Q2 2023 Private Home Prices Fell By 0.2%; Hdb Resale Prices Inched Up By 1.5% – A Signal To More Sustainable Price Growth

28 July 2023, SINGAPORE – Trends of residential property prices in Singapore are split but generally signal a slowing growth momentum, and on a path towards more sustainable pricing in the housing market. Private home prices slipped for the first time in 3 years in Q2 2023, while HDB resale flat prices continued to rise at a more moderate pace during the quarter. Meanwhile, the growth in private home rentals also slowed considerably in Q2 2023.

Q2 2023 URA Private Residential Property Index
Data from the Urban Redevelopment Authority (URA) showed that overall private home prices fell by 0.2% QOQ in Q2 2023, reversing the 3.3% QOQ increase in the previous quarter (see Table 1). The final print is a slight improvement from the 0.4% QOQ decline indicated in the flash estimates out earlier this month.
The Q2 price decline snapped a three-year growth streak, with the PPI falling for the first time since Q1 2020, where prices dropped by 1% QOQ. In 1H 2023, overall private home prices have risen by a cumulative 3.1% from Q4 2022.

In Q2 2023, non-landed private home prices dipped by 0.6% QOQ, compared to the 2.6% QOQ increase in the previous quarter, as home prices eased in the city and city fringe. Landed home prices meanwhile, posted a 1.1% QOQ growth, following the healthy gain of 5.9% QOQ in Q1 2023 – this is the 8th straight quarterly increase in prices of landed homes. 

In the non-landed homes segment, the price decline was led by the Rest of Central Region (RCR), despite this sub-market leading sales volume in Q2 2023, thanks in part to four new launches – Tembusu GrandBlossoms by the ParkThe Continuum (freehold), and The Reserve Residences. Overall, URA data showed that 1,573 new RCR private homes and 908 resale homes were sold in Q2, up by 512% and 28% respectively from the previous quarter. Still, non-landed home prices in the RCR fell by 2.5% QOQ in Q2 – the first decline in five quarters –reversing the 4.4% QOQ growth in Q1 2023.

Over in the Core Central Region (CCR), home prices slipped by 0.1% QOQ – the sub-market’s first price decline in five quarters. The hike in additional buyer’s stamp duty (ABSD) rates on foreigners and investors from 27 April 2023, likely weighed on transactions which have contributed to the moderation in price growth during the quarter. Developers sold 445 new CCR private homes while 541 resale homes in the CCR changed hands in Q2 2023, representing a fall of 18% and 0.4% QOQ respectively.

Meanwhile, non-landed home prices in the Outside Central Region (OCR) rose more gradually in Q2 2023 at 1.2% QOQ, easing from the 1.9% QOQ increase in the previous quarter. In 1H 2023, OCR home prices have risen by 3.1%, compared to the 4.4% increase in 1H 2022. The OCR sub-market continued to face a supply crunch in terms of new launches; developers shifted 109 new private homes in Q2 – down by 76% from Q1 2023 and is a record low. OCR private resale home transactions rose by 11% QOQ to 1,527 units in Q2 2023.

All in, developers sold 2,127 units (+69% QOQ; -11% YOY) of new private homes (ex. EC) in Q2 2023 – taking the half year total to 3,383 units, which was lower than the 4,222 units moved in 1H 2022. In Q2 2023, developers launched 2,374 units (ex. EC) of new homes for sale, rising by 81% from 1,312 units placed on the market in the previous quarter.

Private home rentals
The URA rental index of private homes showed that rentals continued to rise for the 11th consecutive quarter in Q2 2023, albeit at a much slower pace. Rentals climbed by 2.8% QOQ, compared to the 7.2% QOQ growth in the previous month. On a YOY basis, private home rentals in Q2 2023 were up by 28.5% from Q2 2022. Cumulatively, private home rentals have increased by 10.2% in 1H 2023 from the end of 2022.

Please attribute the comments below to Ismail Gafoor, CEO of PropNex Realty.
“Three rounds of cooling measures since December 2021, persistently high interest rates, and cautious market sentiments have collectively brought about a moderation in private home prices in Q2 2023. This will help to drive a more sustainable price movement and we think the buyers are better for it, particularly after the strong price gains in the last two years, at 8.6% and 10.6% in 2022 and 2021, respectively.

In April 2023, the government doubled the ABSD rate to 60% for foreigners, and also raised the ABSD rates for Singaporeans and Singapore permanent residents buying their second, or third and subsequent homes. This, coupled with the higher buyer’s stamp duty (BSD) top marginal rates for higher-valued properties – introduced in February 2023 – have raised home acquisition cost, especially for property investors.

Typically, the new launch market tends to play a substantial role in spurring price growth. That the market saw four notable launches in Q2 2023 and yet posted an overall price decline of 0.2% QOQ perhaps reflects pragmatism in the market – where developers are pricing units more sensitively, as they consider price resistance among prospective buyers, as well as their affordability threshold, amidst elevated home loan rates.

