Prices of private homes in Singapore likely to stay depressed

Over-supply a key factor and analysts expect cooling measures to stay in the near term

MCC Land's The Poiz Residences and The Poiz Centre. The developer has chalked up a tidy number of sales this year, up 55 per cent from last year.
MCC Land's The Poiz Residences and The Poiz Centre. The developer has chalked up a tidy number of sales this year, up 55 per cent from last year. PHOTO: MCC LAND

SINGAPORE - There will not be a major correction next year but factors from oversupply to lending curbs will keep prices of private homes and executive condominiums (EC) depressed, say analysts. They also warn that any let up on cooling measures seems unlikely in the near term as the price falls have not affected most owners.

Mr Desmond Sim, CBRE research head for South-east Asia, told The Straits Times yesterday: "Most developers are still propped up by holding power as well as land prices, which continued to be quite high over the past year.

"Unless developers are willing to take a big cut in profits, new sale prices should be quite stubborn."

Prices of new homes could fall 3 to 5 per cent next year although projects with many unsold units may cut even more, according to Ms Alice Tan, head of research at Knight Frank Singapore.

The prospects are no better for ECs, with average prices coming down from a high of over $800 per sq ft (psf) in the first half of this year to $780 psf in this half, said R'ST Research director Ong Kah Seng. Average EC pricing next year should be lower, at $750 to $780 psf, he added.

Unsold stock is a key issue bedevilling the private market, with around 24,000 new units languishing in the market. Apart from the amount of unsold units, developers will be under increasing pressure to sell due to Qualifying Certificate penalties and the Additional Buyers' Stamp Duty (ABSD), he added.

Developers have been trimming prices all year as market realities began to bite. Median prices at The Panorama, for example, fell from $1,343 psf at initial launch in January last year to $1,226 psf in October, noted Mr Wong Xian Yang, OrangeTee research manager.

Sims Urban Oasis prices were down from $1,397 psf at the February launch to $1,285 psf in October.

It is clear that buyers - governed by both the Total Debt Servicing Ratio (TDSR) and ABSD - are being more selective.

Mr Elson Poo, general manager of marketing and sales at Frasers Centrepoint Homes, said they are focusing on projects that offer attractive pricing as well as other value propositions such as lifestyle concepts or prime locations.

Frasers Centrepoint has sold around 760 units so far this year, largely thanks to the popular North Park Residences.

Developer MCC Land has also chalked up a tidy number of sales this year, up 55 per cent from last year to 354 units. If MCC Land includes development projects that it manages for Hao Yuan Investment, its total sales would be 487, similar to 470 units sold last year.

While slightly fewer new private home sales took place this year - the tally of 6,619 units in the first 10 months was 4 per cent lower than last year's - the unsold stock of private homes has been falling. There were 24,149 units unsold in the third quarter, an 18 per cent fall from the same time last year and 25 per cent down compared with two years ago, noted Ms Tan of Knight Frank. "The adjustment of prices, albeit at a moderate level from about 2 to 3 per cent discount, coupled with pent-up demand, especially from local homebuyers, has helped improve take-up rates in the last two quarters," she added.

In the resale market, prices at the top five projects this year have fallen between 6 and 11 per cent from 2013, according to OrangeTee, although prices rose at one of the developments.

Resale volumes may have increased but rents are still expected to remain soft due to the many completions expected next year and limited growth in foreign labour numbers, said Mr Wong of OrangeTee.

EC developers could get more desperate to sell where there are more than 300 unsold units at a project, such as Sol Acres, The Criterion and The Terrace, said Mr Ku Swee Yong, Century 21 chief executive officer.

"The raised income ceiling of $14,000 (earlier this year) does not seem to have brought in many buyers," he said.

Overall, private home prices are down about 8 per cent from their last peak in the third quarter of 2013.

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A version of this article appeared in the print edition of The Straits Times on December 10, 2015, with the headline Prices of private homes in Singapore likely to stay depressed. Subscribe