Q3 private home prices up; new home sales double over previous quarter, but rents are down

white and orange house near water during daytime

A SHARP rebound in private home sales in both primary and secondary markets in the third quarter underpinned continued gains in the official private home price index, but it was a different story in the leasing market.

Private housing rents in Singapore continued to soften in Q3 2020, albeit at a slower clip, while vacancies rose

The Urban Redevelopment Authority’s latest data shows that private home rents in Singapore fell 0.5 per cent quarter-on- quarter in Q3, a smaller decline versus the 1.2 per cent decrease in the previous quarter.

The vacancy rate of completed private housing units rose to 6.2 per cent as at end-Q3 from 5.4 per cent in the previous quarter, despite relatively low net new supply.

JLL senior director Ong Teck Hui noted that in Q3 2020, net absorption of private residential properties stayed in negative territory, reaching an all-time low of minus 2,605 units since data on this was available.

“Leasing demand has been significantly dampened by the weak labour market as well as the government’s stricter policy on employment of foreigners,” he said.

Wong Xian Yang, associate director of research at Cushman & Wakefield, said the number of new private home completions in 2020 is expected to hit a record low of 3,075 units (based on available data since 1996) due to the “circuit breaker” delaying completion.

“However, the fall in demand due to weak economic conditions and current travel restrictions will continue to apply downward pressure on rents.”

Huttons Asia research director Lee Sze Teck attributes the slower drop in rental in Q3 to Singapore exiting the circuit breaker and resuming more economic activities. “However the rental market is expected to remain soft in the coming quarters as limited growth in new tenants and higher vacancy will pressure rents downwards.”

Savills Singapore executive director Alan Cheong also expects overall rents to remain soft, especially those for apartments leased at over S$3,000 per month.

But for units at S$2,000 to S$3,000 per month, the market could remain firm till at least first-quarter 2021 with a high number of transactions, he said.

“Apartments in this rental range fit the budget of foreigners who are already here and who have seen significant salary cuts.

“This segment of the market may also find locals renting for a variety of reasons such as waiting for their Build-to-Order HDB flats to be delivered; but because of the construction delays caused by Covid, they have a tenancy gap to cover,” Mr Cheong said.

On the soft rental outlook affecting investment demand for private homes, Mr Ong of JLL said that for those buying a new-sale from a developer, the project may be completed in three to four years, by which time, the oversupply is likely to be over.

“However, if one is contemplating buying a completed property with a view for investment, one would have to bear in the mind the risk of further declines in rents.”

URA data also showed that the number of unsold private housing units in projects with planning approvals continued to shrink, to 26,578 as at end-Q3 2020.

This is down 5.6 per cent from the previous quarter and a 29.7 per cent contraction from the high of 37,799 units in Q1 2019. The reduction has come on the back of strong developers’ sales and limited private housing land sales.

Amid the buoyant mood in the private home sales market, the URA benchmark private home price index rose 0.8 per cent quarter on quarter in Q3 2020, identical to the flash estimate released earlier this month.

This followed a 0.3 per cent q-o-q gain in Q2, taking the year-to-date gain to 0.1 per cent.

This was supported by buying demand in both developers’ sales and resale markets, despite recession, and rising unemployment.

Colliers International’s head of research for Singapore, Tricia Song, attributes this to the “strength of the underlying property market”, which can be attributed to: unprecedented fiscal stimulus including job support schemes, the ultra-low interest rate environment and the buoyant public housing or HDB resale market that enables upgraders to afford new private homes”.

The Housing Board’s resale price index rose 1.5 per cent q-o-q in Q3 2020, against a 0.3 per cent gain in Q2 2020.

During the third quarter, developers launched 3,791 uncompleted private homes for sale – double the 1,852 units on the market in the preceding quarter and up 4.5 per cent year on year.

With the acceleration of launches in Q3, new private home sales also doubled to 3,517 in Q3 2020 from 1,713 units in Q2 2020.

Market watchers attribute this partly to a continuation of the pent-up demand following the reopening of showflats and resumption of property viewings from June 19 after a hiatus of nearly 21/2 months during the circuit breaker.

In the first nine months of this year, developers moved 7,379 new private homes, close to the 7,469 units in the year-ago period.

In the resale market, 3,467 private homes changed hands in the third quarter, about 3.7 times the 933 units transacted in the previous quarter. Resale transactions accounted for close to half (49.2 per cent) of all sale transactions in the latest quarter, up from the 35 per cent share in Q2.

The tally of private home sales in the resale market for the first nine months was 6,480 units, against 6,607 units for the year-ago period.

Mr Lee of Huttons said: “The official Q3 2020 numbers from URA affirmed that the property market has shaken off the negative vibes from Covid-19 and returned to its growth trajectory. Since bottoming out in 2Q 2017, property prices have grown by 12.6 per cent or 1.0 per cent per quarter.”

ERA Realty’s head of research and consultancy, Nicholas Mak, is not expecting a lull in the fourth quarter when many people traditionally go for year-end holidays and developers slow down launches. This time, many will not be going on overseas vacations due to the pandemic.

“Therefore, some property developers may capitalise on the current buying momentum to launch their new residential projects.

“Between four and six residential projects with 1,720 to 2,450 units could be launched in Q4 2020. Some of these upcoming residential launches include Ki Residences and Clavon. Furthermore, developers would also release additional housing units for sale in projects that were launched recently,” said Mr Mak.

Property consultants expect developers to move 8,500 to 10,500 private homes for the whole of 2020; the figure for last year was 9,912 units.

They forecast the URA’s private home price index will change -1 per cent to +1 per cent for the whole of this year.