While no major correction is expected next year, analysts believe that several factors from oversupply to lending curbs will keep prices of executive condominiums (ECs) and private homes depressed, reported The Straits Times.
Knight Frank Singapore research head Alice Tan expects new home prices to drop by three to five percent in 2016, while projects with many unsold units may lower prices even more.
ECs have seen average prices fall from a high of more than $800 psf in H1 2015 to $780 psf in H2 2015, noted R’ST research director Ong Kah Seng, adding that average prices of ECs could drop next year to $750 to $780 psf.
With around 24,000 new unsold units in the market, remnant stock is a major issue plaguing the private residential market. Aside from this, developers are also under increasing pressure to move units due to the Additional Buyer’s Stamp Duty (ABSD) and Qualifying Certificate penalties, he said.
Developers have been slashing prices all year as market realities start to bite. The Panorama, for instance, saw median prices fall to $1,226 psf in October from $1,343 psf during its initial launch in January last year, revealed OrangeTee research manager Wong Xian Yang.
Prices at Sims Urban Oasis also slipped to $1,285 psf in October from $1,397 psf during its February launch.
Clearly, buyers affected by both the ABSD and Total Debt Servicing Ratio (TDSR) have become more selective nowadays.
But while new private home sales were lower this year, the unsold stock has also been decreasing. Knight Frank’s Tan said there were 24,149 unsold units in Q3 this year, down 18 percent from Q3 2014 and 25 percent lower than in Q3 2013.
“The adjustment of prices, albeit at a moderate level from about two to three percent discount, coupled with pent-up demand, especially from local home buyers, has helped improve take-up rates in the last two quarters,” she said.
Over in the resale market, the year’s top five projects saw prices drop by six to 11 percent from 2013, though prices increased at one of the developments, said OrangeTee.
Despite the rise in resale volumes, Wong expects rentals to remain soft due to the limited growth in foreign labour and many completions expected next year.
Century 21 chief executive officer Ku Swee Yong said EC developers may become more desperate to move units in projects where there are over 300 unsold units, like at The Criterion, The Terrace and Sol Acres.
“The raised income ceiling of $14,000 (earlier this year) does not seem to have brought in many buyers,” he said.