Why prices for higher-tier properties dropped faster than mass-market ones

Homebuyers are getting more price sensitive.

According to Colliers International, given homebuyers’ persistent price sensitivity and the reduction in their purchase budget under the strict financing rules of the TDSR, prices of mid- to high-end homes in the Rest of Central Region (RCR) and Core Central Region (CCR) showed marked declines amid thinning market activity. 

Prices of non-landed homes in the RCR buckled 2.8% QoQ, reversing the 0.4% growth in 4Q 2013, while prices of non-landed homes in the CCR fell for the fourth consecutive quarter by 1.3% QoQ.

Here's more from Colliers International:

Prices of non-landed homes in the Outside Central Region (OCR) slipped by a marginal 0.3% QoQ following 4Q 2013’s 1.0% decline, as homebuyers continued to be drawn to the relatively more affordable mass-market homes, thereby providing some level of support for prices. 

URA’s flash estimate for 1Q 2014 shows that prices of private homes in Singapore are firmly on the downtrend. The price index fell by a faster 1.3% quarter-on-quarter (QoQ) in 1Q 2014, after a decline of 0.9% QoQ in the preceding quarter.

The decline in private home prices for two successive quarters is in line with the slower transaction activities in the primary and secondary sales markets and is an evident sign that the multiple dosages of the government’s cooling measures and particularly the Total Debt Servicing Ratio have been effective in arresting price growth and steering the private residential market towards stability.

With affordability being the main concern of homebuyers, developers were seen dangling various sweeteners to attract buyers. These include early-bird discounts, partial absorption of stamp duty, furniture vouchers and direct price discounts. With developers pricing their new projects attractively to generate sales amid waning demand, price declines were registered.