SINGAPORE – The Urban Redevelopment Authority’s (URA) private home price index snapped a three-year growth streak in the second quarter, due to higher financing costs and recent rounds of cooling measures, which spurred buyers to prioritise buying for occupancy, and tempered foreign investors.

Private home prices contracted at a slower pace of 0.2 per cent in the second quarter, less than the URA’s flash estimate of a 0.4 per cent drop, due to strong take-up at several new launches in recent weeks.

The overall price drop – the first since the first quarter of 2020 when the index fell 1 per cent during the onset of the pandemic – is in sharp contrast to a 3.3 per cent gain in the first quarter of 2023.

Year on year, the price index is up 7.5 per cent. But price gains moderated in the first half of 2023, up 3.1 per cent, compared with a 4.2 per cent rise in the first half of 2022, according to OrangeTee & Tie.

Driving the price fall is the slowing growth of landed property prices to just 1.1 per cent, following a 5.9 per cent jump in the first quarter. In addition, non-landed prices dropped 0.6 per cent, compared with a 2.6 per cent gain in the first quarter.

Analysts also pointed to a 2.5 per cent quarter-on-quarter drop in prices of non-landed private homes in the city fringe, compared with a 4.4 per cent rise in the first quarter even as the city fringe led sales volumes.

The Reserve Residences in Upper Bukit Timah was the top performer in the second quarter, selling 590 units. This is followed by Tembusu Grand in Katong, which sold 362 units, and The Continuum in Thiam Siew Avenue, also in the Katong area, which sold 217 units.

PropertyGuru Singapore country manager Tan Tee Khoon expects “uneven performances” among upcoming new condominium launches in the next quarter.

“The proximity to MRT stations, choice of schools, the scale of development and the number of one- and two-bedders will be key factors,” he said.

Prices in the prime district fell 0.1 per cent compared with the URA’s flash estimate of a 0.3 per cent increase, and a 0.8 per cent rise in the first quarter. This suggested that the doubling of the Additional Buyer’s Stamp Duty (ABSD) rate to 60 per cent for foreigners took a toll, Mr Leonard Tay, Knight Frank’s head of research, said.

But the prime district market should remain resilient as more local buyers are jumping in, with the price gap between this sub-market and city fringe properties having narrowed to just 8.7 per cent in the second quarter from 48.1 per cent in the first quarter, Mr Eugene Lim, ERA Realty Network’s key executive officer, said.

Despite a drop in new non-landed home purchases by foreign buyers to 109 units in the second quarter from 180 a year ago, a higher proportion of pricier prime district homes was sold to this group in the second quarter compared with a year ago, PropNex Realty chief executive Ismail Gafoor noted.

Close to 25 per cent of prime district new non-landed homes sold were priced above $5 million, up from 20 per cent in the second quarter of 2022, he said.

Price growth in the suburbs moderated to 1.2 per cent from 1.9 per cent amid a crunch in new home supply.

Mr Lim said the growth was “driven by the resale market, with median prices jumping 3.9 per cent quarter on quarter to $1,370 per square foot”.

This is as the price gap between new and resale prices of suburban properties has widened to 48.3 per cent, driving demand to the resale market, he added.

Edmund Tie head of research and consulting Lam Chern Woon noted that the suburbs accounted for 51 per cent of overall resales, as buyers favoured affordable mass-market properties amid the tight financing climate.

“HDB resale prices grew by 1.5 per cent quarter on quarter in the second quarter, picking up pace from 1 per cent growth in the previous quarter, helping to sustain upgrader demand for suburban homes,” he said.

Meanwhile, new home sales excluding executive condominiums (ECs) jumped to 2,127 units from 1,256 in the first quarter. There were 2,976 resale transactions in the second quarter, compared with 2,622 in the first quarter.

The number of sub-sales also increased to 285 from 243 in the previous quarter, due in part to a significant price gap of 20 per cent to 30 per cent between a new sale and sub-sale unit, Mr Mark Yip, chief executive of Huttons Asia, said.

A sub-sale is recorded when a buyer resells a property bought directly from the developer, before the project is completed.

“There is a growing number of buyers who prefer new projects that have yet to achieve their certificate of statutory completion, as they can save on renovation costs,” Mr Yip added.

Developers launched 2,374 uncompleted private homes for sale in the second quarter, up from 1,312 in the previous quarter.

The rental market rose at a significantly slower pace of 2.8 per cent in the second quarter – the smallest quarter-on-quarter gain since the fourth quarter of 2021 – compared with a 7.2 per cent increase in the previous quarter.

Rents will continue to ease as expatriate demand has slowed alongside the economic slowdown and as temporarily displaced owners move into their new homes, Ms Tricia Song, CBRE’s head of research for South-east Asia, said.

“But rents are unlikely to fall back to pre-2022 levels, due to increased property taxes, higher home prices and mortgage payments, and higher rental demand from the 15-month wait-out period for downgraders buying resale flats,” she added.

Rents of non-landed properties rose 2.3 per cent, against a 6.2 per cent gain previously, while rents of landed properties grew 6.7 per cent, compared with a 14.5 per cent jump in the previous quarter.

In the non-landed market, apartments in the suburbs saw the biggest rental hikes at 2.9 per cent, followed by the prime district and city fringe at 2 per cent each.

“Rental deals are taking longer to close as there remains a big disparity between landlords’ and tenants’ rental price expectations and the supply of new homes has increased,” Ms Christine Sun, OrangeTee & Tie’s senior vice-president of research and analytics, said.

The Government has been ramping up the supply of private housing. According to the URA, 12,306 units, including ECs, will be completed in the second half of 2023. In total, about 40,200 units including ECs are expected to be completed between 2023 and 2025.