Private home prices in Singapore plummeted by 13.8 percent in Q1 of the current year. This quarterly drop is a record as number of market players and developers trimmed down their expectations.
Yesterday, Urban Redevelopment Authority (URA) released advance estimates showing that this drop in private home prices was the third quarterly plunge. It was also viewed to be much steeper than in the final quarter of 2008, which has recorded a 6.1 percent drop. A 1.8 percent drop was seen in the third quarter of the previous year, after 17 consecutive quarters of progression.
Resale HDB apartment prices also plunged by 0.6 percent in the first quarter of the current year, after nine quarters of progression. This is despite of the fact that HDB apartment prices have overwhelmingly grew in 2008.
Analysts already expected a sizeable fall in private home prices, though the fall seemed to be quite bigger than what they have anticipated. Recently, developers opt to reduce new homes’ selling prices, and secondary properties sellers also seemed to be following the flow by trimming their prices.
Chua Chor Hoon, senior director of DTZ, said, “The fall is not surprising as a lot of developers have reduced prices to move new units, and in the resale market, people are now asking for more reasonable prices”.
Developers decide on re-launching and launching new projects as well as units in recently opened, but unsold projects at 10 to 30 percent price cuts, said analyst Brandon Lee of DMG & Partners Securities. This method seemed to have paid off as about 2,100+ new units were sold in the first quarter, which is the utmost level since the mortgage crisis in the US in Q4 2007 had upset the market. Still, this increase in sales volume has sacrificed prices.
Non-landed private home price index of URA for Core Central Region, covering Sentosa Cove, prime districts, and financial district, dropped by 15.2 percent quarter-on-quarter in the first quarter. Meanwhile, a drop of 17.2 percent was seen in Rest of Central Region and 7.5 percent in Outside Central Region.
Some observers were apparently surprised by the decline in HDB resale prices, since analysts estimated that it should be rising in the first two quarters of the current year.
Eugene Lim, associate director at ERA Asia-Pacific, said, “HDB resale prices increased some 32 percent since Q1 2007 before reaching a new peak in Q4 2008”. Q1’s marginal decrease implies that HDB resale prices currently move alongside the weakening economic, as well as unemployment conditions.
The lower amounts of cash-over-valuation (COV), which are now prepared to be paid by the buyers, are the cause of the drop in resale index in HDB, analysts stated. Mohamed Ismail, PropNex CEO, said, “The slight dip is probably due to more buyers of HDB flats being resistant to paying high levels of COV”.
“While demand for HDB resale flats is evidently still strong, sellers in this economic climate are realising the weaker buying power of consumers”.
It is anticipated that private home prices will continue to plunge in the current year, though its pace is likely to wind down. Tay Huey Ying, Colliers International director (research and advisory), estimates that URA price index’s rate of decline could taper off to almost 8 percent in the second quarter of this year, and about 3 to 5 percent for the awaiting two quarters.