Sharp rise in prices for HDB resale flats, private homes

Strong Q1 in private market driven by costlier city-fringe homes, landed property demand

The housing market turned in a robust performance in the first quarter of the year, with prices of both private homes and Housing Board resale flats climbing smartly.

The prices of private homes went up for the fourth straight quarter, rising 2.9 per cent in the first three months of this year from the previous quarter, thanks to costlier city-fringe homes and a strong market for landed homes.

Year on year, private home prices have risen by 6.2 per cent, with most of the increase - over 5 per cent - taking place over the last two quarters, analysts said.

HDB resale prices also showed no signs of flagging, climbing 2.8 per cent in the first quarter, according to HDB flash estimates. Year on year, resale prices were up 8 per cent.

The sharp and continued rise in home prices has revived talk of whether property curbs may be around the corner to cool the private residential market.

Analysts said that the pace of growth in the public housing resale market is still sustainable.

Last quarter's HDB resale prices are just 5 per cent lower than their peak in the second quarter of 2013, said Ms Christine Sun, OrangeTee & Tie's senior vice-president of research and analytics.

Ms Wong Siew Ying, head of research and content at PropNex, said that this pace is "relatively sustainable".

"Prior to its recovery from the second half of 2019, the HDB resale price index had notched six consecutive years of decline from 2013 to 2018," she pointed out.

In the private residential market, the 2.9 per cent increase is the steepest quarterly rise since the second quarter of 2018, when prices rose by 3.4 per cent, before property curbs hit in July that year. It follows a quarter-on-quarter increase of 0.8 per cent in the third quarter of last year and 2.1 per cent in the fourth, noted Urban Rede-velopment Authority flash estimates yesterday.

Precipitating the July 2018 round of cooling measures were four consecutive quarters of price increases totalling 9.1 per cent, as well as higher than expected Government Land Sales bids and record-high collective sale bids.

Mr Ong Teck Hui, senior director of research and consultancy at JLL, believes there is a higher risk of fresh cooling measures being introduced as the pace of price growth is picking up.

"For the whole of 2020, the index rose 2.2 per cent but GDP (gross domestic product) growth plunged 5.4 per cent, sparking concerns that home prices and economic fundamentals are misaligned," said Mr Ong.

"Based on current momentum, underpinned by optimistic sentiment and the fact that prices have already risen 2.9 per cent in the first quarter, it is quite likely that the price growth of private homes will exceed the Government's GDP growth forecast of 4 per cent to 6 per cent within 2021."

PropNex chief executive Ismail Gafoor noted that the pace of price growth in the last two quarters "will certainly draw the Government's attention".

"We believe the final pricing data for the first and second quarters this year will be closely watched, and a stronger pickup in home values could likely trigger new measures to keep prices in check," he said.

But some felt it is unlikely that the Government will ring in more cooling measures.

Mr Nicholas Mak, head of research and consultancy at ERA, said: "Construction is one of the sectors more adversely affected by the pandemic. Construction output contracted 35.9 per cent last year. If the Government were to introduce cooling measures, they would adversely affect the property market, which would in turn impact the construction industry. Subsequently, they would slow down the economic recovery."

Prices of private homes were driven up largely in the city-fringe areas, where they rose 6.1 per cent, quarter on quarter. 

A version of this article appeared in the print edition of The Straits Times on April 02, 2021, with the headline 'Sharp rise in prices for HDB resale flats, private homes'. Subscribe