-year low after 2008’s 4,264 units, she said.

Knight Frank’s head of research Leonard Tay noted that, despite healthy household balance sheets, buyers were more selective because of buyer fatigue, higher interest rates, the cooling measures and recession concerns.

Sub-sales, however, rose to 355 from 285 units transacted in the previous quarter, because of a substantial price gap of 20 per cent to 30 per cent between a new sale and sub-sale unit, said Mr Lee Sze Teck, Huttons Asia’s senior director of data analytics.

A sub-sale is recorded when a buyer resells a property bought directly from the developer before the project is completed.

Meanwhile, private home prices have remained resilient despite growing headwinds.

Prices of non-landed properties jumped 2.2 per cent in the third quarter, reversing a 0.6 per cent drop in the previous quarter, driven by price growth in the city fringe and suburbs.

In the third quarter, city fringe prices rose 2.1 per cent, compared with a 2.5 per cent drop in the previous quarter, while prices in the suburbs jumped 5.5 per cent, compared with a 1.2 per cent increase in the previous quarter, fuelled by higher new launch prices and volumes.

Prices in the prime district, which tends to see greater interest from foreigners and local investors, fell 2.7 per cent in the third quarter, following a 0.1 per cent drop in the previous quarter, as the cooling measures continue to take a toll.

“Despite growing price resistance, significant price cuts for new launches are not likely unless there is a prolonged recession and job losses,” said Ms Chia Siew Chuin, head of residential research at JLL.

“High land costs previously committed to by developers for upcoming projects, combined with low inventory of unsold homes, should support prices,” she said.

The rental market grew at a significantly slower pace of 0.8 per cent in the third quarter – the smallest quarter-on-quarter gain since the fourth quarter of 2020 – compared with a 2.8 per cent increase in the previous quarter. Year to date, private residential rents jumped 11.1 per cent.

Prime district rentals dropped 1.7 per cent quarter on quarter for the first time since the fourth quarter of 2020, as some tenants moved to cheaper rentals in the city fringe and suburbs.

The city fringe rental market saw the strongest rental growth at 1.9 per cent quarter on quarter, while suburban rentals gained 1.3 per cent. Private home rents are expected to rise 10 per cent to 15 per cent in 2023, moderating from a sharp 29.7 per cent growth spurt in 2022, said Cushman & Wakefield’s Mr Wong.

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