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Private residential home prices continued their recovery in Q2, albeit at a slower pace of 3.4% compared to the 3.9% increase posted in Q1. On a year-on-year (y-o-y) basis, prices rose 9.1%. This is a significant rise as it is the highest yo-y increase observed since 2Q11 (10.2%). For the first half of 2018, overall prices have risen 7.4% since Q4/2017. Prices of non-landed properties rose the most quarter-on-quarter (q-o-q) in RCR (5.6%), followed by OCR (3.0%) and
CCR (0.9%). Price increase is lesser in CCR as there were fewer new launches compared to the other two segments.
In light of the cooling measures, we expect prices to stabilize, possibly trending sideways in the next few months. We do not foresee huge dips in prices as developers are not offering big discounts at this juncture. Many developers are deep-pocketed or public listed companies with strong holding power and they have proven to ride through the odds during the past rounds of cooling measures. The two-pronged approach used by most developers now include giving a direct 3-5% discount to offset the extra ABSD or stricter LTV limit for buyers, and to increase agents’ commission to ‘divert’ buyers to their projects. The latter strategy is preferred especially for the high-end segment, as it serves to maintain ongoing sales without causing large price fluctuations.
The coming months should continue to see a steady stream of new projects being launched in the market. Although new launch prices may now be slightly lower than expected, we may still observe benchmark prices in selected locations, as some developers have acquired land parcels at high prices and are probably not willing to sell their units at a loss. While some developers may choose to hold back their launches to observe the market performance, others are pressing ahead by rolling out different discount schemes and employing more sales agencies to reach out to more potential buyers. The upcoming launch of The Tre Ver has already employed six marketing agencies for their project.
First-timers (mostly owner-occupiers) who can afford the extra 5% cash or CPF down-payment as a result of the stricter LTV limit, are entering the market now to leverage on the reduced prices. Some of these first-timers are children or grandchildren of existing owners, who have made purchases through their names to avoid the hefty ABSD. Therefore, we observed a shift in buyers’ preference for two and three bedroom units instead of one-bedders after the cooling measures. One bedders that are commonly bought by investors will see less takers as investors are more adversely impacted by the ABSD. We feel that this buying trend is likely to continue and the greater demand for larger units will likely bring down the overall average prices in the coming months.
As a result of the cooling measures, we have adjusted our overall price projection for the full year to be 8%-10% from our original 8%-12%. Primary sales could hover between 8,000 and 9,000 units for the whole of 2018.