Private Home Prices Are At A 5-Year High, But Are They Sustainable?
Singapore’s private home prices recently hit a five-year high, according to URA estimates on 1 July 2019.
But is it just a quirk, or will prices keep rising? Let’s find out.
Disclaimer: This is not a sponsored post. Opinions expressed in the article should not be taken as investment advice. Please do your own due diligence.
What’s Happening In The Property Market?
In a separate article, we pointed out that private property prices were rising, even as resale flat prices were falling.
URA’s private residential property price index is at 150.5 points for Q2 2019, the highest level in five years. It’s a 1.3 per cent increase from Q1, during which we saw a 0.7 per cent dip in prices.
We believe the main causes are:
- More flats hitting their MOP, and a surge of upgraders (hence the falling resale flat prices, even as private property prices climb)
- Confidence in the US Federal Reserve halting or even lowering interest rates, thus making property loans more affordable
- A segment of investors who believe that Singapore properties are a safe haven, on par with gold or German government bonds (Sino-US trade tensions are prompting a flight to safety among some investors)
- Some market watchers also credit an increase in launch prices.
Developers paid more for collective sales in 2017 when the bidding was especially aggressive. There was also rising ABSD (additional buyer’s stamp duty) for developers and higher development charges, so new launch prices are on the high end.
Some experts we spoke to also attribute the sales spike to a large number of en-bloc sales in 2017. But we believe the bulk of buyers are still upgraders rather than displaced homeowners – some displaced owners may not be buying private properties.
How Likely Is This To Continue?
We foresee private property prices heading on an upward trend for the second half of 2019.
This will be probably be fueled by:
- investors spooked by the trade war
- the number of upgraders, and
- higher launch prices
However, the market will still be weighed down by weak rental rates and the recent cooling measures so we wouldn’t be surprised to see prices pushed up as much as 2.5 to 3 per cent if conditions continue.
However, the momentum is not likely to last far into 2020.
By that point, most upgraders and displaced people from the en-bloc exercises would have found their new homes.
On a wider scale, it’s improbable that the US and China will sustain their tariffs till 2020. both sides will take political heat from the economic drawbacks at home.
Likewise, there’s general acceptance that low interest rates can’t last much longer – they’ve been at historical lows for almost 10 years. Even if borrowers are getting a temporary stay of execution, they know the rates have to normalise over the next few years; probably while they’re still paying their loans. This won’t be much of an enticement to homeowners, although it will still draw investors who are planning to sell after a short period (e.g. five years or so).
At any rate, we know the Singapore government watches the market like a hawk, and likes the prices as they are.
Any substantial price increases are likely to see the screws get tightened, and a new round of cooling measures.
Key Takeaway: Homeowners Shouldn’t Try To Time The Market
We have no doubt plenty of homeowners figured “prices can only go down”, due to the last round of cooling measures and economic uncertainty.
But as current events show, the market isn’t that easy to predict.
Homeowners should focus more on affordability and personal comfort, and worry less about clever “wait and see” approaches.
Seedly Guest Contributor: 99.co
For our Property Talks, the Seedly team worked closely with 99.co, who is an expert in the field, to curate unbiased, non-sponsored content to add value back to our readers.
99.co is a Singapore-based property portal that aims to take away the tedious bits of property hunting. If you have any questions on the mentioned stocks, feel free to discuss them with the Seedly Community here.
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