Suburban sales drive up private home prices

High demand for suburban mass-market units helped drive overall private home prices up 1 per cent in the second quarter.

This was a touch higher than a flash estimate of 0.8 per cent earlier this month and also outstripped the 0.6 per cent growth posted in the first quarter.

Analysts said the pick-up in pace as shown in Urban Redevelopment Authority (URA) data out on Friday suggested that market fundamentals remained solid.

But they added that the momentum was unlikely to continue due to home loan caps imposed by the Monetary Authority of Singapore late last month.

The overall increase was propelled by strong sales in the suburban mass-market segment, where prices jumped 3.8 per cent in the second quarter compared with a 1.4 per cent rise in the first three months of the year.

Suburban home prices also grew at 3.8 per cent in the final quarter of last year, but then came the tough cooling measures in January. These initially took some steam out of the market until the second-quarter rebound.

The main reason for the price jump was the launch of 738-unit J Gateway in Jurong late last month, analysts said. The project moved all units but one on its launch day, at a median price of $1,486 per sq ft.

City-fringe prices maintained a 0.2 per cent growth rate in the second quarter, the same pace as in the preceding three months. But city centre prices slid 0.2 per cent in April through last month, their first decline since last year's first quarter. The drop came after high-end home prices grew 0.6 per cent in the first quarter to hit an all-time high.

"This could indicate that developers and unit owners in the high-end market are beginning to succumb to the pressure of persistent weak demand by adjusting prices to move sales," said Colliers International research and advisory head Chia Siew Chuin.

Developers' launch volumes tumbled 21 per cent from the first quarter to 4,395 units, excluding executive condominiums (ECs), in the second quarter. New sales also fell, down 16 per cent to 4,538 units.

Resale transactions dipped 1.1 per cent to 1,982 units in the quarter but were 48 per cent lower compared with the same three months last year. "The secondary market for private homes has weakened to a level close to that during the global crisis," noted Jones Lang LaSalle Singapore research director Ong Teck Hui.

OrangeTee research head Christine Li said overall volumes could drop by as much as 15 per cent this year over last year. "The increase in pipeline supply together with the rising vacancy rate amid cooling measures could put downward pressure on prices in the near to medium term."

URA said 11,998 units, including ECs, will be completed in this half of the year with 21,235 homes expected to be built next year.

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