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Economy

Singapore home prices fall again as economy, measures bite

Private residences in prime areas hardest hit

Flash estimates from the Urban Redevelopment Authority showed private home prices fell 0.6% in the three months to March from the previous quarter, when they edged down 0.1%.   © Reuters

SINGAPORE (Nikkei Markets) -- Prices of private homes in Singapore edged lower for a second straight quarter led by those in prime areas, strengthening the likelihood of a continued downtrend as sentiment remains weak due to a slowing economy and government measures to cool the market.

Flash estimates from the Urban Redevelopment Authority showed private home prices fell 0.6% in the three months to March from the previous quarter, when they edged down 0.1%. Apartments in the central areas, which include the high-end homes popular with foreigners, bore the brunt of the decline, dropping 2.9% after retreating 1.0% in the preceding period.

Jason Low, senior investment strategist at DBS Private Bank, said the bank expects prices of private residential property to fall by up to 3% this year with sales by developers declining around 20%.

New launches in the central region could face more headwinds, given the likely supply spike, he said. According to Low, homes in the prime areas account for around 60% of upcoming launches.

"Buyers have become more cautious and selective and are not in a hurry to purchase, as prices are easing," said Ong Teck Hui, senior director of research and consultancy at JLL in Singapore.

Ong cited URA records, which showed there were just 3,215 private home transactions in the first quarter of 2019, a sharp drop of 40% from 5,328 transactions in the year-ago period.

Singapore's property market began to slow in early July after the government unveiled measures such as higher stamp duties for foreigners buying residential property in the city-state as well as for locals buying a second home. The steps came after developers, eager to capitalize on signs of growing demand for apartments, chased land prices higher with aggressive bids at auctions.

For the whole of 2018, prices of private residential properties increased by 7.9% following a gain of 1.1% in 2017.

Developers also face a slowing economy, with a recent survey of economists forecasting growth around 2.5% this year, down from 3.2% in 2018.

While analysts were uniformly bearish about the outlook for homes in the central areas, some were more sanguine about prospects for the broader market.

Desmond Sim, CBRE's head of research for Southeast Asia, said developers have the option to delay launches as penalties imposed on unsold units would not kick in for another three to four years. He added that sales at mass market projects could remain resilient as prices are still affordable.

Under Singapore law, developers who buy land must complete the housing development and sell all units within five years. Most of the recent land acquisition for private housing took place from 2017 to early 2018.

URA's latest data show prices of homes on the fringes of town retreated 0.2% on quarter between January and March after registering an increase of 1.8% in the previous quarter. Prices in the suburbs, however, were unchanged following a 0.7% increase in the last three months of 2018.

Private property accounts for about 20% of the housing stock in Singapore, where most people live in government-built apartments.

--Kevin Lim

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