We observe that the proportion of non-landed new private homes purchased by foreigners have fallen to the lowest level in over a year at about 5.2% in Q2 2023 (see Table 2a), while the portion of new homes bought by Singaporeans is almost at a two-year high at 84.6% in Q2 2023, according to URA Realis caveat data. In absolute terms, 109 new non-landed homes were purchased by foreigners in Q2 2023 (see Table 2b); of these, 26 are buyers from the US, and 19 are from China (see Table 2c).

While foreign buyer participation has dropped, we do not expect foreign demand for high-end luxury homes to grind to a halt. An analysis of new non-landed private homes in the CCR purchased by foreigners (non-PRs) showed that a higher proportion of pricier CCR homes were sold in Q2 2023 compared to a year ago. Close to 25% of CCR non-landed new homes sold to foreigners in Q2 2023 were priced above $5 million (see Chart 1) – this is up from the 20% recorded in Q2 2022, and just a shade lower than the 29.7% in Q1 2023, as investors took time to digest the April 2023 cooling measures.

With the moderation in demand from foreign investors, local buyers will face less competition and there could be more buying opportunities, as developers recalibrate their pricing strategy, especially for homes in prime central locations or those in areas with more plentiful unsold inventory or upcoming launches. The URA said that 17,484 uncompleted private homes (ex. EC) remain unsold as at the end of Q2 2023 – up from the 16,252 units in the previous quarter.

With a slew of new private residential project launches lined up in the second half of the year, we expect home prices to be supported. For the whole of 2023, we project that overall private home prices could rise by 4% to 5% and developers’ sales may range from 7,000 to 7,500 units (ex. EC). Meanwhile, private resale volume could come in at 12,000 to 13,000 units – down from 14,026 units in 2022 – as the high interest rates and tight resale stock continue to weigh on sales.

Over in the private home leasing marketrentals continued to rise in Q2 2023, albeit at a slower pace. Looking ahead, as the third quarter tends to be a peak period for the home leasing market, we estimate that rentals could remain firm in view of the healthy demand. As more completions come on, it could bump up the rental stock and help to ease the upward pressure on rentals slightly. The URA added that 7,366 private homes (ex. EC) were completed in 1H 2023, with another 11,810 units due to be completed in 2H 2023.”

Q2 2023 HDB Resale Price Index
Final statistics published by the Housing and Development Board (HDB) indicated that resale prices of public housing flats climbed for the 13th straight quarter, rising by 1.5% QOQ in Q2 2023 – a touch higher than the 1.0% QOQ increase in the previous quarter (see Table 3). This figure is marginally higher than the flash estimates of 1.4% released on 3 July 2023.

There were 6,514 HDB resale flats being transacted in Q2 2023, marking a 6.7% decline from the 6,979 HDB flats resold in the previous quarter (see Chart 2). The resale volume witnessed in Q2 2023 is the lowest quarterly sales tally in the past 3 years.

Please attribute the comments below to Wong Siew Ying, Head of Research and Content, PropNex Realty.
“Prices of HDB resale flats continued to rise at a more modest pace in Q2 2023 by 1.5% QOQ, following the 1.0% QOQ increase in the previous quarter. This takes the cumulative price growth to 2.5% in the first half of 2023 – much slower than the 5.3% increase in the corresponding six months in 2022.

Based on transaction data, the larger flat types posted higher median price growth in Q2 2023, with the executive and 5-room flats seeing a 2.3% and 1.9% QOQ increase in the median resale price (see Table 4).

The slower sales in Q2 2023 could be due to a combination of factors, including a mismatch in price expectations between buyers and sellers, the 15-month wait-out period discouraging some private home owners from selling their private residential property and buying a resale HDB flat as a replacement home, as well as the ramped-up supply of new build-to-order (BTO) flats possibly siphoning some prospective buyers from the resale market. The BTO exercise in May 2023 featured sought-after mature estates Kallang WhampoaBedok and Serangoon – with the latter two being the first BTO project to be launched in Bedok and Serangoon in years.

We have also heard feedback that a delay in HDB Flat Eligibility (HFE) letter approval could also have contributed somewhat to the slower resale transactions. The HFE was introduced from 9 May 2023 to streamline eligibility checks for flat purchase, housing grants and HDB housing loans into one single application.
For the full-year 2023, we maintain our forecast for resale flat sales volume to possibly reach between 27,000 and 28,000 units, with demand for smaller flats likely to remain strong in view of the higher housing grants for the purchase of such flats among eligible buyers. We project that HDB resale prices could grow by 5% to 6% in 2023, slowing from the double-digit increase booked in the past two years (10.4% in 2022; 12.7% in 2021).”

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