The Urban Redevelopment Authority's flash estimate for its first quarter 2017 private home price index provided a couple of positive signals for the market, at least for the condo and private apartment segment.
For the first time after 13 quarters of decline, the price index for non-landed private homes remained flat. It had eased 0.8 per cent quarter-on-quarter in Q4 2016.
It was also the first time that the sub-index tracking prices of non-landed private homes in the suburbs or Outside Central Region (OCR) turned positive, with a 0.1 per cent rise, after 13 quarters of decline.
That said, the URA's index for landed homes slipped 2.8 per cent q-o-q in the first quarter after climbing 0.8 per cent in the previous quarter.
The high absolute prices of landed homes remain a challenge in the current market which has trended towards an affordability play, with smaller-sized condo and apartment units in greater demand.
The landed segment, being the abode of upper middle income professionals and SME bosses, is feeling the chill winds of structural unemployment and challenging business conditions respectively.
URA's overall private home price index eased 0.5 per cent q-o-q in Q1 2017 - the same magnitude of decline registered in the previous quarter. Against the same period last year, the benchmark index has eased 2.9 per cent.
From its recent peak in Q3 2013, the index is down 11.7 per cent.
Amid general comments about the market stabilising, most property consultants polled by BT on Monday, predict a full-year decline in the index. The decreases forecast are up to 3 per cent.
URA's flash estimates also showed that the subindex for prices of non-landed homes in the city fringe or Rest of Central Region (RCR) was unchanged in Q1 this year, after retreating 2 per cent in Q4 last year.
The firm prices for private apartments and condo units during the first three months of this year in OCR and RCR were amid strong primary market sales by developers - in new launches such as The Clement Canopy, Grandeur Park Residences and Park Place Residences at PLQ, as well as substantial sales in earlier-released projects such as Parc Riviera, The Santorini, Principal Garden, Commonwealth Towers and Sims Urban Oasis.
However, in the prime areas or Core Central Region (CCR), the price index for non-landed homes eased 0.2 per cent in Q1 2017, after inching up 0.1 per cent in Q4 2016.
Some market watchers believe that within the non-landed segment, the CCR could fare worse this year than the other two regions.
This is because more units in CCR projects may come into the market for sale on individual-units basis - as bulk sales have become harder after the government shut a loophole last month that some Singaporean investors had been using to enjoy substantial savings in stamp duties, when they acquired unsold units in private residential projects here developed by foreign housing developers via a sale of shares in the company that developed the project.
Foreign housing developers were eager to enter into such deals with Singaporean investors in order to meet strict sales deadlines set as part of the government's Qualifying Certificate (QC) rules. Otherwise hefty extension charges are payable to the state.
The tax loophole was shut through the introduction of the Additional Conveyance Duties (ACD) effective March 11.
With the ACD's rollout, developers are likely to trim prices in the short term to pare down their unsold inventory.
It remains uncertain as to how this could protract the turnaround in prices.
While the ACD is a dampener on bulk sales of private homes, another change the government announced at the same time is seen as putting more people in the mood to invest in property - the tweaking of the seller's stamp duty on residential properties bought on or after March 11. The holding period as well as the stamp duty rate have been reduced.
However, observers cautioned that weak household income growth and interest rate hikes will help to rein in excessive demand for private homes.
Moreover, for those thinking of buying a residential property, the major pillars of the cooling measures - the additional buyer's stamp duty, loan-to-value ratios and the total debt servicing ratio - remain unchanged.
The residential leasing market will also remain weak for the rest of the year. In this regard, it is the OCR which will fare worst in coming quarters due to the significant supply of newly completed private homes coupled with lacklustre demand for rental homes in the suburbs.
On a more positive note, the market should prepare itself for a landing very soon. The private residential market is reaching its trough - supported by relatively strong land pricing as well as strong balance sheets of developers.
However, among projects, there may be differences in price declines, or even increases - depending on the project's attributes and the developer's profile.
Adapted from: The Business Times, 4 April 2017