Private home prices in Singapore are currently at the highest in five years, with the official flash estimate private residential index reaching 150.5, the highest since the first quarter of 2014 when the index was 151.3. It comes in the wake of two unexpected changes.
First, developers sold 821 units last month, the highest sales figure for the month since June 2013, when 1,806 units were sold. This stellar performance is encouraging because the June school holidays tend to make the month a slow one for new home sales as many parents would go on vacation with their children.
Second, the unexpected increase in private home prices in the second quarter of this year, with preliminary figures showing prices going up by 1.3 %. This reverses the decline of the preceding two quarters from last October to March this year after cooling measures were imposed last July. Prices have risen by 0.6 % since the start of this year.
The return of confidence, despite the cooling measures and heightened volatility stemming from the United States-China trade tensions, points to sound fundamentals, rising affluence and ample liquidity in Singapore's real estate. Investors with a long-term view are fully cognisant of the value that Singapore's real estate offers, beyond the vagaries of cyclical price movements and cooling measures.
The US Federal Reserve is set to cut interest rates this year, a move that will give prospective buyers a breather from the increases in the last few quarters that have bumped up mortgage rates and deterred some buyers. Buyers are now ready to commit because, in such an environment, property investment is always seen as a hedge against inflation. The rise in interest is also because Singapore is viewed as a safe haven for both capital preservation and appreciation.
The June figures show greater buyers' interest in new launches, which saw a pick-up in sales recently. To keep the momentum going, developers are pricing their projects more competitively. Year-on-year sales were up by 25.5 %, despite the absence of the latest round of cooling measures a year ago.
Four new home launches took place last month: Sky Everton, Lattice One, Seraya Residences and Sloane Residences. The take-up rate of 40 % for Lattice One and 51 % for Sky Everton were encouraging.
The top seller was Sky Everton in Everton Road, at the former site of Asia Gardens. It came on the market on June 22. A total of 134 out of 262 units were sold and the market found it attractive for a mix of reasons: the attractive price of $2,550 per sq ft, its freehold tenure and central location, and the dearth of new launches in the area.
But there is a fly in the ointment. Buying sentiment could deteriorate in the wake of Singapore's growth plunging to 0.1 % in the second quarter, the worst showing in a decade and far below analysts' expectations. One silver lining at this point is that Singapore's job market is still healthy, with the unemployment rate hovering around 2.2 %.
With ample liquidity, the sales momentum will continue in the second half of this year. And this will be aided by the heating up of competition among the new launches and developers striving to price their projects more favourably to attract buyers.
Adapted From The Straits Times, July 21 2019