SINGAPORE, April 3 — Private home prices rose the highest in almost eight years for the first quarter, surprising analysts who were predicting a moderate price increase.
This prompted some of them to revise their market forecast for non-landed private home prices to rise by up to 10 per cent this year — likely to be boosted by the growing momentum of transactions and by displaced homeowners from en-bloc sales who are looking for new homes.
On the back of positive economic growth numbers — barring no changes to the existing cooling measures put in place by the authorities — another factor for the projected increase are higher prices for new launches due to higher land and construction costs.
Eugene Lim, key executive officer of real estate agency ERA Realty, said: “The market was expecting a moderate price increase; this jump came quite as a surprise. With almost all the cooling measures still in place, this indicates a very positive market sentiment; and the market is on an upswing trend.
“We had projected a 3-5 per cent price increase for 2018 earlier this year and have now revised it to 8-10 per cent.”
The private residential property price index gained 3.1 per cent quarter-on-quarter in the January-to-March period, flash estimates from the Urban Redevelopment Authority (URA) showed yesterday. This is up from the 0.8 per cent increase registered in the previous quarter.
Aside from being the third consecutive quarterly expansion, it is also the largest quarterly price increase since the second quarter of 2010, when prices rose by about 5.3 per cent then.
Lim said that the more-than-expected price increase could have been contributed by people who are afraid of higher price increases in the months to come and are buying now, as well as an upward revision of prices from “opportunistic” sellers.
Tricia Song, head of research for Singapore at Colliers International, agreed that there is “pent-up demand and buyers’ fear of missing out on good value buys as prices trend up”.
“We now project average private home prices to rise by 8 per cent (from the 5 per cent forecast earlier) for the full year 2018, implying a rise of another 5 per cent for the rest of the year,” she added.
Rising land cost
For the first quarter, prices of non-landed private residential properties rose the most in the core central region (CCR) or city centre, at 5 per cent. This was followed by the suburbs, or outside central region (OCR), at 3.8 per cent. For the rest of central region (RCR) or city fringes, the increase was 1.1 per cent.
Desmond Sim, head of CBRE Research for Singapore and South-east Asia, said: “The increases in the CCR and OCR could be attributed to rising land cost, and that average asking prices have been trending upwards while the quantum remains.”
The 5 per cent increase in the CCR could be attributed to a few projects selling well, he noted, adding that it was the same situation for the OCR.
With rising land prices, developments were sold at competitive prices per square foot, while sizes were maintained to facilitate sales, Sim said.
Seeing that most of the new launches for this year are located in the suburbs, Sim expects that region to maintain its growth, and that is where the “bulk of activity will be concentrated”.
For the CCR, prices may slacken, mainly due to the limited pipeline of launches and higher entry barriers, he added.
Song from Colliers International is of the view that prices are likely to rise by a more “gradual pace” for the rest of the year, as she expects more new launches and a rise in mortgage rates.
The flash estimates are compiled by the URA based on transaction prices given in contracts submitted for stamp duty payment and data on units sold by developers up until the middle of March. The authority will release the full three-month data on April 27. — TODAY
