BUYING sentiment in Singapore’s private housing market appears to have revived in the third quarter of this year, on the back of lower interest rates and ahead of a slew of new launches, said analysts.
While overall prices of private residential properties showed a 0.7 per cent dip in Q3, home sales picked up in the quarter after months of record-low volumes, data from the Urban Redevelopment Authority (URA) showed on Friday (Oct 25).
The 0.7 per cent price index decrease was a smaller fall than the 1.1 per cent drop posted earlier in URA’s flash estimate, and reverses an increase of 0.9 per cent in the previous quarter.
The Q3 fall in the URA’s property price index was led by landed properties, which saw a 3.4 per cent fall in the quarter after rising 1.9 per cent in Q2. Overall, non-landed prices were flat, showing a marginal 0.1 per cent increase. Prices in the prime Core Central Region (CCR) fell 1.1 per cent.
But condominium prices in the city fringe Rest of Central Region (RCR) rose 0.8 per cent, while prices of suburban condos in the Outside Central Region (OCR) were unchanged.
Amid the first decline in Singapore home prices since Q2 2023, when the index fell 0.2 per cent, transaction volume rang in 9.3 per cent higher in Q3, totalling 5,372 units compared to the previous quarter. “This is the first time in 12 months that transaction volume is above 5,000 units,” noted Lee Sze Teck, Huttons Asia’s senior director of data analytics.
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Unsold inventory is starting to clear, market watchers noted. Alongside a pickup in new sales, unsold inventory of uncompleted private residential units (excluding executive condominiums or ECs) fell 3 per cent to 19,940 units in Q3, after rising for two straight quarters, according to CBRE.
Including completed units, unsold inventory was also 3.1 per cent lower at 20,122 units in Q3, and “significantly lower than the last peak of 37,799 units recorded in Q1 2019”, said CBRE’s head of research for South-east Asia, Tricia Song.
At these levels, unsold housing stock is “manageable”, said PropNex CEO Ismail Gafoor. “Taking a measured annual sales level of 6,000 units, that inventory can be cleared in just over three years.”
Cumulatively, private home prices rose 1.6 per cent in the first three quarters of 2024 – much slower than the 3.9 per cent pace during the same period last year and the 8.2 per cent growth in the first nine months of 2022, said Christine Sun, chief researcher and strategist at OrangeTee Group.
Prices moderated the most in the OCR. CCR prices are up 1.9 per cent for the first nine months, with RCR prices 2.7 per cent higher and OCR prices almost flat at 0.4 per cent, said Wong Xian Yang, head of research at Cushman & Wakefield.
In comparison, for the full year 2023, CCR prices rose 1.9 per cent year on year, RCR was up 3.1 per cent while OCR jumped a whopping 13.7 per cent.
The steep slowdown in OCR prices “could be a sign of increasing buyer resistance for (suburban) home prices, which have seen substantial price growth over the last few years”, said Wong.
OrangeTee’s Sun attributed much of Q3’s index decline to buyers opting for “lower-value private homes”.
SRI head of research and data analytics Mohan Sandrasegeran noted that within the CCR, there was a lower volume of high-value transactions, particularly those priced at S$10 million or more.
As for the 3.4 per cent fall in landed home prices, ERA CEO Marcus Chu pointed to the sale of 16 landed home units with a shorter tenure remaining, for less than S$1,000 per square foot (psf) in the quarter.
On top of that, there was an outlier freehold landed home transaction – for a 1,614.6-square-feet unit at Excelsior Gardens in Bedok – for S$42,000, said Chu.
The primary market saw more activity in Q3 with 1,160 new homes sold, up from 725 units in Q2. This came as developers launched 1,284 private homes (excluding ECs) for sale in Q3, slightly more than double Q2’s 634 units.
There were 3,860 resale transactions in Q3, a slight increase from the 3,802 units transacted in the prior quarter. These deals accounted for 71.9 per cent of all sales in Q3, lower than the 77.4 per cent in Q2.
PropNex said prices in the OCR and RCR could be lifted in Q4, as major new launches come up in these submarkets, such as Nava Grove and Union Square Residences in the RCR.
Robust sales at the 348-unit Norwood Grand, which sold 84 per cent of its units at an average price of S$2,067 psf at launch, will prop up OCR prices in Q4, the agency said. In the RCR, Meyer Blue hit the market in October and moved 50 per cent of its 226 units at an average of S$3,260 psf.
Leonard Tay, Knight Frank research head, said: “There are a few months left in 2024 for developers to launch projects that are highly anticipated and if launched, these projects could very well move the index back into positive territory.”
PropNex’s Gafoor added: “Following the US Fed’s rate cut announcement, the STI (Straits Times Index) hit its highest level since November 2007. Taken together, we think buyer confidence has strengthened, and there is a more positive vibe in the market of late. We think the more upbeat sentiment will likely persist in Q4 and carry over into the new year, barring any unforeseen events.”
Rental market turning a corner?
What some found surprising in the URA’s Q3 data was that rents appeared to have bounced up after three straight quarters of decline.
The URA’s private residential rental index was up 0.8 per cent in Q3, a turnaround from the previous quarter’s 0.8 per cent decrease.
Still, rents are cumulatively down 1.9 per cent for the year thus far, although still 52.1 per cent above the pandemic-low of Q3 2020, said CBRE’s Song.
The vacancy rate also inched up to 7.2 per cent as at end-Q3, from 6.1 per cent in Q2. This followed the completion of 3,953 private housing units, including 700 ECs, in Q3. In comparison, Q2 saw 3,339 units completed, including 1,457 ECs.
This quarter’s injection in supply could have kept rental price growth in check, said ERA’s Chu.
In 2024, some 11,260 private homes, including ECs, are expected to be completed. Another 28,203 units will be finished between 2025 and 2027.
Given the high number of completions expected in Q4, Song of CBRE predicts that rents will “still be under pressure” until the end of this year, before completions decline in 2025 to 5,348 units.
“However, rents are unlikely to fall back to pre-2022 levels, due to increased property taxes, higher prices, higher mortgage payments from higher interest rates, and higher rental demand from the imposed 15-month wait-out period for (private home) downgraders,” she said.
CBRE moderated its projection for the full year’s rental index to a 3 per cent decline, led by CCR properties that have higher double-digit vacancy rates.
