Slow Creep Upward In Private Home Prices And Hdb Resale Flat Prices In Q3 2023 As Market Sentiment Moderates: Flash Estimates

 02 October 2023, SINGAPORE – Both the private residential property and HDB resale flat segments posted price growths QOQ in Q3 2023 – albeit relatively trim ones, according to the flash estimates published on Monday (2 October). Recent price trends continue to point towards a moderation in the housing sector, as the cooling measures work their way in through the market. The flash estimates tracked transactions up till mid-September; the final print for the entire third quarter will be published on 27 October 2023.

Q3 2023 URA Private Residential Property Index (Flash)
Flash estimates from the Urban Redevelopment Authority (URA) indicated that overall private home prices inched up by 0.5% QOQ in Q3 2023, reversing the 0.2% QOQ decline in the previous quarter (see Table 1). This takes the cumulative price increase in the first nine months of 2023 to 3.6%, slowing from the 8.2% for the corresponding period in 2022.

The price increase in Q3 2023 was led by the non-landed private homes segment, mitigating the 4.9% QOQ decline in prices of landed homes. This is the first quarterly decline in landed home prices in nine quarters, since the 0.3% QOQ drop in Q2 2021. The decrease in landed home prices can be attributed to the slower transaction volume, particularly that of pricier detached houses which saw transactions fall by an estimated 32% QOQ in Q3 2023 – the steepest fall among landed home categories – based on caveats lodged.

In the non-landed private home segment, prices climbed by 2.1% QOQ in Q3 2023, rebounding from the 0.6% QOQ decline in the previous quarter. The increase was largely due to higher prices in the Rest of Central Region (RCR) and Outside Central Region (OCR) where there were several new projects being launched during the quarter. Cumulatively, non-landed private home prices have risen by 4.1% in 9M 2023 – at a slower clip than the 7.8% increase in 9M 2022.

The Core Central Region (CCR) was the only non-landed home segment that posted a price decline. Prices in the CCR fell by 2.6% QOQ in Q3 2023, extending the previous quarter’s price decline of 0.1% QOQ. This is the first back-to-back quarterly decline in CCR home prices since Q4 2019 and Q1 2020. The CCR sub-market is expected to face more challenges compared to the other two sub-markets, as the punitive additional buyer’s stamp duty (ABSD) rates on foreigners and investors curb price growth upside in the CCR, which counts more foreign purchasers and property investors among its buyer pool. In addition, there was only one new launch in the CCR during the quarter, being the 78-unit Orchard Sophia, which sold 29 units at a median price of $2,820 psf.

Meanwhile, non-landed home prices in the Rest of Central Region (RCR) reversed the 2.5% QOQ decline in Q2 2023 - climbing by 2.3% QOQ in Q3 2023. The uptick in prices in the RCR can be attributed to several fresh projects being launched in this sub-market in Q3, including Pinetree Hill, Grand Dunman, and TMW Maxwell. Looking at caveat data, the median unit price of some previously launched projects also rose from Q2 to Q3, such as at One Pearl Bank, Terra Hill, The Continuum, The Landmark, The Reserve Residences, amongst others.

Non-landed home prices also rose in the Outside Central Region (OCR), climbing at a faster pace of 5.1% QOQ in Q3 2023, compared to the 1.2% growth in Q2 2023. Four OCR private residential new launches were put on the market in Q3 2023 – namely Lentor Hills Residences, The Arden, The Lakegarden Residences, and The Myst – which helped to drive sales and supported pricing in this sub-market. All four launches made it to the top 10 best-selling project list in Q3 2023 (see Table 2).

URA said 4,569 private homes (up till mid-September) have been sold in Q3 2023. In all likelihood, overall private home sales would underperform that of Q2 2023, which came in at 5,388 transactions. It is also expected to be markedly lower from the 6,148 transactions posted in Q3 2022.

Ismail Gafoor, CEO of PropNex Realty:
“The growth momentum in private home prices has slowed substantially in recent quarters, indicating the heightened sense of caution as developers, buyers and sellers parse market data to assess the impact of the cooling measures on housing demand, and as buyers take a watch-and-wait approach on their property purchase amid more plentiful supply of new homes in the last few months. This has dragged the overall sales volume lower in Q3, which admittedly was also impacted by the typically more muted sales in August and September, due to the Ghost month where developers held back on launching new projects.

