Resale home prices fell last month

RESALE home prices dropped for the first time in four months in May, as growing fears over higher interest rates dampened buyer sentiment.

Prices of resale homes last month fell 0.2 per cent from April, according to the flash Singapore Residential Price Index (SRPI) released yesterday. In April, prices rose 1.9 per cent from March.

Suburban and smaller homes led the dip in resale prices, while prices of homes in the central region continued to rise at a slower pace, the index showed.

In the suburban region, resale prices of completed condos fell 1.6 per cent last month from April, with prices of completed small apartments - 506 sq ft or smaller - 1.3 per cent lower.

Property consultants said that the fall was partly caused by buyers' concerns over US Federal Reserve chairman Ben Bernanke's recent comments on tapering of quantitative easing.

Once the United States central bank embarks on such a move, interest rates are expected to shoot up, putting pressure on home loans.

Orange Tee's head of research and consultancy Christine Li said the price fall last month was essentially a correction in the market after a strong surge for the January to April period. Resale volumes decreased by 48 per cent from 1,136 transactions a year earlier to 594 transactions last month, Ms Li added.

Prices of resale properties in May were also affected by a slew of new launches that month, said R'ST Research director Ong Kah Seng.

"In months where there are fewer new projects launched, buyers tend to be more open to resale homes," said Mr Ong.

"But in months where there are more projects on offer, buyers who can afford to wait for the completion of the new home in about three years will definitely hesitate in buying a resale property."

Last month, statistics showed that 1,939 new private homes, including 418 executive condominium units, were sold, he said.

The SRPI showed that resale prices of completed properties in the central region rose by a smaller 1.5 per cent last month, compared with an increase of 1.9 per cent previously.

Mr Ong said: "This is encouraging although general buyers' interest for completed homes in the Central Region (districts 1 to 4) remains weak on the back of large unsold stock (from developers and new completions)."

"Prices for central properties will decline moderately as there are still a large number of high- end and luxury condo developments with unsold units even though they were completed two or three years ago," ERA's key executive officer Eugene Lim pointed out.

With about 16,742 new private homes projected to receive Temporary Occupation Permit status this year, the impending supply of new homes and the effects of the property cooling measures will work together to cause demand for completed homes to slow down, Mr Lim said.

ocheryl@sph.com.sg

Get a copy of The Straits Times or go to straitstimes.com for more stories.