Private home prices up 3.2% in Q1, driven by surge in landed prices and more new launches

SINGAPORE - Private home prices gained 3.2 per cent in the first quarter of 2023 even as sales dropped, fuelled by a surge in landed property prices and overall growth in non-landed prices, particularly in the city fringe.

This is in stark contrast to the tepid gain of 0.4 per cent in the fourth quarter of 2022.

Year on year, prices rose by 11.3 per cent last quarter, according to flash estimates released by the Urban Redevelopment Authority (URA) on Monday, which are based on data till mid-March.

Landed prices surged 5.7 per cent, up from a 0.6 per cent increase in the previous quarter.

This was driven by new landed project Pollen Collection, which saw take-up double to eight units since its launch in October 2022. Median prices for its terraced houses jumped to $2,199 per square foot (psf) in the first quarter from $1,893 psf in the fourth quarter, according to CBRE.  

Meanwhile, non-landed private home prices, which grew 3.2 per cent in the first quarter, are likely to flatten out or rise marginally in the next few quarters, CBRE head of research for South-east Asia Tricia Song said.

The overall private home price growth in 2023 should be slower than the 8.6 per cent jump in 2022, due to significantly higher borrowing costs and weaker economic growth, she added.

One factor that will sustain price growth is that developers are unlikely to reduce prices due to low unsold inventory, heightened development risks and construction costs, said Mr Wong Xian Yang, head of research at Cushman & Wakefield. Others include China’s reopening, a healthy local job market and rising rents.

However, private housing sales fell for a second straight quarter, with transaction volumes dipping 8 per cent quarter on quarter, and by about 38 per cent year on year, as affordability declined in the face of higher interest rates, rising prices and a slowing economy.

Despite stable take-up at new launches Terra Hill, Sceneca Residence and The Botany at Dairy Farm, buying sentiment has turned cautious.

The upcoming launch of the 638-unit Tembusu Grand, 807-unit The Continuum, 598-unit Lentor Hill Residences and 740-unit The Reserve Residences will be watched for the strength of buyers’ appetite amid rising headwinds, Ms Song added.

Nonetheless, first-quarter prices got a boost from more property launches, said Huttons senior director of research Lee Sze Teck. He noted that most buyers seem unfazed by the marginal increase in buyer’s stamp duty for pricier properties announced in February.

The non-landed price increase of 2.5 per cent, up from 0.3 per cent, was driven by a higher proportion of new home sales, noted OrangeTee & Tie senior vice-president of research and analytics Christine Sun.

According to URA Realis, new homes, excluding executive condominiums, made up 33.4 per cent of total sales last quarter, up from 18.9 per cent in the preceding quarter. Resales, however, dipped to 62.4 per cent from 76.1 per cent over the same period, she added.

The city fringe area outperformed other sub-markets with a 4 per cent jump in prices in the first quarter, up from 3.1 per cent in the previous quarter, thanks to robust sales at Terra Hill in Pasir Panjang at a median selling price of $2,699 psf.

Prices in the suburbs rebounded 1.9 per cent from a drop of 2.6 per cent, as

Sceneca Residence

and The Botany at Dairy Farm booked good sales on launch day, with HDB upgraders underpinning demand, Mr Lee said.

In the prime district, prices gained 1 per cent in the first quarter, up from 0.7 per cent in the previous quarter, with existing projects seeing greater take-up as the price gap narrowed between the prime district and the other two sub-markets, analysts said.

Potentially cooling private home prices is the slowing momentum in HDB resale price growth, market observer Nicholas Mak said. Prices of Housing Board resale flats grew at a slower pace of 0.9 per cent in the first quarter of 2023 compared with the 2.3 per cent increase in the previous quarter.

With more Build-To-Order supply hitting the market in 2023, this could dampen HDB resale price growth and in turn affect HDB upgraders’ demand for private housing, he added.

“About eight out of every 10 buyers of private housing are Singaporeans, and about 80 per cent of the local population live in HDB flats. Hence, demand from HDB upgraders is critical to the health of the private housing market,” Mr Mak said.