Singapore private home prices rebounded to scale to a new height in the second quarter of 2012. The freshly released private property index (PPI) by the Urban Redevelopment Authority (URA) showed that prices continue to defy expectations, rising 0.4% to reach an all-time high of 206.9 points in 2Q12.
“At the current level, the index is 16.5% above the previous 2Q08 peak of 177.5 and this increase of 0.4% broke a eleventh consecutive quarter of price moderation to resume an upward trend. It appears that the strength of property demand has outweighed concern over the slowing economy, the worrying global economic situation especially with the troubles in Europe and weak growth in the US, and the dampening effect of multiple rounds of government measures.”
“In addition, other local factors such as low mortgage rates, rising affluence and the increased supply of mass market condominiums and Executive Condominiums (ECs) - have been driving demand for private residential properties in Singapore,” commented Mr Mohd Ismail, CEO of PropNex Realty.
Moderate rebound in Q2, reflects stabilisation of prices
“The 0.4% increase from 206.0 in the previous quarter reflected a stabilisation of the market as prices were generally flatter for the third quarter running—rising only 0.3% for 1H12. Comparatively, the price index was increasing at a sharper rate of about 4.4% for 1H11,” noted Mr Mohd Ismail.
In the individual sub-markets, the price index for the Core Central Region (CCR) recovered by 0.6% following a dip of 0.6 per cent in the previous quarter. The price index for the Rest of Central Region also recovered to a 0.4% while Outside Central Region (OCR), which reflects the suburban mass market segment, increased at a slower pace of 0.5%, compared to 1.1% in the previous quarter. This indicates that price growth was rather muted across all the sub-markets.
Mass market continues to drive demand
The 0.4% increase in prices in the OCR is the fifth consecutive quarter in which price growth is experienced. “The resilience of this sub-market could probably be attributed to the implementation of the Additional Buyer's Stamp Duties (ABSD) in December 2011. Since its implementation, a sharp reduction in foreign demand for private residential properties was observed, particularly that for private homes in the CCR and to a lesser extent the RCR. This in turn, made properties in the suburban mass market segment more appealing to HDB upgraders who buy with a longer term perspective,” explained Mr Mohd Ismail.
“The suburban mass market segment, which caters primarily to the local population, remained largely unaffected by the lingering cautious buyer sentiment due to two factors. Firstly, HDB prices have peaked and this encouraged more affluent first time homebuyers or HDB upgraders to consider moving into the mass market segment. Secondly, the sustained demand from HDB owners who have fulfilled the minimum MOP have the added option to purchase a second property as part of their investment portfolio.”
Volume of private resale transactions picking up pace
“A closer analysis on the significant increase of resale transactions in 2Q12 which accounted to 37% of the overall sales showed that interestingly homebuyers’ confidence is back for purchases in the Core Central Region (CCR). This was reflected in the increase of more than 100% in the volume of transactions in this region compared to 1Q2012.
The results are mainly contributed to the softening asking prices of sellers which are about 5 to 10% lower. This has encouraged more Singaporeans and PRs to pick up the resale units in CCR,” pointed Mr Ismail.
Expect near-term price correction, but long-term outlook remains stable
“The presence of high liquidity and favourable interest rate environment will continue to drive robust buying demand for private homes as evidenced by the rouse take-up of new private homes, which is supported by a stable employment level and growth in wages,” explained Mr Mohd Ismail.
However, it remains to be seen if the strong sales momentum can sustain for the second half of 2012. “The presence of price resistance should help to moderate any price increases for the next two quarters. Overall, given that URA’s all private residential property price index has appreciated only by a tame 0.3% in 1H12; private home prices will continue to remain relatively stable.”
“On the whole, we expect residential property prices in Singapore to remain largely flat with marginal and gradual growth of between 1 to 2% for 2012. The record supply in the pipeline could further help to alleviate any pent-up demand in the OCR, thereby preventing spikes in property prices. In the mid to long term, strengthening global economies would also boost investor sentiment, leading to a gradual recovery of CCR and RCR prices,” concluded Mr Mohamed Ismail.
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