Will property market bottom out soon?

Hopes of a market rebound may be reignited as the bottom of the cycle seems to be in close reach. While private home prices have fallen by 0.4% for the 13th consecutive quarter, the rate of decline of private home prices have been reduced from the 1.5% in 2016’s Q3.

cairnhillresidencesIn 2016, private home prices fell only 3%, the slowest since 2013. Since the third quarter of 2013, home prices have fallen 11.2%, with a 4% fall in 2014 followed by a 3.75% fall in 2013. The projected fall in home value this year is 2% to 3%. While home seekers and investors may be drawn back into the market with the lowered property prices, analysts are not expecting them to splurge.

highlandresidencesIn Q4 of 2016, non-landed private home prices fell 0.7 per cent, led by city fringe properties with a 2 per cent drop. Prices of units in the core central region remained unchanged while suburban home prices fell 0.3 per cent. Units in the core central region have suffered a 1.9 per cent fall in Q3, thus the fact that sales volume have increased while prices remained unchanged could be a good sign for the year ahead.

Landed property prices posted a surprising rise of 0.9 per cent after a 2.7 per cent fall in Q3 while in the resale HDB flat market, prices fell 0.1 per cent.

Prime land plots released for H1 of 2017

Out of the 5 residential sites which were released under the Government Land Sales (GLS) scheme‘s confirmed list for H1 of 2017 are 3 sites which may see heated competition from bidders – one on Jiak Kim Street where the Zouk nightclub used to stand, another on Fourth Avenue right next to the Sixth Avenue MRT station and yet another on Woodleigh Lane, near the new Bidadari township and Woodleigh MRT station.

rmaisonThese 5 sites are expected to yield up to 2,330 new homes, about 50% more than the 1,560 units yielded by land released in the first half of this year. Bidding on the last few sites released this year have gotten developers and property analysts excited about the potential volume and size of land plots to be released next year, but the authorities have kept it conservative thus far, having released only 10 sites on the reserve list. This includes 1 mixed-use site and 2 commercial sites.

It is possible that the Government is concerned about the stock of unsold executive condominiums (EC) currently in the market. In addition, most of the units sold this year were purchased by investors and not true home-occupiers. The Monetary Authority of Singapore has also recently flagged their concern about rising vacancy rates in the private property market. This combination of factors may have influenced their decision on how much land supply to release in 2017. Only 1 EC site was released on the confirmed list and another on the reserved list.

2016’s demand for properties level with last year’s

Though it may seem like the property market took a turn for the worse this year, figures have shown that the level of demand has remained similar to last year’s.

peak-cairnhillProperty prices have fallen 10.8 per cent since the 2013 peak and perhaps it is precisely this decline of home prices that have kept buyers coming to the table, more so this year than the previous few which have been dull partly due to the property cooling measures implemented since 2013. Some property agents have in fact reported up to a 50 per cent increase in sealed deals this year, indicative of increased buyer’s interest and number of project launches.

The market inertia in terms of the property cooling measures and interest rates may also have been push factors in enticing buyers back into the market. Resale property sales have been strong with 5,587 transactions closed in the first 3 quarters of this year, up 18 per cent from 2015. Developers have also been pricing new units more competitively this year, giving the resale market a run for their money.

the-crestCity fringe and central region resale properties were particularly popular with buyers though some may still be waiting for better deals.  And as property analysts predict a further 3 to 3.5 per cent drop in prices for the rest of the year, the market seems primed for owner-occupiers though those considering investing in properties should wait a little more to get the most out of their buck.

 

Fall in Q3 Private home prices

Private home prices have been falling for the past 3 years, 12 consecutive quarters to be exact, and it’s currently at it’s lowest in 7 years. Last quarter’s fall was the steepest at 1.5%. So it does seem like the property cooling measures which were rolled out at around the same time have worked. And while the authorities are committed to continue having them in place, the real estate industry might have to bite down hard and stay the course.

threebalmoralEffects from the general global, regional and local economic markets have trickled down to the property sector as worry about the job market and a weakening economy affects demand and risk-taking. Though interest in high-end core central region luxury properties may have improved, prices have yet to completely made a turnaround. Home prices in this segment fell the hardest at 1.8 per cent following a 0.3 per cent rise in Q2. Landed property prices also fell 2.2 per cent while previously in-demand city fringe properties saw a 1.3 per cent fall.

