What does the year 2018 have in store for Singapore’s residential property market?
Everyone knows that economists make for poorer forecasters than the weathermen, but economists continue to hold their jobs, the general public continues to want to hear the forecasters divine the future, and the whole prediction cycle continues to spin along.
There’s no avoiding forecasts for the future and with real estate being such a key part of the lives of Singaporeans, this is what the
fortune tellers consultants have to say for the residential market in 2018.
JLL: Residential market likely to recover by early 2018
According to Tay Huey Ying, JLL’s head of research for Singapore, luxury home prices have recovered by 1.1% in the early part of 2017. Signs of recovery are beginning to appear when prices bottomed out in 3Q2016.
The recovery in the luxury sector was due to various types of deferred payment schemes made available by developers such as OUE and Wheelock properties. Condominium developments where the scheme was available include OUE Twinpeaks and Ardmore III.
Even though prices for mass market homes have fallen 11% since their 2013 peak, Huey Ying sees a reversal soon, following a strong showing in developer sales volume in early 2017.
In the government land sales program, there are also signs that bidding is becoming more aggressive. Early in 2017, a Toh Tuck Road site attracted 24 bids.
Morgan Stanley: Home prices to rise by 8% in 2018
Morgan Stanley is one of the more bullish equity research houses to put out a 2018 forecast. They expect prices to rise by 8% in 2018, compared with DBS’s forecast of a 3 percent rise in the same year.
Early in 2017, Morgan Stanley’s analyst Wilson Ng expects prices to double by 2030.
In September, Wilson maintains his forecast, reiterating that he sees an inflection point in early 2018.
The optimistic outlook is precipitated by the rising number of en bloc deals which started in early 2017. Substantiating his view, Wilson sees that, with leverage, there could be a potential capital inflow of S$13 billion when the money received by displaced owners re-enters the market.
There are also many more en-bloc developments in the market, with some analysts saying there are up to 50 more in the pipeline.
Savills: Transaction volumes to rise substantially
Alan Cheong from Savills has a very bullish tone on the market in 2018, proposing that, “When a large batch of new projects is launched in 2018, it will come as a rude awakening to those who hold onto the belief that prices are languishing”.
This view is supported by brisk 2Q2017 sales in the residential market. Despite the June school holidays, buyers snapped up 3,077 units in total in the quarter. This is up 3.9% on a quarterly basis and 36.4% year-on-year.
Very clearly, 2016’s second quarter was not a strong one, leading to the sharp yearly rise in quarterly sales.
Given the numerous en-bloc deals that have occured in 2017, there exists the potential for a spike in migratory demand as displaced owners find alternative housing once they handover their units to the en-bloc buyer.
Some might buy a public flat to lock in the cash portion of their windfall, but there will still be a substantial number of displaced buyers who will be looking to maintain their exposure to the private residential market.
Some may even use the cash proceeds to buy two properties – One for their own stay and the other to be rented out.
While the real estate market engine is very complex, the build up of momentum since mid-2017 is likely to carry through to the remainder of the year and into 2019. If the government does not clamp down heavily on the property market with more punitive policy measures, the price rises may even spill over to 2019.