THE private residential market is set to sink deeper into the doldrums with buyers continuing to hold off purchases for as long as hard-hitting cooling measures stay firmly in place.
Analysts told The Straits Times private home prices could shed a further 2 per cent in the second quarter of the year from the first.
"Both developers and home sellers are reducing their prices to attract buyers amid the onslaught of property cooling measures," said Ms Alice Tan, director and head of research at Knight Frank Singapore. "The overall market sentiment remains fairly weak with macroeconomic uncertainties looming."
The forecast for lower prices comes even as more units are expected to have changed hands in the almost-ended second quarter.
Dr Chua Yang Liang, JLL head of research and consultancy, said the overall transaction volume for private homes may have grown about 10 per cent to 20 per cent quarter-on-quarter.
Already, the prime districts saw 253 transactions in April and May, up from 198 in January to February.
"But the fundamental driver (behind this) is that we are heading into the second and third quarters of the year, where activities are generally higher than in the first quarter," noted Dr Chua.
"Prices are likely to continue heading south on continual effect from policy measures, especially as demand in the mass market will probably weaken further."
The mass market will likely see further correction until next year, according to a report by Barclays released on Monday.
Mass market home sales - those outside the "central region" - fell 53 per cent to 469 units month-on-month in May, with no new launches.
The report added that the luxury home market, on the other hand, shows signs that it has bottomed out, with renewed interest in the segment. Sales in the core central region rose 73 per cent to 69 units, with more transactions for homes priced $2,000 per sq ft (psf) and above.
Luxury freehold condominium Cluny Park Residence, for instance, sold three units last month as prices dipped to $2,620 psf from $3,121 psf in August 2013.
As for the rental market, Dr Chua expects rates to keep falling, with another 3 per cent to 5 per cent correction for the rest of this year. This is "given the rising vacancy on the back of a generally weaker labour market, supply overhang, and expected new stock completion", he said.
A separate report by DBS Group Research said that with a slew of completions flooding the market this year and next, vacancy rates could jump to 9 per cent or 10 per cent from the current 7.9 per cent, "implying further pressure on rentals and prices".
The report added that residential prices, on the whole, would drop 12 per cent to 15 per cent over this year and the next.
"With the private property market continuing to operate in a tight financing and regulatory environment, we believe that the market remains in the early part of the down-cycle," it said.
"A widely anticipated reversal in policy measures is unlikely in the near term."
Ms Tan expects "pockets of opportunities for value buys" as the overall market could see further price moderation.
"Such value buys, especially in the high-end segment, may see healthy interest, given the growing latent demand for private homes from both local and foreign buyers."