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A Commentary: Surging Private & HDB residential property prices in 4Q 2021, and the Road Ahead.

Written: 3 January 2022


Recently, the flash estimates of the HDB resale and private residential price indices for the fourth quarter (4Q) in 2021 have been released by the government. We notice that the prices for all residential property types have increased at an accelerated rate in 4Q 2021 compared to the preceding quarter.


Pricing Trend Review: Private Residential Properties

Based on the flash estimates, we can see that the growth rate of private residential property price indices rising steeply across the various residential property segments in 4Q of 2021.


Based on the figures, we can see that the overall private residential property price index has increased by a considerably 5.0% quarter-on-quarter in 4Q 2021, and 10.6% over 4Q 2020. This marks a significant difference as compared to the 1.1% qoq price growth in 3Q 2021. The growth of the real estate price index has reflected a strong surge before the government announced the latest cooling measures. The cooling measures were implemented on 16 December 2021, less than an hour after the government's late-night announcement on 15 December.


Source: URA, ERA Research & Consultancy

We also note that the 5.0% qoq price increase has been the steepest growth for the past 11 years. Based on this accelerated price growth, it is no wonder the cooling measures were bound to come.


Across the three market segments, the price index for Rest of Central Region (RCR) has seen the greatest increase, making its mark at 7.3% qoq. Conversely, we actually saw muted growth in CCR, which was the slowest at 2.5 qoq in 4Q of 2021.


Another price index to mention would be the landed housing, which grew considerably at 3.7% qoq in the fourth quarter. This is also relatively faster than 3Q 2021, which was a 2.6% increase back then.


Source: URA, ERA Research & Consultancy

Pricing Trend against Sales Transaction Volume

The accelerated pace of price increase for private property sales in 4Q 2021 took place even though there was a slowdown in the sales transaction volume. We saw the volume of private residential units transacted in both primary and secondary markets standing at about 16.6% and 24.4% qoq respectively in the same quarter. This showed that there has already been a lower rate of property transactions taking place even before the cooling measures were implemented.


Pricing Trend Review: HDB resale units

In 4Q 2021, we also saw the HDB resale price index increasing at an accelerated rate at 3.2% qoq. In comparison to a year ago, we note that there is a 12.5% increase in overall prices of HDB resale flats.


In 2021 alone, HDB has rolled out approximately 17,100 Build-to-Order (BTO) flats. In an effort to meet the rising demand for BTO flats along with the steep prices in the HDB resale market, the government has already made plans to release another 23,000 flats per year in 2022 and 2023. In order to continue encouraging homeownership and to address this strong demand, HDB has also announced that it is “prepared to launch up to 100,000 flats in total from 2021 to 2025, subject to prevailing demand”.


In February 2022, we will see HDB launching 3,900 BTO flats across Geylang, Kallang Whampoa, Tengah, and Yishun. This will be followed by another 5,200 - 5,700 BTO flats across Bukit Merah, Jurong West, Queenstown, Tampines, Toa Payoh, and Yishun, which will be released in May 2022. It should also be noted that some of these flats are also offered under the Prime Location Public Housing (PLH) model.


Source: URA, ERA Research & Consultancy

Road Ahead

With the advent of 2022, there are a few factors that will determine the path ahead for residential real estate prices.


One deciding factor would be the extent of economic recovery in the face of the ongoing COVID situation, and the possible arrival of foreigners streaming in for work opportunities once the borders are opened up. This will also include more foreign students on exchange, who will live in Singapore for a longer period of time as well. If these figures are on a steady increase, it will positively impact the real estate prices and the demand.


For now, real estate sales remain primarily driven by buyers that are not as affected by the latest cooling measures - this would be the Singaporeans and the permanent residents that are purchasing their first residential property in Singapore. This would mean that the intention of purchase would be less of investment and more for owner-occupiers.


In the face of potential tighter property market curbs, impending interest rate hikes, and the ongoing pandemic situation, it is true that the road ahead for the property market may face certain challenges. The recent cooling measures also have a huge impact that increases the uncertainty in the local property market.


However, there is light at the end of the tunnel, where the Omicron variant has been announced to be less deadly despite its being more contagious than its other variants. If there are no further developments or variants emerging, there would be hope that the current pandemic will gradually be contained. This will hasten the economic recovery and reduce its adverse impact on the real estate market.


With all factors taken into consideration, the private residential property price index will look to increase approximately 0 - 3% in the upcoming 12 months ahead.


In comparison, the latest round of cooling measures has little effect on the HDB resale market, and the ramping up of BTO flats supply would be the government’s solution to address this. After all, any cooling measures to curb demand would be discouraged, as it is understood that public housing is the preferred choice for the majority of Singaporeans. This is especially so for the newlyweds and younger couples, where public housing is usually the only type of housing that they are able to afford.


With that into consideration, HDB resale flats will potentially continue to see an increase in the price of 1.4% - 2.5% each quarter. This is also because the ongoing issue of supply chain problems in the construction remains unsolved, and this affects the timeline of when the BTO flats can be completed. If the shortage of manpower and materials can be resolved with the easing of the pandemic, the increase in the supply of new BTO flats will have put brakes on the growth rate of HDB flat resale prices.


The information provided is for generation information purposes only and does not have regard to specific investment objectives, financial situation and the particular needs of any recipient hereof. No information here should be used as legal, taxation or investment advice.


Source: By ERA Research


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