Record wave of new homes could swamp prices and rents (Amended)

Singapore

WITH a record number of new private homes being completed this year and the next, it could be a while before prices and rents hit bottom, property consultants say (view infographic).

More HDB flats entering the rental market could further heat up the competition for tenants, they add. Such projections dispelled any mild optimism that could have arisen from Friday's data from the Urban Redevelopment Authority (URA), which showed the fall in private home prices moderating. URA's overall private residential price index slipped 0.7 per cent in the third quarter - marking its most gentle decline since it turned south a year ago - after a one per cent fall in the second quarter.

The main drag was a 1.8 per cent fall in landed homes, while non-landed homes fell by a smaller 0.4 per cent quarter on quarter, with the decline most pronounced in the Core Central Region (CCR) where prices fell 0.8 per cent.

DTZ regional head of research Lee Lay Keng noted that prices in the city fringe and suburban regions were supported by new launches in the third quarter, including Highline Residences and City Gate located in the Rest of Central Region (RCR) and Seventy Saint Patrick's in the Outside Central Region (OCR).

Yet, Ms Lee does not "expect prices to plateau soon as the cooling measures coupled with the stricter financing conditions will still keep transaction activity low".

Some 20,852 private condos and executive condos will be completed in 2014, according to URA (view infographic). Another 23,769 units are expected to be co. Another 23,769 units are expected to be completed next year.

A total of 13,575 private residential units were completed in the first nine months of this year, already surpassing the 13,150 units for the whole of last year.

"This is already about 20 per cent higher than the past five-year (2009-2013) annual average number of completions," Ms Lee said, adding that more than 50 per cent of the completions in the third quarter were located in the suburban areas.

JLL national research director Ong Teck Hui reckoned that the record numbers of completions this year and the next two years are expected to "intensify competition in the leasing market and exacerbate the softening in rentals".

In the third quarter, private residential rents sank by a deeper 0.8 per cent, after a 0.6 per cent decline in the preceding quarter.

Developer sales in the third quarter fell a steep 42.6 per cent quarter on quarter to 1,531 units, in tandem with a 54.5 per cent fall in new units launched. New sales accounted for 51.8 per cent of total sales in the third quarter, down from 63.3 per cent in the second quarter.

Close to half of new sales took place in the suburban region and some 43 per cent in the city fringe, URA data shows.

Still, the 738 units sold by developers in the OCR represent the lowest since the fourth quarter of 2009, showing how hard cooling measures have also hit the supposedly more resilient OCR segment, Mr Ong said.

By pulling back on new launches, developers managed to move more units in existing launches, where the number of unsold units fell 7.4 per cent quarter on quarter to 5,845 units in the third quarter, after rising for four straight quarters, Ms Lee observed.

After a total of 5,940 new sales in the first nine months, consultants project full-year sales raked in by developers to be in the region of 7,500-8,000 units - well below the 14,948 units sold last year.

Knight Frank research head Alice Tan pointed out that there is a limit to how much developers can cut prices given the need to guard margins, though they may dangle discounts for selected units from time to time.

A potential waiting fatigue could draw buyers back to the market and "we foresee a bottoming out of prices at the end of Q1 2015", she said.

While stronger holding power among sellers has lent support to private home prices, HDB resale flats dealt a bigger blow from cooling measures and posted their steepest quarterly fall in prices since the third quarter of 2005.

But the 1.7 per cent drop in HDB resale prices seemed to have enticed more buyers, with resale transactions rising 2.8 per cent during the quarter to 4,513 transactions.

Leasing activity for HDB flats also increased; subletting transactions in the third quarter rose 5.5 per cent to 8,923 cases.

Consultants expect more HDB upgraders to put up their HDB flats in the rental market as they move into their newly completed condo units.

ERA Realty key executive officer Eugene Lim said he expects resale volumes to fall to an all-time low of below 17,500 for 2014 before rebounding next year when the government scales down its build-to-order (BTO) flats supply.

"As resale prices continue to stabilise, we may see the return of more first-time buyers to the resale market, particularly those that are unable or unwilling to wait the three years or so for the completion of the BTO flats," Mr Lim said.

SLP International executive director Nicholas Mak noted that with a reduction of new BTO flats next year, the fall in HDB resale prices should moderate in the later part of 2015.

"However, as the government has not indicated any plans to reduce the cooling measures, prices would still face downward pressure in the next six to 12 months or until some property curbs are relaxed," he said.

An earlier version of this article incorrectly stated that HDB resale flats posted their steepest quarterly fall in prices since the third quarter of 2001. It should be the third quarter of 2005.