Private housing market driven by optimism shows URA’s flash data

Private housing market turned in a blockbuster performance in the last quarter of 2020 given all the challenges amid the global pandemic and the economic downturn

Initial estimates from the Urban Redevelopment Authority (URA) showed that overall private home prices rose by 2.1% in Q4 2020. This is the highest quarterly increase since Q2 2018 when prices rose by 3.4%. Taken together, private housing market prices have risen by 2.2% in the full-year 2020, marking the fourth straight year of price increase. Based on the Q4 2020 flash estimate, the URA private residential property index (with a reading of 157 points) is now about 1.6% above the recent peak in Q3 2013 (154.6 points).

The private housing market price increase in Q4 2020 was led by the surge in home values for non-landed private residential properties, which rose by 3.2% over the previous quarter.

Non-landed home prices rose across the board in Q4 2020, with the Rest of Central Region (RCR) seeing the sharpest rise of 4.8% – likely supported by several new launched in this sub-market during the quarter. Meanwhile, the Core Central Region (CCR) registered a price growth of 3.3% and home values in Outside Central Region (OCR) climbed by 1.7% in Q4 2020, according to the flash estimate.

Commenting on the private housing market performance, PropNex noted: “A much improved market sentiment and rising consumer confidence have helped to boost home values in Q4 2020. This came on the back of fresh optimism around the Singapore economy returning to growth in 2021, Covid-19 vaccine hopes, the effective containment of the pandemic, and further re-opening of business and social activities.”

private housing market

Ismail Gafoor, CEO of PropNex, commenting on the private housing market performance, said: “Looking at the numbers, I would say the residential property market – both public and private housing – turned in a blockbuster performance in Q4 2020 given all the challenges amid the global pandemic and the economic downturn.”

“We believe the property market has emerged relatively unscathed in this crisis thanks to the various rounds of cooling measures which have eradicated real estate speculation and encouraged households to be more prudent in their property purchase.

“We saw the sales momentum and price resilience in Q3 2020 carrying through to the final quarter of the year, as market sentiment and consumer confidence picked up steadily. In Q4 2020, market confidence got a shot in the arm on prospects of the phase 3 re-opening as well as positive news around Covid-19 vaccines. In addition, there is also a growing sense of optimism amid the gradually recovering economy and successful containment of the pandemic in Singapore.

“According to URA, overall private home prices rose by 2.1% in Q4 2020 and 2.2% for the whole of 2020, which is slightly better than our forecast. We expect that home values should continue to inch up in 2021 by 2% to 3%, given the improving market outlook and diminishing supply of units. In addition, with the firm land price for sites and higher construction cost, there is little headroom for developers to cut prices.

“In general, we think developers have got their pricing strategy on-point in 2020 and this has helped to ensure that their projects remain appealing to price-sensitive buyers; in fact, it has enticed many buyers to enter the market, with several new launches achieving stellar sales on their launch weekend – The Linq At Beauty World was practically sold-out, while Clavon sold 70% of its units, for example.

“Moving forward, we expect the sales momentum of private homes to remain intact, backed by the ample liquidity in the market as well as the benign interest rate environment. In addition, we could potentially see more foreign buyers returning to the market should there be any further easing of travel restrictions. We anticipate that 8,000 to 9,000 new private homes could be sold in 2021 – slightly lower than the 9,793 units sold in 2020 based on Realis data. The lower sales forecast for 2021 is mainly due to fewer large developments that will be launched this year, as most of the mega projects have already been progressively put on the market in 2017 and 2018.”

Commenting on the upward movement of the prices of private housing market, Ms Tricia Song  Head of Research for Singapore at Colliers International, said: “In Singapore, private residential property prices rose in Q4 2020 for the third straight quarter, on pent-up demand and against the weak macroeconomic conditions.”

Ms Song added, “Based on advance estimates for the fourth quarter of 2020, the Singapore economy contracted by 3.8% YOY, but grew 2.1% QOQ seasonally-adjusted. This brings the full-year GDP growth to -5.8%, the worst recession in Singapore history.  2019’s GDP growth was +0.7%.”

“We believe home prices, which historically were highly correlated to GDP growth, actually rose against the deep recession, largely due to the following reasons:

  1. The pandemic and recession have had an uneven impact on different sectors of the economy. Tech, financial services and biomedical/ healthcare sectors have been sheltered or have even thrived, while aviation, transport, tourism, retail services have been affected adversely;
  2. For those affected, the government has been quick to dish out financial help – some S$100 billion over four fiscal stimulus packages, including job support schemes to protect local jobs, and legislating temporary measures on moratoriums or waivers on commercial rents, home mortgages, interest payments.  These have helped, to a large extent, most businesses and individuals tide through the most difficult six months;
  3. Property prices were relatively in line with fundamentals before the recession. In fact, cooling measures on the private home market were imposed in July 2018, and home prices have declined 0.7% in Q4 2018-Q1 2019, before rising 3.4% in Q2 2019-Q4 2019.
  4. Public housing has also started seeing resale HDB volumes and prices rise, which support upgraders’ demand in private housing.

“In the future, with a brighter economic outlook in 2021, we expect private residential prices to move in the same direction. However, with the resilience of the market and prices up 2.2% in 2020, we expect private home price growth to be a modest 5% in 2021, tracking the expected GDP growth.”


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