Press Release

July 24, 2020

Private Home Prices And Hdb Resale Prices Withstood The Pandemic, Posting A Marginal Increase In Q2 2020

24 July 2020
Private Residential Property

Overall private home prices in Singapore unexpectedly rose by 0.3% in Q2 2020, following the 1% decline in the previous quarter, according to the latest real estate statistics announced by the Urban Redevelopment Authority. The marginal uptick in prices in Q2 reversed the forecast of a 1.1% decline in the flash estimate released earlier this month.

The improvement in private home prices from Q1 to Q2 was fairly broad-based across the landed and non-landed home segments, with the exception of the Rest of Central Region (RCR). In Q2 2020, the non-landed home segment led the increase, rising by 0.4% – boosted by the Core Central Region (CCR) which saw prices climbed by 2.7% and the Outside Central Region (OCR) where prices inched up by 0.1%. In the Rest of Central Region (RCR), Q2 home prices fell by 1.7%, a steeper decline compared with the 0.5% fall in the previous quarter. Meanwhile, landed home values remained unchanged in Q2, after slipping by 0.9% in Q1 2020. (See Table 1).

In terms of sales volume, 2,664 private residential properties were sold (See Chart 1) in Q2 2020, representing a 37.6% quarter-on-quarter (QOQ) decline from the 4,269 private homes sold in Q1 2020. On a year-on-year (YOY) basis, sales were 44.1% down from the 4,766 units transacted in the corresponding period in 2019.

On private home prices and market outlook:
Please attribute the comments below to Ismail Gafoor, CEO of PropNex.
“Notwithstanding the COVID-19 pandemic and economic slowdown, it appears that property prices have defied the odds to register a small growth in Q2 2020. This is an upside surprise given the unprecedented safe distancing measures and mass gathering restrictions in Q2 2020, which resulted in showflat closures and a standstill in the resale market. In addition, there were almost no major project launches in Q2 which typically help to boost volume and support prices.

We think the residential property market held up well in the face of crisis and it is testament to the resilience of the sector, which in our view entered the crisis with strong fundamentals, as various property measures over the years have curbed overexuberance in the market. By and large, we believe developers could draw some comfort from this set of numbers which showed that sales and prices have put up a good resistance to what is probably the biggest crisis for Singapore and the world.

Cumulatively, the Property Price Index has now fallen by 0.7% for the first half of 2020. On account of the resilience seen in Q2 2020 and our observations on the market, we are adjusting our forecast for prices to fall by 1 to 2% this year, rather than the 3% drop in our earlier projection. Our observations on the ground suggest that private home prices will likely be fairly stable. Developers with strong holding power are generally not cutting prices actively but have adopted sensitive pricing as buyers remain value conscious. In addition, home values could find more support in the near-term with several new launches still to come as well as the potential for economic recovery – albeit patchy - in the quarters ahead. Meanwhile, developers’ sales may fall to about 7,500 units (excluding Executive Condos) this year – down by about 24% from 9,912 transacted in 2019”

On new private home sales and demand profile:
Please attribute the comments below to Wong Siew Ying, Head of Research and Content, PropNex.
“As developers set to roll out more projects with prices that are attuned to the market, we believe there is still a good chance for the new home sales momentum seen in June to be repeated in the months ahead. While the economic downturn could lead to some buyers postponing their buying decision, we believe the benign interest rates and strong fiscal policy measures to help businesses and individuals will broadly lend support to housing demand and underpin sales.

In Q2 2020, developers sold a total of 1,713 new units (excl. ECs) in the primary market – 20.3% lower than 2,149 units in Q1 2020 and down by 27.1% YOY. Taken together, new home sales totalled 3,862 units in the first half (1H) of 2020, down by 7.6% from the 1H 2019.

