Two-speed market develops for private-home prices

Two-speed market develops for private-home prices

A TWO-SPEED market may be emerging in the private residential property market, with the price declines for non-landed units in prime areas and the city fringe moderating, while declines for suburban non-landed units and landed homes accelerate.

This observation among some property consultants was stoked by the latest flash estimates by the Urban Redevelopment Authority (URA), which showed signs of such diverging trends in the first quarter of this year.

On Friday, URA data showed private residential property prices slipped 0.7 per cent in the first quarter on a quarter-on-quarter basis; this was the 10th straight quarter of decline, following a 0.5 per cent decline in the fourth quarter. The key drag was a 1.5 per cent fall in landed home prices.

Non-landed home prices dipped 0.4 per cent during the quarter, with the steepest 0.9 per cent decline seen in the Outside Central Region (OCR), followed by a 0.4 per cent slide in the Rest of Central Region (RCR). The Core Central Region (CCR), however, bucked the trend with a 0.4 per cent price uptick. Ong Teck Hui, JLL national director of research and consultancy, said: "We could be seeing a two-speed market with price declines in CCR and RCR moderating in 2016, while OCR and the landed segment continue to soften at a higher pace."

He explained that prices in the CCR and RCR had softened more significantly in the earlier part of the property down-cycle. "Having declined more in prices, CCR and RCR properties would appear relatively more attractive and find buying support, which would in turn mitigate price declines."

For landed homes, however, the price quantums tend to be higher and sellers have to offer discounts if they have an urgent need to sell, DTZ regional (South-east Asia) research head Lee Nai Jia said.

Consultants note that the sub-index for CCR non-landed home prices in the first quarter was bolstered by the success of CapitaLand's Cairnhill Nine - which sold more than 60 per cent of its 268 units since its launch in March - and a lack of new launches in CCR in the preceding quarter.

ERA Realty key executive officer Eugene Lim said this indicates that luxury properties are finding favour among high-net-worth buyers who are looking for value buys in Singapore's prime districts, given that the properties there are transacting at a discount, compared to those in major cities such as London and Hong Kong. There were 460 caveats lodged for properties bought in the CCR this year as at March 22, up from 328 in Q1 2015.

For the basket of high-end non-landed units in the CCR tracked by Savills, prices had already turned the corner in the fourth quarter of last year, with a slightly more than one per cent rise quarter on quarter.

But whether this is a convincing price recovery for CCR non-landed homes will depend on whether the stalemate between potential buyers and sellers in the resale market will be resolved soon, said Savills Singapore research head Alan Cheong.

As for non-landed homes in the RCR, there would have been a return of buying interest if not for the slowing economy, he said. How soon transaction volumes and prices will turn around in the RCR region will depend on the overall economy and whether there will be more structural layoffs in the offshore marine and banking sectors.

Desmond Sim, CBRE head of research for Singapore and South-east Asia, concurred that the risk of job losses would keep buyers from committing to a home purchase. This, along with a limited number of new property launches, could affect volumes.

Estimates by Knight Frank showed that the steepest price declines (0.5 to 1 per cent quarter-on-quarter fall) for non-landed homes in the second quarter would probably take place in the OCR region on the back of massive supply, while non-landed home prices in the RCR could see a more moderate decline of 0.1 to 0.4 per cent; CCR non-landed home prices may dip 0.2 per cent in the worst-case scenario, or a rise of 0.3 per cent at the upper end of the forecast.

This article was first published on April 4, 2016.
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