Singapore Home Prices Expected to Fall. Question is by How Much?

Although private home prices fell only 1% in Q1, sharper price falls are a given for the rest of the year, it’s only a matter of magnitude.

Prices in the core central region (CCR) fell the most, down 2.2% compared with -0.5% and -0.4% in the rest of central region (RCR) and outside central region (OCR) respectively. The latest data was released by the Urban Redevelopment Authority (URA) on Friday.

This brought CCR home prices to 4.9%  below the recent peak in Q3 2018 and 7.2% below the all-time peak in Q1 2013, said Tricia Song, Colliers International head of research Singapore.

Still consultants are not prepared to revise sharply downwards their forecasts of where prices will be by the end of 2020 despite Singapore heading for a deep recession, citing factors like government relief measures.

The extended circuit breaker to June 1 has led to economists revising further downwards Singapore full year GDP to range from -6 to -10%. The International Monetary Fund has also said the world is heading towards the worst recession since the Great Depression.

A fair correction in prices is expected in 2020, but not to the magnitude of the 24.9% plunge over four quarters during the Global Financial Crisis (GFC), said Ong Teck Hui, JLL senior director, research & consultancy. During GFC, total transaction volume in 2008 plunged by two-thirds from 2007. This was due to a highly exuberant market in 2007 when 40,654 private homes changed hands, he said.

By contrast, the total transaction volume in 2019 was only 19,150 units, largely due to the cooling measures being in place. Therefore, while total transaction volume in 2020 may not decline as badly as 2008, it is possible that it could be around 40 per cent to 50 per cent, said Mr Ong.

“Sale volumes are expected to plunge in Q2 2020, as show galleries remain closed during the circuit breaker period,” said Christine Li, Cushman & Wakefield head of research.

Price falls may not be that steep in the coming two quarters at least as both buyers and sellers adopt a wait-and-see stance, she said. “This is due to the temporary relief that the government provides for the home owners who have difficulty repaying the mortgage. This will help owners to buy some time before they cave in to buyer’s price, but it will happen later in the year,” said Ms Li. She expects residential prices to correct by around 5% this year with further decline next year.

The 1% price fall in Q1 was the first decline after three consecutive quarters of growth. This contrasts with an increase of 0.5% quarter on quarter in Q4 2019.

Year-on-year prices rose 2.4%.

The all private residential price index is now 1.6% above the most recent peak in Q3 2018 and 1.6% below the all-time peak in Q3 2013.

The URA also said that prices of landed properties fell 0.9% in the first quarter of this year, after rising 3.6% in the fourth quarter of 2019.

Rentals of private residential properties edged up 1.1% in Q1 2020, compared with a fall of 1% in the previous quarter.

Ms Song also thinks prices will not plunge like they did during GFC as there was rampant speculation and loose credit prior to the GFC. The nine rounds of property cooling measures in 2009-2018 have reined in speculation and price increases over the past three years were more sustainable.

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