PDF versionSingapore, - The flash estimates of the private residential property prices released by the Urban Redevelopment Authority’s (URA) today indicates that the price contraction that started in the third quarter of 2008 has accelerated. Overall prices in the private residential property market dropped 5.7% qoq in 4Q 2008. This was a larger fall compared to the first correction of 2.4% qoq in 3Q 2008. The sharper fall in the prices of homes of private residential properties can be best explained by a generally cautious attitude among homebuyers, which resulted in lower demand. This is due to Singapore’s technical recession from 3Q 2008 and the fallout from the worst performance in decades of almost all major stock markets globally.
On a yearly basis, the median price of private residential properties is estimated to have fallen by 4.3% in 2008. The overall private residential index has retreated to around 3Q 2007’s level (price index of 160.0). This shows a correction of private residential prices, back to when the effects of the sub-prime mortgage problems surfaced. However, the fall was only a marginal 4.3% yoy because the impact of economic recession in Singapore has not badly affected some property owners yet, and some sellers have yet to realign their expectations.
As there developers launched fewer projects for sale in 4Q 2008, and that most of the projects launched in 2008 have not been severely re-priced lower, the secondary market accounted for a larger fall in private home prices. Of note, prices may have fallen most in the sub-sale market, which is a part of secondary market (the other being resale market). For example, based on caveats lodged, median prices of sub-sales fell more compared to that of developers’ sale and the resale market in 3Q 2008 and 4Q 2008. Median prices of sub-sales fell 10.6% qoq and 7.5% qoq in 3Q 2008 and 4Q 2008 respectively, accounting for the largest average price fall across the three types of property transactions. The fall could be due to some speculative owners who try to dispose projects just before TOP is obtained, or when the project is newly completed. There may be some who are confronted by the on-going financial woes and are willing to sell at lower prices to limit their exposure. Examples of projects transacted in the sub-sale market at lower median prices include Ardmore II, The Azure and Casa Merah. Although it depends on the units’ characteristics, a significant fall in median prices reflect that prices have somehow shown notable price declines – Ardmore II had a median sub-sale price of about $2,000 psf in 4Q 2008, much lower than a median sub-sale price of $3,000 psf in 4Q 2007; The Azure had a median sub-sale price of $1,200 psf in 4Q 2008, lower than an average of $1,700 psf in 2Q2008 and 3Q 2008. However, most of these projects were generally sold in the sub-sale market at above the initial purchase price from the developer.
All non-landed residential property market segments, saw price fall in the fourth quarter. For the prime residential market segment of the Core Central Region (CCR), prices fell the most, by 6.3% qoq. This brings prices in CCR to fall 5.5% yoy. Private home prices in the mid-tier Rest of Central Region (RCR) recorded a slightly faster fall of 5.5% qoq, and have dropped 4.1% yoy in 2008. The least drop was for mass-market private homes Outside Central Region (OCR), which fell 4.7% qoq and 1.6% yoy. Although the smallest fall was observed in private homes in OCR, it reflects sentiments are increasingly weak for the mass-market segment, where prices initially were steady in 1H, 2008. The subdued interest for mass-market homes is largely due to a significant worsening of economic conditions from September 2008, where buyers become very cautious in spending in the face of a deterioration in the job market and increasing difficulties in securing financing as banks tighten credit evaluation criteria. Some of the more cautious buyers would also choose to buy resale HDB flats, rather than mass-market private condominiums. This contributes to the steady increase in HDB resale flat prices in the first three quarters of 2008.
On a brighter note, Singapore’s public housing market continues to grow in 4Q 2008. According to
HDB’s flash estimate, average HDB resale home prices increased 1.5% qoq. This however reflects a
slowdown from a 4.2% qoq increase in 3Q 2008. The slowdown was partly because prices of larger
resale flats somehow stagnate, while smaller-sized flats still increased at 2-5% qoq. Nonetheless,
average prices of HDB resale flats are at an all-time high, and grew an impressive 15% in 2008. The
growth was partly because prices of HDB resale flats have been lagging behind that of private
residential properties and demand for resale flats are still steady. In addition, it was because buyers
are increasingly cautious and prefer to purchase HDB flats instead of private homes to limit their
exposure to the uncertain market. This reflects a number of homeseekers are re-aligning housing
requirements from aspirations to functional needs.
Going forward, the price decline is expected to persist as more economy and job market weaken. As a result, the average price of private residential properties is expected to fall by 13% to 20% in 2009. This would bring the overall prices of private home to about the level in the beginning of 2007.For the HDB resale market, prices of resale flats should hold in 1Q 2009, but a slight decline may follow after. Prices of HDB resale flats may correct 5% to 10% in 2009, as the weakening economic conditions filters into the HDB market.
Nicholas Mak, Director of Consultancy & Research Department, Knight Frank, +65 6228 6821
Knight Frank and its New York-based partner, Newmark Knight Frank, operate over 140 offices in established and emerging property markets on five continents. Last year, the companies handled transactions valued at over $41billion with annual revenues of over $545 million.
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