SINGAPORE (EDGEPROP) - Private residential property prices fell 1% q-o-q in 1Q2020, after rising for three consecutive quarters, absorbing the blow of Covid-19 on the economy.
Property consultants, however, caution that the impact of the pandemic has not yet been fully reflected in 1Q2020 data — 2Q2020 would paint a clearer picture of conditions on the ground, comments Christine Li, head of business development services, Singapore & Southeast Asia at Cushman & Wakefield (C&W).
Private residential launches in the quarter also declined 6% q-o-q, marking a 30% y-o-y fall.
In 1Q2020, developers sold 2,149 private homes in Singapore, a 12% q-o-q fall, but a 16.9% rise y-o-y. New home sales started to slow down in March as the effects of the economic downturn began to unravel, says Ong Teck Hui, senior director, research & consultancy at JLL.
Of the number of private homes sold in the quarter, 37.7% or 810 units were in the Outside Central Region (OCR), while the Rest of Central Region (RCR) accounted for 36.2% or 779 units. This indicates that affordability remains a key demand driver for most projects, says Ong.
Among the three market segments — OCR, RCR and Core Central Region (CCR) — homes in the CCR suffered the most severe drop in prices, taking a 2.2% decline. This is followed by a 0.5% fall of home prices in the RCR. Homes in the OCR tail behind, suffering a price decline of 0.4%.
The fall in home prices in the CCR could be due to selected launches sold at perceived discounts, notes Tricia Song, head of research for Singapore at Colliers International. The M — launched in February — sold 381 units in 1Q2020 at a median price of $2,439 psf. Comparatively, Midtown Bay, located nearby, sold 10 units at a median price of $2,899 psf in 1Q2020.
The Enclave at Holland, also in the CCR, sold 14 units in Q1 at a median price of $1,851 psf, compared to earlier units sold at between $2,500 psf and $2,600 psf.
Given the worsening economic conditions, developers could be rolling out star buys and discounts to maintain sales momentum, says C&W’s Li.
A further correction of prices is expected for the rest of 2020. However, this would not take the magnitude of that experienced during the Global Financial Crisis (GFC) when prices plunged 24.9% over four quarters, asserts Ong from JLL. “Unlike the preceding years of the GFC when prices rose sharply, price increases in recent years have been mild due to the cooling measures, thereby averting an asset bubble,” he says.
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Ong adds that government support via the three recent rescue budgets released within two months would also help to cushion the fall in property prices, providing temporary relief for homeowners who have difficulty repaying their mortgage.
Meanwhile, sales of private homes in the secondary market recorded 2,120 units in 1Q2020, a 12.9% fall q-o-q, but an increase of 11.3% y-o-y.
On the other hand, the oversupply of units is gradually improving. As at end-1Q2020, there were 29,396 unsold units, 3.5% lower than that in 4Q2019 and a sharp 22.2% decline from the recent high of 37,799 units in 1Q2019, marking four consecutive quarters of downtrend.
The bright spot appears to be the rental market. Overall, residential rents rose by 1.1% in 1Q2020, after a 1% q-o-q decline in 4Q2019.
In particular, rents for non-landed homes increased by 1.3% in 1Q2020, after recording a 0.9% decline in 4Q2019. Rents for landed homes, however, fell 0.9% over the quarter, compared to a 1.6% fall in 4Q2019.
Property consultants attribute the overall rise in rents to tight supply. Only 1,528 private residential units were completed in 1Q2020, with another 4,506 units expected to be completed over the rest of the year. However, the “circuit breaker” measures have temporarily stopped construction works, possibly delaying the completion of units till 2021.
Although rents would be supported by tight supply, the demand shock to the rental market — driven mainly by foreign demand who are not supported by government reliefs — will likely lead to flat or negative rental growth, observes Li.
Looking ahead, sales volume in 2Q2020 for both the primary and secondary markets are expected to take a plunge. Consultants are expecting a 3% to 5% contraction in private residential prices this year. The circuit breaker that will last till June 1 will also minimise market activity in April and May.
However, over the long term, Singapore’s safe haven status and stable currency are likely to garner interest from foreign buyers, says Li.
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