You Jump. I Jump. Making Sense of Why Singapore’s Private Homes Prices Jumped 2.9% in Q1 of 2021.

What Is The Reason Why Prices Jumped 2.9%

Recently, the Straits Times had published an article that Singapore private homes prices had jumped 2.9% in the first quarter of 2021. This information was taken from the URA’s flash estimates that compiled the developer’s sales and stamp duties paid. Now, if you compare this percentage increase of 2.9% in this quarter with only a 2.2% increase for the entire year of 2020, it does seem like an alarming number, isn’t it? Is this an indicator that the property market is red hot? And that consumers are snapping up units in a frenzy, FOMO like environment? Well, let us take a closer look at the numbers.

You Jump, I Jump. Unfortunately, Not Everywhere Or Everything Is Jumping. Source: Straits Times

Price Index Is Not A Reflection Of Actual Individual Property Prices

First, you must understand how this 2.9% came about. This 2.9% increment is an increase in the property price index from the 4th quarter of 2020 to the 1st quarter of 2021. URA calculates this property price index using a Stratified Hedonic Regression Method with a base period from Q1 2009. The new calculation method started in 2015 due to the greater diversity and age of properties in Singapore. Having a property price index is important because it gives you an overall idea of the current prices and where they are going.

The problem arises when consumers confuse indexes with actual property prices. Like the stock market, you have an index that tells you where the market is heading. However, the performance of individual stocks may not reflect what is referenced to the index. Take the private non-landed residential homes in Singapore, for example. We have the high psf shoebox units, typical units, and ultra-low psf units, including penthouse and ground-level patios. When you have more transacted data of a particular unit type, the index can be skewed in that direction.

Midtown Modern, The Main Driving Force Behind The Spike In The Property Index

To better understand why “prices” went up by 2.9% in the 1st quarter of 2021, we must understand what was sold in the first place. As usual, I have extracted this data from my favourite website at www.squarefoot.com.sg.

Forget About Jumping. The prices have literally flew! Source: Square Foot Research

By purely looking at this graph, prices seemed to have shot upwards from an average of $1513 psf to a whopping record price of $1787 psf in March 2021. A whopping increase of 18% within a month! In fact, this was a record high over the last 10 years! The main contributor to this increase was largely due to the launch of Midtown Modern. Prices averaged $2774 psf for the 393 units sold. With over 30% market share of the new sales done for March 2021, it is no surprise that Midtown Modern is the main driving force behind the 2.9% index increment.

Thankfully, URA has revised their model on how they calculate this new index. Otherwise, this increment will be much higher than 2.9% without taking into the sizes for reference and set off even more alarm bells.

Average Resale Prices And Other Districts May Not Even Register A 2.9% Price Increment 

Average resale prices, on the other hand, paints a vastly different picture. Although prices have gone up from the last quarter of 2020, averages prices have reached levels like what we have experienced before the pandemic. In fact, current prices are remarkably similar to what we have in 2018 as well as 2019.

Wait A Minute. What Happened To The Jump In Prices? Source: Square Foot Research

So, it is essential to look in-depth at the numbers and tell us whenever we read headlines. Yes, the price index has gone up by 2.9%. But does not mean this is happening across the entire island or applicable for all unit types. Over at Condominiums of Singapore, we don’t just look at the headlines, we dig deep into the data so we can help our clients make better-informed decisions. To help you understand the market better, why not speak with us today? Get all your answers from someone who is on the ground every day looking at properties, analyzing statistics and making sense of all the numbers. Meanwhile, stay safe, do your research, and don’t just read the headlines!

Article contributed by Jerry Wong.

Jerry Wong is a realtor with Propnex Realty. He loves coffee, cookies and condos and has been in real estate for ten years. Most importantly, he loves connecting people to properties and gets enormous satisfaction when they acquire their dream home. Or making well-informed decisions that see their assets grow. Book a video call appointment and Jerry will share with you the following.

  1. How certain factors affect real estate prices. Why some condos can make a million dollars while others can lose that same million.
  2. Why timing is not the most important thing. Because some people can buy the same condo at the same time, but one end up making $100k to $200k while the other suffers losses of the same amount!
  3. Understanding your requirements and craft a solution for your real estate needs. Be it in the form of asset progression, tax planning, financial calculations, rentals, sales, etc.

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