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Private Home Prices Rise by 3.2% in Q1 2023 Despite Low Volumes

Hyll on Holland

On Monday, April 3, the Urban Redevelopment Authority (URA) released their flash estimates indicating a 3.2% increase in the prices of private homes in Singapore in Q1 of 2023, despite lower sales volume. This marks a significant acceleration from the marginal 0.4% increase in Q4 of last year.

Despite economic headwinds, analysts attributed the surge in prices to major launches and subsequent sales of new private homes at fresh benchmark prices in the past quarter. URA data further revealed a year-on-year price increase of 11.3%, while sale transaction volume decreased by about 8% quarter on quarter and approximately 38% year on year in Q1, according to Christine Sun, OrangeTee & Tie's Senior Vice President of Research and Analytics.

Non-landed private residential property prices showed an overall growth of 2.5% quarter-on-quarter, following a slight increase of 0.3% in the previous quarter. Within this category, non-landed homes in the Rest of Central Region (RCR) or city-fringe witnessed a significant spike of 4%, surpassing the 3.1% rise in Q4. Meanwhile, suburban non-landed homes in the Outside Central Region (OCR) recorded a growth of 1.9%, reversing the 2.6% decline in the preceding three months. In the prime Core Central Region (CCR), prices increased by 1%, compared to the 0.7% increase in the previous quarter.

According to URA Realis data, new homes, excluding executive condominiums (ECs), contributed to 33.4% of total sales in Q1, a significant increase from 18.9% in Q4 of the previous year. On the other hand, resales accounted for 62.4% of all transactions this quarter, down from 76.1% previously.

The launch of Terra Hill in February played a pivotal role in setting a new benchmark price of S$2,650 per square feet (psf) in the Pasir Panjang neighbourhood and driving price movements in the RCR, as noted by Leonard Tay, Knight Frank's Head of Research. Terra Hill sold over a third of its 102 units during its launch.

Similarly, the launches of Sceneca Residence in Tanah Merah and The Botany at Dairy Farm recorded new benchmark prices of S$2,072 psf and S$2,070 psf in their respective locations in the OCR, said Tay. He also observed that the land prices paid for development parcels over the past 12 to 18 months made it "inevitable" for new project pricing to reach new levels.

Meanwhile, prices of landed private homes recorded a marked increase of 5.7% quarter on quarter in Q1, compared to the previous quarter's rise of 0.6%. Catherine He, Colliers' Head of Research in Singapore, attributed this to sales at the Pollen Collection, where pricing surged by 18% to S$2,196 psf from Q4 2022, when the 99-year landed project was launched.

Sun pointed out that a larger proportion of higher-priced private homes were sold in Q1. In the previous quarter, around 37.9% of transactions, excluding ECs, were for private homes costing at least S$2 million, which increased to about 40% in Q1. Furthermore, there were 282 properties sold for at least S$5 million, representing a 19.5% increase from 236 transactions in Q4.

Last quarter, 26 private homes were sold for at least S$15 million, including a 6,286 sq ft unit at the Les Maisons Nassim ultra-luxury freehold condominium that was sold for S$36 million or S$5,727 psf in February, and a 25,683 sq ft bungalow at 61 Wilkinson Road that was sold for S$55.5 million or S$2,161 psf in January.

Lee Sze Teck, senior research director at Huttons, noted that the resurgence of foreign buyers likely contributed to the increase in home prices, with many luxury units in the CCR being snapped up by mainland Chinese buyers in January and February following the easing of border restrictions.

According to data on caveats lodged as of March 31, foreign buyers purchased around 127 new homes, an increase of 16.5% from the previous quarter's 109 units.

The foreign buyers preferred high-end condominiums located in prime districts, with 21 units sold at Riviere at Jiak Kim Street, 20 units sold at Klimt Cairnhill in the Orchard area, and 10 units sold at Perfect Ten along Bukit Timah Road.

More launches are expected in the near future and analysts predict that property prices will continue to rise, albeit at a slower rate. Among the upcoming launches are Tembusu Grand, The Continuum at Thiam Siew Avenue, Lentor Hill Residences, and The Reserve Residences at Jalan Anak Bukit.

Tricia Song, CBRE's head of research in Southeast Asia, stated that the success of these projects would give a clearer indication of the level of demand among homebuyers. However, according to Eugene Lim, key executive officer at ERA Realty, prices are unlikely to decline as developers are still facing high land, construction, financing, and labor costs.

According to Wong Xian Yang, the head of research for Cushman & Wakefield in Singapore and Southeast Asia, a stable job market, rising rents, and sustained demand from HDB upgraders will support the underlying demand for private residential properties. He expects a 3 to 5% increase in prices for 2023, which is lower than the 8.6% growth in 2022.

Ismail Gafoor, the CEO of PropNex Realty, said that the Q1 2023 price growth exceeded expectations, but uncertainties in the market may lead to a more measured increase in prices in the next few quarters. Nicholas Mak, a longtime industry observer, suggested that private residential demand could be dampened by high interest rates, a slowing HDB resale market, and an influx of completions in built-to-order public homes in 2023.

Lam Chern Woon, the head of research and consulting at Edmund Tie, advised buyers to exercise prudence and wait, given the numerous projects to be launched this year. Professor Cristian Badarinza, an associate professor at the NUS Business School's Department of Real Estate, noted that owners are not under pressure to sell as high rental yields can offset higher mortgage payments. Professor Badarinza also stated that the dynamics of rental prices will be crucial, as if they decrease, selling pressure may start to emerge.

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