SINGAPORE - Private home prices in Singapore are forecast to fall by as much as 8 per cent this year by market observers but they could go lower if the coronavirus-triggered economic slump worsens, job uncertainties rise and the “circuit breaker” period is extended yet again.
On Friday (April 24), final data from the Urban Redevelopment Authority (URA) for the first quarter of this year - before circuit breaker measures were imposed - showed that private residential prices dropped 1 per cent from the previous quarter, slightly less than the 1.2 per cent initially estimated.
The drop comes after three consecutive quarter-on-quarter gains, with private home prices last up a modest 0.5 per cent in the fourth quarter of 2019. Prices achieved a “soft landing” last year with the July 2018 cooling measures, softening by 2.7 per cent.
Year on year, private home prices in the first quarter are still up 2.4 per cent from March 2019.
Ms Christine Sun, head of research and consultancy at OrangeTee & Tie, said prices of private homes may decline up to 4 per cent for the full year, though her forecast may be revised if the circuit breaker extends beyond June 1.
She added: "Although the long-term effects of the coronavirus pandemic remains uncertain, the bright side is that Singapore’s property market has always recovered after every economic crisis. Buying activities could pick up faster than other downturns given the pent-up demand from many weeks of home isolation. "
Mr Desmond Sim, CBRE's head of research for South-east Asia, predicts prices will correct by 5 to 8 per cent this year. "Softer economic sentiments may hold back buyers while we could see developers with weaker holding power offering more competitive pricing to move units," he said.
According to URA's final data for the first quarter, prices of non-landed properties declined by 1 per cent, worse than the 0.3 per cent drop in the previous quarter. Prices of landed homes dropped 0.9 per cent, reversing from a 3.6 per cent increase in the previous quarter.
For prices of non-landed properties by region, those in the core central region fell 2.2 per cent, compared with the 2.8 per cent drop in the previous quarter. Units in the city fringe or rest of central region dipped by 0.5 per cent, compared with the 1.3 per cent fall in the previous quarter. Prices in the suburbs or outside central region declined 0.4 per cent, compared with the 2.8 per cent increase in the previous quarter.
The closure of sales galleries, stay home measures and the restriction of foreign visitors into Singapore will put more downward pressure on the volume of new home sales, which began to fall in the first quarter of this year before the circuit breaker came into effect.
URA data showed resale and subsale transactions in the first quarter stood at 2,120 units, a 12.9 per cent drop from the previous quarter but 11.3 per cent higher year on year.
Developers moved 2,149 new homes (excluding executive condominiums or ECs) in Jan-March this year, down by 12 per cent quarter on quarter but up 16.9 per cent year on year. They also launched about 6 per cent fewer units - 2,093 as against 2,226 units in the previous quarter.
"We believe the take-up has yet to reflect the full impact of Covid-19 as the circuit breaker measures kicked in after the quarter-end, at 7 April, and most of the transactions had occurred in January and February," said Tricia Song, head of research for Singapore at Colliers International.
Colliers' Ms Song says developers’ sales may fall to 8,000 units in 2020, compared to the 9,912 units in 2019, assuming some rebound due to pent-up demand before the year-end."
CBRE's Mr Sim sees developer sales for the whole year dropping to between 4,000 to 5,000 units (excluding ECs) , especially if the severity of Covid-19 is prolonged. New units for launch will continue to slow down as some developers delay their project launches in this uncertain time, amid the closure of show galleries, he added.
Mr Nicholas Mak, ERA Realty's head of research & consultancy, said: "Almost two-third of the potential housing transaction volume in the second quarter of this year can be written off due to the eight-week partial lockdown. Even after the lockdown is lifted, the spread between the bids and offers of property buyers and sellers would widen due to the expected economic impact of Covid-19, resulting in fewer transactions in the coming months."
He said prices could contract by 3 to 6 per cent this year with Singapore headed for a recession. "All this could change once the pandemic is contained, and confidence is restored in the market," he added.
For the rental market, URA's data show that rents rose 1.1 per cent in the first quarter of this year, reversing from a drop of 1 per cent in the previous quarter, while the number of leasings rose 2.4 per cent to 21,191 units. Overall rents are still 10.7 per cent below the peak in the third quarter of 2013.
Orange Tee & Tee's Ms Sun said the spike in short-term demand likely propped up rental prices last quarter. Rental renewals rose last quarter as many foreign workers required immediate lodging prior to the circuit breaker measures and lockdowns imposed by Malaysia, she added.
Colliers' Ms Song expects rents to stabilise in 2020, from an expected 5 per cent increase previously, given the economic fallout from the pandemic.
"While expat demand may decline due to loss of jobs and pay reductions, rents are unlikely to crash as completions in 2020 will be significantly below the 10-year historical annual average of 12,948 units, with potential delays, and vacancy remains tight below the historical average of 8 per cent," she said.