Singapore Home Prices Rise 3.2% in Ninth Straight Quarter of Growth

Singapore home prices rose at a faster pace in the three months ending 30 June to record their ninth consecutive quarter of growth as tight supply met rising demand fueled by border reopening and builders passed along rising construction costs.

A government price index of private residential properties jumped 3.2 percent to 180.4 points in the April-June period from 174.8 points in the preceding three months, a faster increase from the 0.7 percent uptick in the first quarter based on flash estimates released by the Urban Redevelopment Authority on Friday.

“The sheer weight of demand is simply outpacing the backlog of supply as Singapore normalises from the pandemic years,” said Leonard Tay, research head of Knight Frank Singapore.

Despite the second quarter upswing, the rise in home prices for the first half of the year softened to 3.9 percent from 4.1 percent growth in the first six months of 2021 with analysts projecting price growth to slow further in the coming months as interest rates dent buyer demand. “Nevertheless, price increases could taper in the coming months as rising interest rates will be a natural cooling measure in H2 2022, reining in homebuyer purchasing power,” Knight Frank’s Tay noted.

Enduring Demand

With second quarter home prices coming in 10.3 percent above the same period last year, URA figures showed that the upswing from April through June was mainly driven by a leap in values of non-landed properties where prices grew 3.3 percent to erase a 0.3 percent first quarter dip in prices of condos and apartments.

For landed homes like bungalows, shophouses and strata landed housing, price growth slowed to 2.9 percent last quarter from the 4.2 percent surge seen in the preceding three months.

Analysts attributed much of the price growth during the period to sales at a pair of residential projects launched in May, Piccadilly Grand on Northumberland Road – a joint project between City Developments Ltd (CDL) and Hongkong Land and Bukit Sembawang’s Liv @ MB in Mountbatten, with both of the upscale projects having sold over 70 percent of their units during their launch weekends.

CBRE’s research head for Southeast Asia Tricia Song, said the success of these launches helped pushed market expectations higher as developers stood firm on their asking prices given the low volume of unsold stock and the need to recoup higher construction costs.

“The strong showing at the two projects might be indicative that investment and genuine demand and liquidity for well-located projects are still relatively strong despite recent cooling measures and global economic headwinds,” Song said. “Some buyers could also be locking in mortgage rates ahead of anticipated further interest rate hikes especially since selling prices at future launches are likely to remain elevated with land prices staying firm.”

Prices Up 18.6% From Q1 2020

By region, non-landed residential property values received a boost during the period from the six percent spike in home prices in the city fringe locations which the URA refers to as the rest of the central region, with prices in the segment rebounding from 2.7 percent decline during the first three months of the year.

In the suburban locations classified as outside the central region, prices rose by 1.7 percent from April through June after climbing by 2.2 percent during the previous quarter.

Prices in the prime areas known as the core central region, which includes Raffles Place, Marina Bay and Tanjong Pagar, price increases were less pronounced at 1.6 percent after dipping by 0.1 percent in the preceding three months.

With the second quarter price increase, values of private homes in the Lion City have surged by 18.6 percent since bottoming out in the first quarter of 2020 at the onset of the coronavirus pandemic.

PropNex Realty chief executive Ismail Gafoor said the sustained rise in home prices shows the resilience of housing demand in Singapore as the city continues to provide an attractive and safe investment destination for foreign investors, especially with the further reopening of international borders.

“Private homes sales market performed quite well in Q2 2022, the 3.2 percent growth posted during the quarter was surprising given the many uncertainties in the market – one where we have had to contend with rising inflation, stock market turmoil, monetary tightening as central banks around the world increase interest rates,” Gafoor said.

Interest Rates to Cool Market

Despite the recent upswing, analysts expect home price growth for the full year of 2022 to come in below last year’s 10.6 percent increase. Knight Frank’s Tay projects a full year 2022 price increase of from 5 to 7 percent while Gafoor expects 5 to 6 percent growth.

The Propnex executive said higher interest rates environment may push potential buyers to reconsider their plans and dampen overall demand as rate hikes are likely to continue through next year.

In a bid to boost home supply, the government land sale programme which was released by the URA last month increases land provided for housing with six sites to be put on the auction block in the second half of 2022 that could yield 3,505 new homes in the city.

The en bloc market has been active as well, fueled by land-hungry developers like the Singapore arm of regional developer Wing Tai which clinched a lakefront residential site in the Jurong East for S$273.9 million ($199 million) through a collective sale in late May. Wing Tai plans to redevelop the Lakeside Apartments at on Yuan Ching Road into a 24-storey residential complex with 307 units