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Nikkei Markets

Cash-rich buyers drive Singapore private home prices

Property market recovery firms with fourth consecutive quarter of gains

 The biggest gains in the second quarter were seen in the rest of central region, which refers to apartments on the outskirts of the city center.   © Reuters

SINGAPORE (Nikkei Markets) -- Prices of private homes in Singapore rose for the fourth straight quarter, underpinned by demand from cash-rich buyers who've benefited as developers bid up prices for land in the city-state.

Flash estimates from the Urban Redevelopment Authority on Monday showed private residential property prices rose 3.4% from the previous quarter in the April-June period. Prices rose 3.9% in the first three months of the year.

The biggest gains in the second quarter were seen in what URA described as the "rest of central region," which refers to apartments on the outskirts of the city center. Prices in these locations rose by 5.7%, following an increase of 1.2% in the previous quarter.

Singapore's housing market began to recover in the middle of last year as economic growth strengthened and as developers began to bid aggressively for plots of land. The market had been the doldrums previously, hurt by government cooling measures that included additional stamp duties for locals buying second homes and for foreign buyers.

Christine Li, senior director of research at Cushman & Wakefield Singapore, said private home prices could rise by 12% to 16% this year, surpassing the peak reached in 2013.

"The recycling of capital is pushing up the prices now," she said, pointing to the wave of collective sales over the past year. Such sales occur when owners jointly sell their homes, and the land on which the building rests, to a developer for a higher price than what they would get if they sold the units individually.

The buyer subsequently redevelops the site, taking advantage of increased height limits and plot ratios to build more apartments.

Collective sales boost demand for property because the sellers would have to find new homes soon after the deal is concluded, while the redeveloped complex will only hit the market three or four years later.

In a report on Monday, real-estate services firm CBRE said there were 15 such collective sales of residential sites in the second quarter of 2018, bringing the half-year tally to 32 deals worth 9.7 billion Singapore dollars ($7.1 billion). This is already above last year's total of 26 deals worth S$8.1 billion.

Ismail Gafoor, executive chairman of PropNex, Singapore's largest real-estate agency, said the residential market has also received a boost from foreign buyers, who've returned despite the additional stamp duties that could increase their purchase prices by 5-15%.

According to analysts, Chinese buyers find Singapore relatively inexpensive compared to Hong Kong and large Chinese cities like Shanghai, where prices have continued to rise in recent years.

PropNex, which had an initial public offering recently, made a strong debut on the Singapore Exchange on Monday, countering the broader trend. By late afternoon, the stock was trading at 71.5 Singapore cents, up 10% from its IPO price.

DBS Group Holdings, Singapore's biggest lender, said at a briefing on Monday that it remained bullish on Singapore property even though it had cut its outlook on Asian stocks to neutral from overweight, mainly due to the growing tit-for-tat on trade tariffs between the U.S. and other countries. DBS's reasons included the strong domestic economy that could sustain demand for Singapore property and the potential for more foreign buying.

DBS's top picks among Singapore-listed property stocks are City Developments, UOL Group and Roxy Pacific Holdings.

--Kevin Lim

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