Marginal home price growth expected for 2019

The Business Times - Jan 03
Private home prices are expected to remain flat or rise slightly this year, supported by a slew of new projects poised for launch.

After five straight quarters of growth, private residential prices dipped 0.1 per cent in the fourth quarter of 2018 over the preceeding three months, led by the softening in prices of the landed property segment. This followed a quarter-on-quarter increase of 0.5 per cent in the third quarter, in the wake of July's cooling measures.

According to the flash estimate provided by the Urban Redevelopment Authority (URA), the private residential property price index for 2018 as a whole rose 7.9 per cent, outpacing the 1.1 per cent increase in 2017.

Tricia Song, Head of Research:
After five quarters of growth, overall private home prices fell marginally by 0.1% quarter-on-quarter (QOQ) in Q4 2018, as the cooling measures implemented in July continued to depress home values. This is the first quarterly decline since Q2 2017 where home prices dipped by 0.1% QOQ from Q1 2017. The price decline in Q4 2018 was led by the Landed Property and Core Central Region (Non-Landed) segments where values fell by 1.8% and 1.5% respectively. 

Colliers estimates that overall private home prices could potentially climb by 3% in 2019, in line with the economic growth – barring any unforeseen events. 

Supply side factors will be supportive of prices given: a) the completions for the next few years will be below historical average; b) the land rates at which the developers have acquired sites via the collective sales and public land tenders are indicative of at least the current market prices; and c) developers are unlikely to cut prices unless they are under extenuating circumstances. Click here for our analysis.

Sell Singapore residential, buy office? Not a foregone conclusion for all

The Business Times - Jan 03
Most property analysts at stockbroking houses have a negative view of the Singapore private residential sector and a positive view on the office market.

But with the high level of uncertainty across various aspects of the economies here and abroad, there is a possibility that the consensus view may be too harsh on the outlook for homes, and too upbeat about offices.

Tricia Song, Head of Research:
We believe the differentiating factors for investors or developers would be the risk-reward and investment horizon. The office leasing market will remain favorable for landlords in the next few years as supply pipeline continues to taper off. Colliers International estimates that new CBD Grade A office supply averages 0.57 million sq feet, or 2% of stock per annum over 2019-2021, in contrast to the large supply injection in 2017 (approximately 10% of stock). The supply shortfall over 2019-2021 should keep CBD Grade A vacancy tight, below the 10-year average of 6.2%, even after accounting for the impact of slowing net absorption in 2020 and 2021 in accordance with consensus forecasts of a global economic dampening.  

For residential property sector, while policy risks, rising interest rate could dampen profit expectations, Singapore is generally a more stable market than some other gateway cities and perceived as a safe haven for global and regional investors.  We do not expect an oversupply in the near term and expect prices to stabilize in the first half of 2019 and rise in line with the GDP growth thereafter.  

Asia's property markets join global slump

The Business Times - Jan 05
Asia is finally succumbing to the global property slowdown that has jolted homeowners and investors from Vancouver to London, with markets in Singapore, Hong Kong and Australia showing fresh signs of softening.

The economic ramifications could be serious. Lower house prices and higher mortgage rates will not only dent consumer confidence, but also disposable incomes, S&P Global Ratings said in a report last month.

A simultaneous decline in house prices globally could lead to "financial and macroeconomic instability", the IMF said in study released in April.

Tricia Song, Head of Research:
Singapore’s economy still grew by 3.3% in 2018, above expectations. Going forward, even with slower global growth, economists in general still expect Singapore to grow 2.5-2.6% in 2019.  In fact, Singapore’s private home prices have weathered the July 2018’s ninth round of cooling measures fairly well, dipping just 0.1% in the Q4 2018 flash estimates. This shows the underlying resilience for the market. In the near-term, the completions for the next few years will be below historical average, while demand side factors such as household income growth, job security, household formations are likely to be supportive for private housing.