April 01, 2022
01 April 2022, SINGAPORE – Private home prices and HDB resale prices continued to rise, albeit at a slower pace in the first quarter of 2022, following the introduction of new property cooling measures in December 2021 that were aimed at stabilising the market and reining in buying demand from foreigners and investors with multiple properties. The slowing price growth came amid a pullback in sales volumes as uncertainties loom.
The flash estimate from the Urban Redevelopment Authority (URA) showed that overall private home prices rose for the eighth straight quarter in Q1 2022, inching up by 0.4% QOQ – markedly slower than the 5% QOQ increase in the previous quarter.
Apart from the cooling measures, a mix of factors also contributed to the sluggish price growth in Q1 2022. These included a dearth of new project launches, diminishing inventory of unsold suburban new homes as well as the rise of Covid-19 community cases brought by the omicron variant, which had impacted home viewings and dampened the private resale market.
The price growth in Q1 2022 was led by the landed private homes segment, which grew by 4% QOQ. This was driven by the landed resale market as well as the new strata-landed project launched during the quarter – Belgravia Ace - which had sold units at an average transacted price of $4.4 million, likely boosting landed home values.
Overall prices in the non-landed homes segment contracted in Q1 2022 by -0.6% QOQ, with prices of homes in the central region largely slipping due to softer investor and foreigner demand as well as limited viewing activity due to the outbreak of COVID-19 community cases.
Prices in the Core Central Region (CCR) slipped by -0.5% QOQ in Q1 2022. Values of high-end homes in the CCR may continue to soften in the near-term as the cooling measures weigh on demand from investors and foreigners.
In the Rest of Central Region (RCR), home prices fell by -3.0% QOQ – reversing from the 6.7% QOQ growth posted in the previous quarter where the launch of Canninghill Piers at benchmark prices of nearly $2,900 psf had boosted values in the RCR in Q4 2021. Activity in the RCR market has been fairly muted in Q1 2022 due to the lack of new launches, most of the sales transactions during the quarter came from previously-launched projects such as Normanton Park, Avenue South Residence and One Pearl Bank.
While prices in the central region had slipped, non-landed homes in the Outside Central Region (OCR) bucked the trend. Prices continued to grow in Q1 2022, supported largely by demand from local homebuyers. Non-landed private home prices in the OCR grew by 1.9% QOQ, albeit at a slower clip from the previous quarter’s growth of 5.7%. The moderation in price growth can be attributed to the tighter unsold inventory and limited new launches which had likely crimped home sales and price growth in the OCR.
Based on Realis caveats data up till 22nd March 2022, more than 1,500 new private homes (ex. ECs) and about 2,600 private resale residential units changed hands in Q1 2022 - sharply lower than the 3,018 new homes and 4,748 resale homes transacted in the previous quarter.
“The private residential market got off to a slow start in 2022 after what was an exhilarating performance last year. The cooling measures have certainly helped to tame price growth in Q1 2022 to a more sustainable pace.
Typically, new launches help to boost home values. So, the moderation in overall price growth was not unexpected given the limited number of new launches during the quarter. We estimate that developers put out few hundred units of new private homes for sale in the last quarter – far fewer than the 3,716 new homes launched in Q1 2021 and 2,275 units launched in Q4 2021, as per URA data.
Over in the resale market, transaction volume has softened in Q1 2022, as the Chinese New Year festivities and the Omicron wave likely disrupted viewings and sales activities during the quarter. Some buyers could also have held back on property purchase to monitor the impact of the fresh cooling measures introduced in December 2021.
In addition, the level of uncertainties rose substantially in Q1 2022, with the escalation of the Russian-Ukraine conflict, which will likely exacerbate inflation woes and the global supply chain disruption. These uncertainties could also have weighed on market sentiment and buying interest during the quarter. Another downside risk to watch is rising interest rates – a much steeper borrowing cost may negatively impact sales.
Notwithstanding these risks, we expect the private housing market to remain fairly resilient this year and prices could grow by 3% to 5% in 2022, as HDB upgraders and local buyers help to underpin sales and the limited unsold stock could lend support to home values. Singaporeans continued to form the bulk of private housing demand in Q1 2022, accounting for 82% of non-landed private new sales and 76% of non-landed private resale transactions during the quarter.
Furthermore, the relaxation of community safe management measures and easing of travel restrictions will bode well for the property market, facilitating sales in the show flats and potentially spurring sales from more foreign buyers, who are able to visit and view properties. In Q2 2022, we anticipate several new projects to be launched for sale - including North Gaia EC and Piccadilly Grand – which will help to drive sales and sustain prices. With rising inflation and higher construction cost, we anticipate prices of new launches to stay firm.”
The flash estimate released by the Housing and Development Board (HDB) showed that resale prices of public housing flats rose by 2.3% QOQ in Q1 2022 - moderating from the 3.4% increase in Q4 2021.
Based on transaction data, about 6,500 HDB flats were resold in Q1 2022 – down by about 18% from 7,940 units sold in the previous quarter. The decline is largely due to the slower market activity during the Chinese New Year period as well as the exponential rise in COVID-19 community cases in February, which had hit more than 25,000 daily cases at the peak. The omicron wave likely dampened the number of viewings and affected sales during the quarter.
“The moderation in sales and price growth in Q1 2022 is unsurprising owing to the seasonal lull and as buyers take stock of the market following the introduction of new cooling measures in December. In addition, the tighter supply of resale flats available for sale may also have curtailed transaction volume after a year of robust sales in 2021. Some HDB upgraders could have held back on selling their flat as their new home is not ready for occupation owing to completion delays.
On the demand side, concerns over construction delays and long waiting time for new homes was one of the factors that had helped to drive demand for HDB resale flats last year, especially among buyers with more pressing housing needs. We expect demand for HDB resale flats to remain resilient this year, with more flats becoming available for resale as they attain their minimum occupation period (MOP) – over 31,000 flats are estimated to reach their MOP in 2022.
In addition, as the construction sector manpower situation improves, we could see more HDB flat owners getting keys to their new home and subsequently putting their flat on the resale market. We note that the recent announcement on the streamlining of entry requirements for new construction, marine shipyard and process sector workers will accelerate the entry of workers into Singapore and thus alleviate the labour crunch in those sectors.
The HDB resale market had a banner year in 2021, with prices growing strongly at 12.7% and sales volume hitting a 10-year high at more than 31,000 units. We do not expect prices to continue to grow at the pace witnessed in 2021, as that would be unsustainable. For the full year 2022, we project that HDB resale prices could rise by 6% to 8%, as cooling measures temper the buoyant market sentiment and buyers becoming more resistant to higher prices.”
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