“The new cooling measures introduced in July have put the brakes on rising home prices in Q3 2018. Flash estimates by the Urban Redevelopment Authority showed that private home values rose by 0.5% quarter-on-quarter (QOQ) in Q3 – a much slower pace of QOQ growth compared to increases of 3.4% in Q2 and 3.1% in Q1. 

That said, the 0.5% rate of price increase in a quarter where fresh measures were implemented was still quite decent, considering the 0.4% rise in Q3 2013 when the Total Debt Servicing Ratio (TDSR) kicked in effective in June 2013. Then, prices in the Core Central Region (CCR) and Rest of Central Region (RCR) fell 0.3% and 0.9% QOQ respectively, while Outside Central Region (OCR) rose 2.2% QOQ. 

Broadly, the 0.5% overall price growth in Q3 was within our expectation and we believe it heralds more sustainable price movements in the quarters to come. Cumulatively, private home prices have risen by 7.9% in the first three quarters of 2018, 9.6% above the recent trough in Q2 2017. Home values are still 3.2% lower than the peak in Q3 2013. 

Price moderation in RCR and OCR weighed on overall home values in Q3. Home values appeared to be more resilient in the CCR - it was the only segment that bucked the trend, with prices of non-landed homes climbing 1.2%, up from the 0.9% increase in the previous quarter, also a contrast to the 0.3% sequential decline back in Q3 2013 post-TDSR. 

The price growth in CCR was likely driven by 8 Saint Thomas and Wallich Residences. In Q3, 8 Saint Thomas was launched, and sold 20 units at a median price of SGD3,226 psf, while Wallich Residences sold 11 units at median price of SGD3,531 psf, 8% higher than the median price of SGD3,283 psf achieved in Q2. We also note that New Futura and Martin Modern continued to clock 14 and 28 units sales in Q3 respectively, while maintaining their median prices from Q2 2018 (New Futura (SGD3,558 psf); Martin Modern (SGD2,746 psf)).  

Prices in RCR saw the only sequential and sharpest drop, declining by 0.8% in Q3 after a 5.6% jump in Q2. We think the price decline could be due to selected projects clearing their inventory at a discount such as The Poiz Residences which sold 16 units at SGD1,320 psf in Q3.  Tre Ver, a new launch in RCR in Q3, also sold well at a lower-than-expected price of SGD1,553 psf. 

JadeScape was launched and sold well at the end of Q3. We expect more launches such as Jui, Parc Esta, Mayfair Gardens in the RCR in Q4. Prices could be lower than pre-measures expectations as these projects seek indications from the existing projects which sold well.

Meanwhile, price in OCR rose at a slower pace of 0.1% in Q3 following a 3.0% growth in the previous quarter. Sales at Affinity at Serangoon appeared to pick up from a slow Q2 - when it was launched - as median prices dipped below SGD1,500 psf to SGD1,490 psf from the median price of SGD1,594 psf achieved in Q2.  It sold 96 units in Q3 versus 83 units in Q2.  

For the whole of 2018, we expect private home prices in Singapore to rise by 8%. With the 0.5% increase in Q3, we forecast that home values will be flat in Q4. Prices should remain firm hereon as new projects seek indications from the existing projects which sold well.

New private residential Government Land Sales tenders have seen fewer bids and less bullish bids from before the measures. We expect the winning bid prices would likely indicate a stable end-product pricing from the current levels.  

The pace of new launches as well as the amount of competing supply in the vicinity will likely dictate developers’ pricing strategies going forward.”