Of the new private homes sold in Q2 2020, mass market homes in Outside Central Region (OCR) accounted for about 49% (833 units) of the total new sales. Projects in the OCR such as Treasure At Tampines, Parc Clematis, and The Florence Residences topped the sales chart last quarter and appeared to be steadily shifting units while keeping prices fairly stable. Based on Realis data, the median transacted prices of the three projects all came in slightly higher in Q2 – at between 1 and 6% - than their respective launch prices (see Table 2).

PropNex Research notes that 90% of the new private homes sold in Q2 2020 were below $2 million, slightly higher than the 86% in the previous quarter. Meanwhile, 61% of new units transacted were under 800 sq ft (Q1 2020: 63%), according to Realis figures. The data continues to affirm that buyers are price sensitive and mostly prudent in their home purchase.

As developers progressively move units, the unsold inventory continued to decline to 27,977 as at the end of Q2 2020 (See Chart 2), down from 29,149 units in the preceding quarter. Based on the historical 10-year annual average for new home sales at around 12,000 units a year, it would take just over two years to clear the remaining unsold units. Even adopting a conservative sell-through rate of 7,000 units per annum, the unsold stock could be cleared in about four years - which is still a reasonably healthy timeline.”

HDB Resale
The Housing and Development Board (HDB) has also released its HDB Resale Price Index which showed that resale prices of public housing flats rose by 0.3% in Q2 2020 (See Table 3) – building on the price resilience seen in the preceding three quarters. The 0.3% print is also higher than the 0.2% growth indicated in the flash estimates announced in the beginning of July.
It marked the fourth straight quarter that HDB resale prices stayed out of the negative territory, following six years of decline from 2013 to 2018. The HDB resale price index (131.9) is now 11.7% below its all-time peak (149.4) in Q2 2013.

On HDB resale prices and outlook:
Please attribute the comments below to Ismail Gafoor, CEO of PropNex.
“The HDB resale market likely bottomed in Q2 2020 with prices growing marginally by 0.3% from the previous quarter. We started to see some improvement in HDB resale prices in the second half of 2019 – no doubt helped by various changes to housing policies, including the enhanced CPF Housing Grant, higher income ceiling and relaxation of rules in using CPF to buy older HDB flats. The fact that prices held up in recent quarters – amid the pandemic – reflects the strength of the HDB resale market, where sellers still have sufficient holding power and are able to maintain their asking prices.

We believe factors that would help to keep prices fairly stable in the HDB resale market include: 1) the Mortgage Servicing Ratio of 30%; 2) buyers of resale flats are mostly owner occupiers; 3) limited speculative activity; and 4) healthy underlying demand for resale flats. Hence, we expect HDB resale prices to remain flat for the rest of the year, with a potential for marginal upside of up to 1% increase for the whole of 2020.
In terms of sales volume, a total of 9,319 HDB flats were resold in 1H 2020. We are projecting overall HDB resale volume to be in the range of 21,000 to 22,000 for the full-year 2020, compared with 23,714 units resold in 2019.”

On HDB resale transactions:
Please attribute the comments below to Wong Siew Ying (???), Head of Research and Content, PropNex.
“HDB resale transactions have been on a growth trajectory from 2014 (See Chart 3), growing each year to reach 23,714 units last year and we saw that sales momentum spilling into Q1 2020 where 5,893 HDB flats were resold, which incidentally was the highest quarterly HDB resale volume for a first quarter since 2012.

We believe the 41.9% QOQ decline in HDB resales volume to 3,426 units in Q2 2020 does not reflect weaker demand for such homes, but rather the effects of the circuit breaker and Phase 1 measures which restricted agents from conducting property viewings and closing sales. Indeed, transactions picked up significantly upon the re-opening of the economy, thereby boosting June’s volume.

Demand for resale flats is likely to remain fairly healthy and we anticipate that HDB resale volume should improve in the quarters to come. Meanwhile, given Singapore’s high national savings rate, we think household wealth should be able to provide some buffer against immediate sell-down in the event of job loss”.