Private home prices grew 1.9% in 2Q 2011

Colliers says the price growth for 2011 could slow to around 7% to 8%, from 17.6% in 2010.

Here are Colliers International’s comments on the URA 2Q 2011 Private Property Price Index Flash estimates:

As expected, the pace of increase in prices in the private residential market continued to slow in 2Q 2011.

Although URA’s flash estimate for 2Q 2011 shows private residential prices rising for the eighth consecutive quarter to an all time high, the growth momentum has slowed for the seventh consecutive quarter since 4Q 2009. Preliminary figures show that private residential property prices rose 1.9% in 2Q 2011, compared to 2.1% in 1Q 2011.

The sustained strong buying demand supported the upward growth in prices in 2Q 2011. This is on the back of healthy economic fundamentals, the low interest rate environment, high liquidity, as well as the popularity of leveraging real estate as an investment to hedge against inflation.

However, the prevailing cautious market sentiment has put a lid on price escalation as developers and potential homebuyers/investors alike adopt a wait-and-see approach after the May 2011 General Elections pending clearer direction on policy changes.

Slowest Price Growths in RCR and OCR since 3Q 2009
Rest of Central Region and Outside Central Region recorded the slowest pace of quarterly price increase by 1.2% and 1.6%, respectively in the June-quarter since 3Q 2009. This reflects that buyers have increasingly become more cautious and price-sensitive and resistance to continued price escalation could have also set in these segments.

In the Core Central Region prices grew at a faster rate of 1.6% compared to 1.1% the previous quarter, indicating that there were more higher-priced transactions in the quarter.

Outlook for 2011
The low interest rates, high liquidity and easing of credit would continue to support home buying for the rest of 2011, thereby providing lifting support for private home prices.

However, uncertainties in the global economy, including the unrests in the Middle East/North Africa regions, the European sovereign debt issues as well as future policy risks surrounding Singapore’s housing market after the General Elections that have been compounded by the large residential land supply under the 2H 2011 Government Land Sales programme announced by the Government, could take some exuberance off the market. Homebuyers are also likely to remain price-sensitive and cautious as they await for clearer housing policy directions.

As such, the pace of price increase is likely to moderate further for the rest of the year. Overall, the price growth for 2011 could slow to around 7% to 8%, from 17.6% in 2010.