As the last quarter of the year will possibly see more new property launches in comparison to Q3 which was relatively quiet, and HDB rolls out its next launch of 5,090 new BTO flats in Bedok, Bidadari, Punggol and Kallang/Whampoa HDB estates in November, will existing unsold stock and resale private homes be on the receiving end of added pressure and competition?

Property market’s road to recovery a gradual one

While the global economy remains in the doldrums and the authorities keep the local property cooling measures in place, Singapore’s real estate market is likely to see a gradual gentle road to recovery, starting with stabilisation.

LakeGrandeJuly’s sales figures show promise, with 1,091 units sold (excluding executive condominiums). That is almost double that of June’s 536 units. Although August’s numbers may dip due to the Hungry Ghost month and the lack of major property launches, September will see the launch of Parc Riveria at West Coast Vale and Forest Woods in Serangoon. The former is developed by EL Development and the latter by City Developments.

Consumer interest on landed homes, a rare commodity in local context, has also shone of late. CapitaLand‘s launch of 6 Victoria Park Villas‘ units which all sold between $4.3 to $4.9 million led the way to positive market sentiments. July’s major launch of the highly affordable units at Lake Grande largely boosted sales figures, accounting for 40 per cent of the total number of units sold.

VictoriaParkVillasProperty analysts are expecting monthly sales of 500 to 700 units for the rest of the year, totalling up to 8,000 units for 2016. Selling prices have remained steady in July while sales figures rose 22 per cent, signalling the start to the market’s road to recovery.

Market not ready for property cooling measure to be lifted

The Monetary Authority of Singapore (MAS) has said that it is still too early for the property cooling measures to go away. Unlike the car financing sector, the housing sector has yet to achieve the intended levels. The authorities are cautious about a sudden forward surge in the market should the measures be prematurely lifted.

c22aa9c3d5354ad6858cc5cec7ca1854Household debt levels have become more manageable as the debt servicing ratio helped keep new loans portfolios realistic and banks are feeling a reduction in the percentage of non-performing loans. The ultimate aim is a sustainable pathway for the property market – a balance between growth and affordability.

Though the market feels like it has been slowing down for quite a few quarters now, the numbers tell another story. Property prices have fallen 9.4 percent since it’s peak in Q3 of 2013, but between 2009 and 2013, prices rose 60 percent while income rose only 30 percent. Clearly the numbers are disproportionate and it will be some time yet before the market reaches a comfortable equilibrium.

Moving forward, the private resale market is showing signs of bottoming out, and investors who have been sitting in the sidelines may come back into the fold as long as interest rates remain low and home prices steady.

 

Private resale home prices inching up

Prices of resale private non-landed homes have been on the rise since March this year and the upward climb though gradual, shows promise and property analysts are hoping market sentiments will improve as the year moves on.

Qbay ResidencesLast month’s price rise clocked at 0.5 per cent and was apparent throughout all regions. In the core central region (CCR), prices rose 0.9 per cent and 0.4 and 0.5 in the city fringe and suburbs respectively. Sales volume has also improved 27.4 per cent in a year-on-year comparison with 754 units sold, just a wisp lower than the 763 units sold in May.

Buyers are beginning to be more acceptable of the market prices of resale units as the median X-Value (TOX) was at negative $7,000, $1,000 more than the negative $8,000 in April. While there are a few major launches planned for the next half to the year, the number of unsold units in the market has been expanding to almost 15,000, and about 57,500 private homes and 12,000 executive condominiums are in the pipeline. How will the market react to the release of these units into the market? Many new launches now face challenging times beyond their initial launch. Depending on the speed and volume at which new units are released and changes in interest rates will be determining factors.

Completed private home prices fall further

Completed resale private non-landed property prices have dipped further in May, following a slight increase the month before. The muted sales could have also been a reflex response to the recent Brexit vote though in the long term, property analysts are not expecting the fallout to be too drastic.

FulcrumPrice decline of apartments in the central region were the lowest, with prices falling only 0.5 per cent last month, almost evening out with the 0.4 per cent rise in April. Properties here have the location advantage and will be unlikely to see a sudden price depression anytime soon. Astute buyers are however still out for the hunt and are likely to look towards properties in this areas for good deals. In the current market, buyers who lack holding power may find themselves having to let go of their properties within a time period, and may be more open to price negotiations.

As more new properties were launched in the last couple of months, activity from this segment may have also stimulated the resale private property sector and the spillover effect of positive market sentiments could have caused a slight blip in April’s price rise. Small apartments below 506 sq ft saw the steepest fall of 1.1 per cent as competition in the rental market heats up and prices continue to fall with high supply against lower demand.