With the cooling measures in place and higher-for-longer interest rates at play, coupled with some hesitation on the part of buyers, we have also witnessed more restrained land tender participation and bids from developers. We think buyers are watching these trends and waiting for more clarity on price movements before entering the market. Some buyers may be holding out for prices to correct which could lead to some mismatch in price expectations. In our view, we do not expect significant price cuts as developers have to contend with rising costs and are affected by the new rule on gross floor area definitions that will eat into their saleable space. We believe the private property market is still adjusting to the slew of cooling measures over the last couple of years and will find an equilibrium given time.

The doubling of the ABSD rate to 60% on residential property purchase by foreigners from 27 April 2023 has hit demand from this group of buyers. Based on URA Realis caveat data, foreigners (non-PR) accounted for 2.1% of non-landed new private home sales (ex. EC) in Q3 2023 (see Table 3) – an all-time low since records began in 1995. Meanwhile, the portion of non-landed new private homes (ex. EC) purchased by Singaporean buyers and Singapore PRs climbed from about 85% and 10% respectively in Q2 2023 to 86% and 12% respectively in Q3 2023. We expect the local demand to continue to make up the vast majority of new home sales and developers will be mindful of the housing needs and budget of local buyers. By and large, the pricing sweet-spot for many local home buyers is still hovering at around $1.7 million.

With some launches slated to come on in Q4 2023, we think private home prices may find some support. In full-year 2023, we estimate that overall private home prices could climb by 4% to 5% - though it is looking likely to come in closer to the lower end of our forecast.”

Q3 2023 HDB Resale Price Index (Flash)
The flash estimates released by the Housing and Development Board (HDB) showed that resale prices of public housing flats rose by 1.2% QOQ in Q3 2023, a shade slower than the 1.5% QOQ increase in the previous quarter (see Table 4). This marks the 14th straight QOQ growth in the HDB Resale Price Index. The HDB added that 6,592 resale flats changed hands in Q3 2023 (data up to 28 Sep 2023). This is higher than the 6,514 HDB flats resold in Q2 2023, but resale volume will certainly underperform the 7,546 units transacted in the full-quarter Q3 2022.

Wong Siew Ying, Head of Research and Content, PropNex Realty:
“Going by the flash estimates, HDB resale prices have lost quite a bit of wind in its sail from the previous years, with resale prices posting a 1.2% QOQ increase in Q3 2023. In the first nine months of 2023, the HDB resale price index has climbed cumulatively by an estimated 3.8% - much slower than the 8% increase in 9M 2022, and 9% growth in 9M 2021.

In recent quarters, we have witnessed a slight divergence in price trends for private homes and HDB resale flats, with HDB resale flat prices still posting moderate growth, while that of private residential properties were relatively flat. If this trend keeps up, it could improve the affordability of private homes amongst HDB upgraders.

We expect HDB resale prices should remain fairly resilient owing to the stable demand from owner occupiers, and the HDB resale market could also potentially benefit from policy changes, with the stricter non-selection rule for the upcoming Build-to-Order exercise and the new reclassification framework for flats (where Plus and Prime flats will come with more stringent resale conditions) from 2H 2024 possibly channelling some buyers to the HDB resale market.

Based on transaction data updated on 29 September, the price growth in Q3 2023 was driven by 4-room flats, with the average price rising by 1.8% QOQ to over $590,450 from $579,740 in Q2 2023 (see Table 5). The average price of 5-room flats rose by 0.6% QOQ, while that of executive flats climbed by 1.3% QOQ in Q3 2023. We note that there were at least 127 flats that were resold for at least $1 million in Q3 2023 – marking a record high for such transactions in a quarter. Of the 127 flats, 30 are 4-room flats, 54 are 5-room flats, while 43 others are executive flats. In all, an estimated 335 million-dollar resale flats were transacted in 9M 2023 – fast closing in on the record 369 units resold in the whole of 2022.

In the January to September 2023 period, we estimate that more than 20,000 HDB resale flats have been transacted. For the full-year 2023, it is likely that HDB resale volume could come in slightly below our projection of more than 27,000 units, as price resistance among some buyers and cooling measures weighing on demand. We anticipate that HDB resale prices could grow by 5% to 6% in 2023, slowly substantially from the 10.4% growth in the previous year, and the 12.7% increase in 2021.”