Home price hikes could persist until Q3 2020

Although prices normally rise for 8.7 quarters, global headwinds could suggest shorter growth.

The rise in residential property prices based on the Urban Redevelopment Authority’s (URA) index is projected to most likely last until Q3 2020, according to Savills Research.

“Although studies have shown that the up-leg of our price cycle tends to last 8.7 quarters, but with the global headwinds driven by social and political tensions, it may be better to err on the side of caution and choose a shorter time frame of 6 quarters as the base case,” the report wrote.

According to URA, private home prices grew a second time by 1.3% in Q3, moderating from 1.5% in the previous quarter, which Knight Frank attributed to new sales.

Savills added that if a downturn in prices occurred before the quarter, it may have been caused by an event different from the factors that have historically affected the market.

Savills recommended to leave the current private residential market “unperturbed” and not resort to further cooling measures despite the economic conditions.

It noted that the sales volume were largely concentrated amongst the smaller-sized units, with over a third or 34.8% of new sold units in the first nine months of 2019 sized 600-800sqft, as most Singaporeans have budgets less than $1.5m. However, attempts by developers to cut the prices for larger units will cause prices on a per-sqft basis to drop sharply.

For instance, equating the price quantum of an 880sqft apartment to an 800sqft unit will cause prices to fall 9.1%.

“Given the fickleness of market behaviour these days, any measures to rein in demand may instead destabilise it. There will then be the attendant negative spillover effects into the other domestic sectors of the economy. The risk of intervention may incite an unknown market behaviour to emerge,” the report said.

New home sales jumped 39.6% QoQ to 3,281 units in Q3, with the number of uncompleted units put for sale surging 45% to 3,628 units over the same period.