Private property market has turned but price increases will be gradual, say analysts

ERA Realty Network says it expects prices "to remain flattish, possibly moving within the range of 0 to 1 per cent for the whole year".
ERA Realty Network says it expects prices "to remain flattish, possibly moving within the range of 0 to 1 per cent for the whole year".PHOTO: ST FILE

SINGAPORE - Private home prices have turned but increases going forward will be gradual because of strong property cooling measures in place, according to early analyst reactions.

The analysts were responding to official flash estimates showing the private residential prices rising quarter-on-quarter for the first time in nearly four years, according to a Urban Redevelopment Authority (URA) index released earlier on Monday (Oct 2).

ERA Realty Network says it expects prices "to remain flattish, possibly moving within the range of 0 per cent to 1 per cent for the whole year". Year to date, prices have inched up by 0.1 per cent.

Its key executive officer Eugene Lim noted that robust sales underpinned the 0.5 per cent quarter-on-quarter increase in private home prices in the three months to September.

ERA estimated that from July 1 to Sept 24, covering almost the whole of the third quarter, 2,870 private properties were sold by developers and 3,112 resale caveats lodged. This is already a 44.9 per cent and 19 per cent increase from the 1,981 developer units and 2,615 resale units in the same quarter a year ago.

Year to date, developer sales and resale transactions stand at 8,909 units and 9,050 units. This is 57.5 per cent and 42.8 per cent higher respectively than the 5,656 new sales and 6,337 resale units for the same period last year.

 

"We view this as a strong signal that the market has turned," said Mr Lim. "However, as the TDSR continues to keep a lid on prices, we are expecting any price increase to be gradual."

The TDSR, which refers to the total debt servicing ratio which limits how much buyers can take out in home loans, was the the biggest of government property cooling measures introduced in the middle of 2013.

Mr Lee Nai Jia, senior director and head of research for Edmund Tie & Co, said the third quarter price rise is “unlikely to be a flash in the pan, given that private residential sales have been building up for a while”.

He also expects prices to slowly trend up, and sees them rising by 4 to 8 per cent in 2018. 

OCBC research analysts Eli Lee and Andy Wong forecast private home prices to be overall flat in 2017 and to appreciate 3 per cent to 8 per cent in 2018, as the rental market begins to pick up and macro-economic conditions remain firm.

Desmond Sim, CBRE Research head, Singapore and South East Asia, said the 0.5 per cent price increase "is the best indicator that the correction period of the market is past us".

But he noted it is still too early to call a market rebound "as we need more than one data point".

Mr Sim said he expects price increases to hover between 0 per cent and 2 per cent, with "a near-definite increase" in the URA index in the next six months expected, driven particularly by higher land prices than by a demand-supply mismatch.

"The Singapore government will now be monitoring the price performance closely but the impending rise in interest rates will be a major factor to consider when buyers decide on a purchase," he cautioned.