The Business Times, 2 Apr 2021, Fri
By Nisha Ramchandani
THE Q1 2021 flash estimate for the private home price index will be the one to watch as it reveals how much property prices have climbed in recent months.
The flash estimate will be released on Thursday, and the data updated later in April once the full set of statistics for Q1 is released by the Urban Redevelopment Authority (URA).
A substantial – and sustained – uptick in private residential prices could strengthen the case for cooling measures after the index notched a 2.1 per cent gain quarter-on-quarter in Q4 2020. In Q3 2020, the increase was 0.8 per cent.
Nicholas Mak, head of research & consultancy at ERA, expects that a persistently strong increase in the price index for private homes over the next two to three quarters will put more pressure on the government to roll out additional cooling measures. Mr Mak projects the flash estimate for Q1 2021 should surpass 2.1 per cent.
Other indicators
Based on early estimates, OrangeTee & Tie’s senior vice-president of research & analytics Christine Sun also expects the price index to increase in Q1, led by the Core Central Region (CCR) and Rest of Central Region (RCR), given both a quarter-on-quarter and year-on-year increase in the median price of private homes (excluding executive condominiums).
Sales volumes, however, were 7.6 per cent lower quarter-on-quarter in Q1 2021, the data shows.
OrangeTee & Tie studied caveats downloaded from URA data (as at March 29), which can be used as an estimate although it does not represent the actual basket of properties that make up the URA price index.
When it comes to cooling measures though, Ms Sun reckons the authorities may take other factors into context as well, such as whether price increases are outpacing the economic recovery, and whether price increases are seen across the board or remain localised in certain regions.
Similarly, Mr Mak expects the government is also tracking other indicators, such as developers’ sales volumes and the health of household balance sheets. At this point in time, he sees the implementation of cooling measures as premature as it could derail Singapore’s economic recovery, while the en bloc market – although showing signs of a revival – remains modest vis-a-vis the last en bloc boom.
For 2020 as a whole, the Private Residential Property Price Index surprised on the upside by rising 2.2 per cent, despite the deepest recession in Singapore’s history.
Developers managed to move 9,982 new homes in 2020 – pipping the 9,912 units sold in 2019 – in a year where a 10-week-long circuit breaker forced developers to shutter their sales galleries, while unprecedented border closures have sidelined most foreign buyers. The gradual lifting of border measures this year should give rise to greater demand from foreign purchasers.
Factors underpinning market
While the rosy picture is at odds with a global recession, it is underpinned by factors such as low interest rates, ample liquidity and demand from HDB upgraders. Over 24,500 Housing Development Board (HDB) flats hit their five-year Minimum Occupation Period (MOP) in 2020, above the five-year average of 12,575 flats for 2014 to 2018, according to ERA estimates. The HDB resale market was also given a boost by a delay in the construction of build-to-order flats, arising from the disruption in construction activity as the pandemic took hold.
At the same time, the inventory of unsold private homes has eased, falling to 24,341 units in Q4 2020, down from 30,473 units in Q4 2019, while residential supply under the Government Land Sales programme remains conservative.
Therefore, some developers are on the hunt to replenish their landbank, which in turn is beginning to spur demand for residential en bloc sites. Small- to medium-sized sites are seen by market watchers as more likely to find favour with developers.
The pick-up in the en bloc market is something the authorities are likely keeping a close watch on since aggressive bidding for land sites during the last en bloc cycle in 2017-2018 partly contributed to punitive cooling measures in July 2018. It’s worth noting however that the existing cooling measures, which included a hike in additional buyer’s stamp duty (ABSD), may well temper developers’ exuberance this time when it comes to bidding for land.
For now, the en bloc market is still nascent but is something to watch, highlighted Wong Xian Yang, head of research (Singapore) for Cushman & Wakefield.
More robust en bloc market
The emergence of a more robust en bloc market, coupled with private home prices running ahead of economic fundamentals, could increase the risk of developers having to contend with additional cooling measures this year – just as a number of property counters have seen their share prices pop in recent weeks. This will be something investors will want to keep an eye on, starting with this week’s data on private home prices.