Good year ahead for bargain hunters amid soft landing: Analysts

According to URA’s data, prices of private homes declined just 0.5% q-o-q in 4Q2015, compared to 1.3% in 3Q2015. This puts the full year decline at 3.7% for 2015, compared to 4.0% in 2014.

In 4Q2015, prices of non-landed private homes slipped 0.3% q-o-q in the Core Central Region (CCR), 0.4% in the Rest of Central Region (RCR) and remained flat in the Outside Central Region (OCR). This translates into full year declines of 2.5% for CCR, 4.3% for RCR and 3.7% for OCR. 2014 saw full year declines of 4.1% for CCR, 5.3% for RCR and 2.2% for OCR.

The number of transactions for non-landed private homes (excluding ECs) totaled 7,016 for new sale and 5,056 for resale in 2015. This represents an y-o-y increase of 3.3% from 6,793 new sale cases and 23.7% from 4,087 resale cases in 2014.

Rents of private homes declined 1.3% in 4Q2015, compared to 0.6% in 3Q2015. The full year decline was sharper at 4.6% in 2015, compared to 3.0% in 2014.

“The market seems to be steadily absorbing the inventory of unsold units in existing projects as well as those projects which are still under construction - helped by a steady pool of buyers who continue to purchase homes as well as the government’s drastic cut in the number of new sites being offered for sale. Prices have once again fallen, albeit at a slower pace. The residential price index in 4Q2015 registered the slowest rate of decline since 3Q2013 when the full set of measures was implemented. If the decline continues at this controlled, measured pace, the residential market is poised for a soft landing,” said Desmond Sim, Head of CBRE research, Singapore and South East Asia.

Christine Li, Director and head of research at Cushman & Wakefield, agreed that the residential market held up relatively well in 2015 and said this was “largely due to strong holding power of developers and sellers in a low interest rate environment and steady GDP growth. Overall residential price index has declined for 9 consecutive quarters and is 8.4% below the last peak in Q3 2013. Rental has fallen faster than prices, declining by 4.6% from a year ago.”

“Since the beginning of 2016, rising interesting rates, plunging oil prices and stock market sell-off has set the stage for the "perfect storm" for the residential market. Coupled with higher vacancy rates, softening rents and another record year of construction completions, developers and sellers with weaker holding power may have to let go of their units at a lower price. In addition, slower population growth of 1.2% in 2015 and lower GDP growth forecast of 1-2% in 2016 could trim demand for housing,” she added.

Looking ahead, she notes that “nevertheless, it presents a good opportunity for the buyers in such climate as those who have stayed on the sidelines are ready to come into the market. This is partly supported by the rising household income, averaging 5% per year from 2012-2015, and low unemployment rate of 2%. In addition, there is still underlying demand for the residential properties. This could come from investors and home owners who have made capital gains on their previous purchases and are now looking to re-invest their capital gains. There will be more market activities particularly in the resale segment this year due to more residential units bought with Seller’s Stamp Duty (SSD) meeting the four-year deadline to be eligible for sale without any penalty, as the higher SSD was introduced in January 2011. This could incentivise those who have broken even or even made some capital gains to offload the units in the market. As such, 2016 will be a good year for bargain hunters as home prices will be more affordable.”

Separately, HDB released its data for 4Q2015, which indicated that resale prices rose 0.1% q-o-q, ending the downtrend in the Resale Price Index that began in 3Q2013. The full year decline was 1.6% in 2015, compared to 6.0% in 2014. The number of resale transactions also rose 11.5% to 19,306 in 2015, from 17,318 in 2014.

HDB plans to launch four BTO exercises this year, with a total supply of about 18,000 flats. The first BTO exercise will be held in February with about 4,150 flats to be offered in Bidadari, Bukit Batok and Sengkang.