Going against the tide: Private home costs buck property price downtrend

Recent price cuts are no cause for celebration.

It’s too early to be relieved about recent price declines. Despite a slight dip in private home prices in 2Q14, private homes remain 57% more expensive compared to the last price trough in 2009, a report by Barclay’s revealed.

According to Barclay’s, CCR prices have declined by 5% since its peak, with prices for high-end homes falling 1.5% qoq in Q2 compared to the 1.1% drop in Q1.

“We maintain our negative stance on the Singapore residential sector and estimate prices will fall 5-15% in 2015 as interest rates rise, coinciding with the peak in supply. The Ministry of National Development (MND) declared yesterday that it is still too early to roll back property cooling measures, affirming our belief that the government will only start unwinding measures when prices fall a steeper 10-15%, perhaps in 2015,” noted the report.

Here’s more from Barclay’s:

We expect both volumes and prices to languish given: 1) the ongoing government curbs, 2) looming oversupply, and 3) rising interest/mortgage rates in 2H15. The government also declared yesterday it is too early to relax any measures.

In the Core Central Region (CCR), which usually represents high-end homes, prices fell 1.5% after declining 1.1% in the 1Q14. This is the fifth consecutive quarter of price declines in this segment, bringing the total decline of CCR prices to 5.0% since the peak.

The price decline of suburban homes – proxied by the Outside Central Region (OCR) – accelerated for the third consecutive quarter, by -1.1%, compared with the 0.1% decrease in the previous quarter.

In the Rest of Central Region (RCR), mid-end home prices fell 0.6%, compared with the 3.3% decrease in the previous quarter.

Prices of landed private residential properties fell for the third consecutive quarter, by 1.5%, after the decline of 0.7% in the previous quarter. While there were eight new launches in May, mostly in RCR and OCR areas in the median price range of S$1,018-S$1,626 psf, not all of them sold well.
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The price decline of mass market homes – proxied by the Outside Central Region (OCR) – accelerated to -1.1% q/q vs -0.1% in the previous quarter, due to the large amount of supply coming onstream.

In the Core Central Region (CCR), which usually represents high-end homes, prices fell 1.5% q/q after declining 1.1% in 1Q14. This is the fifth consecutive quarter of price declines in this segment, bringing the total decline of CCR prices to 5.0% since the peak. The price decline of mid-end homes eased to -0.6% q/q vs -3.3% in 1Q14.