Private home prices rise faster in Q3 despite Covid-19 recession

The overall price index for private residential properties rose by 0.8 per cent.
The overall price index for private residential properties rose by 0.8 per cent.ST PHOTO: LIM YAOHUI

Despite the recession caused by the Covid-19 pandemic, prices of private homes in Singapore picked up in the third quarter as the country entered phase two of its reopening after a two-month-long circuit breaker.

The overall price index for private residential properties rose by 0.8 per cent, faster than the 0.3 per cent rise in the second quarter, yesterday's flash estimates from the Urban Redevelopment Authority (URA) showed.

This follows a 1 per cent drop in private home prices in the first quarter of this year, their first quarterly decline in a year.

Year to date, private home prices edged up 0.1 per cent.

The latest property market snapshot comes after the URA on Monday clamped down on developers reissuing a buyer's option to purchase (OTP) multiple times.

The move is aimed at encouraging financial prudence amid Singapore's worst downturn by ensuring that buyers do not end up committing to new private homes they cannot afford.

Market experts said that seemingly robust new private home sales amid a severe recession in these past few months may have given rise to a somewhat distorted perception of the market.

Under the new guidelines, developers can no longer reissue an OTP to the same buyer for the same unit for 12 months after the original OTP expires.

Mr Wong Xian Yang, Cushman & Wakefield's associate director of research for Singapore and South-east Asia, said the private home market "remained surprisingly resilient", with third-quarter prices at their highest since the same period in 2013.

 
 

He said this reflected strong underlying demand for private homes and strong holding power due to unprecedented government support for the economy, which has mitigated distress sales and allowed sellers to hold on to their selling prices.

However, with economic uncertainty ahead and as pent-up demand is slowly absorbed, Mr Wong sees demand falling in the fourth quarter of this year.

Additionally, the new curbs on the reissuance of OTPs will cause a slight pullback in market activities as buyers adopt a more cautious stance, he said.

"For the whole of 2020, we expect prices to remain flat and fluctuate around a narrow band at around minus 1 per cent to 1 per cent, given ongoing market momentum and market headwinds."

Ms Christine Sun, head of research and consultancy at OrangeTee & Tie, said waves of quantitative easing by central banks around the world to stimulate their economies may also have had the effect of pushing up property prices.

"Investors' confidence was also boosted by an increase in foreign direct investment, especially from healthcare firms and tech giants."

URA data also showed that prices of private homes in the city fringes or rest of central region rose 3.3 per cent in the third quarter, compared with a 1.7 per cent drop in the previous quarter, while prices in the outside central region gained 1.7 per cent, compared with a 0.1 per cent increase in the previous quarter.

Only prices of non-landed private homes in the prime areas or core central region declined in the third quarter, falling 4.9 per cent compared with a 2.7 per cent increase in the previous quarter.

URA's flash estimates are compiled based on transaction prices given in contracts submitted for stamp duty payment and data on units sold by developers up till mid-September.

The data will be updated on Oct 23, when URA releases its full set of real estate statistics for the third quarter.

Michelle Ng

A version of this article appeared in the print edition of The Straits Times on October 02, 2020, with the headline 'Private home prices rise faster in Q3 despite Covid-19 recession'. Print Edition | Subscribe