After three years of falling prices, 2018 is looking like the year that the Singapore property market's long-awaited turnaround finally gains traction. Analysts reckon that a trough has been reached though they are careful to tamp down excessive optimism.
While market watchers generally agree that prices will move up, their forecasts for the increases vary from as low as 3 per cent to a giddy 15 per cent. Most also agree that resales will drive transaction numbers higher this year than last year.
Sales of new homes, however, are expected to stay at 2017 levels as developers pace out their launches in anticipation of prices going up.
JLL's national director of research and consultancy Ong Teck Hui noted that with cooling measures unlikely to be relaxed, they are "like an iron ball shackled to the foot of the prisoner that will prevent him from running too fast".
"Unlike previous recoveries, the measures act as a retardant to the momentum of the current recovery," he said. "So we are unlikely to see prices spiking... such as the 38.2 per cent surge between mid-2009 and mid-2010."
The recovery could falter if the Government decides to intervene to prevent prices from spiking or if there are external or economic shocks. But market watchers believe this is unlikely in 2018.
Savills Singapore senior director Alan Cheong noted that historically, the length of Singapore's private property price uptrends averages 17.6 quarters.
"If this forms the base case for this new cycle, we still have a few years to go before the price upswing is exhausted," he said.
"If we see a price increase of about 5 per cent, the upcycle will have some legs past 2020. But if prices spike 17 per cent a year, the upcycle will probably taper off by 2019."
Analysts also note that with about 20,000 new units coming on stream in 2018 and 2019 from government land sales and en-bloc sites, prices will not rise too steeply.
Though developers' bullish land bids have led to perceived over-exuberance in the en-bloc market, some observers see initial signs that the collective sales fever may be starting to ease. Only three of six collective sale sites whose public tenders closed last month were sold.
According to regulations, owners may enter into a private treaty contract with a buyer within 10 weeks from the close of the public tender.
In the case of Pearlbank Apartments, marketing agent Colliers International cited concerns by interested bidders. These included uncertainties arising from a pre-application feasibility study on traffic impact. There was also apprehension over whether the incoming developer would be compelled to conserve the iconic development.
Mr Ong warned that property owners' price expectations could go up at the same time that developers, whose demand for land diminishes with each site sold, become more measured in their offers.
"The price gap between sellers and buyers would impede the closing of deals and we could see this happening in (the first half of) 2018," he said.
Other consultants agree that there could be more unsuccessful collective sales down the road. Mr Cheong said there may now be more sites available than developers who have not reached their land-banking quota.
"The number of potential collective sales sites totals over 120 islandwide," he said. "We believe smaller sites may still be transacted and once these get taken up, the over-revving collective sales market may return to an idling state.
"Therefore, just as the collective sales market came to life out of the blue, it may return to sleep mode just as suddenly."
Knight Frank's head of consultancy and research Alice Tan reckoned that developers' hunger for land could persist for another six to nine months "before the market achieves some equilibrium in supply and demand" as more project launches, mainly from collective sale sites, come on stream.
"However, some risks that could quell demand for higher-priced land and properties may lurk on the horizon. Higher interest rates, uneven economic performance, muted population expansion and lower-than-expected income growth may put price escalations in check," she said.
The soft landing of property prices through a series of cooling measures led private home prices to fall 11.6 per cent over 15 quarters after the third quarter of 2013, according to official data.
The fall was broken in the third quarter of last year when private home prices rose 0.7 per cent, and flash estimates for the fourth quarter released by the Urban Redevelopment Authority on Tuesday also indicated a similar increase.
Overall, prices appreciated 1 per cent last year, in contrast to the 3.1 per cent decline in 2016.
Rents of private homes slipped 12.5 per cent over 15 straight quarters before staying unchanged in the third quarter of last year.
Private home sales also saw a significant comeback last year. Pent-up demand pushed total private home transactions to 23,113 from January to November last year, compared with 16,378 for the whole of 2016.
In the same period, developers racked up 10,247 private home sales, excluding executive condominiums, surpassing the 7,972 units sold in 2016 and a yearly average of 7,576 units from 2014 to 2016.
"Buyers feel they are purchasing close to the trough of the market and remain optimistic about long-term capital appreciation," Mr Ong said. "As the Singapore residential market is not yield-driven, many investors may not be particularly perturbed by the current weak rentals, which they expect to stabilise or turn around with economic recovery."
While softening rents and high vacancies have caused concern, rents are showing signs of bottoming out and analysts expect vacancies to improve this year as the number of new completions ease further.
Dr Lee Nai Jia, who heads research at Edmund Tie & Company, expects rents to continue to moderate but at a slower rate of around 1 to 3 per cent. Vacancy rates are likely to decline to 5 to 6 per cent this year.
He also said he expects the en-bloc rush to have a "multiplier effect" on the economy. Besides potential reinvestment into real estate by owners who have sold their homes in collective sales, the property market uptrend will also help the construction sector to recover while the increase in mortgages is positive for the banking sector.
Maybank Kim Eng property analyst Derrick Heng said in a recent note that while the Government's concerns over the strong supply of upcoming residential units from redevelopment projects are valid, he called this a "medium-term issue" as they will add to the housing stock only in 2020 to 2021.
"Furthermore, even after accounting for their completion in 2020 to 2021, average net supply is still not excessive at slightly over 11,000 units per year," he said.
"This is below the five-year average absorption rate of 13,200 units and also far below the 19,500 units that were added annually between 2014 and 2016."