-- Overall private housing prices rose marginally in Q3 2023, reversing the decline in Q2 2023. The increase was led by up-graders in the OCR and RCR non-landed segments, partially offset by declines in landed properties and CCR non-landed segments. Sale transaction volume had fallen by about 15% on a quarter-on-quarter basis and by about 26% on a year-on-year basis in Q3 2023. We believe prices will continue to stabilise over the next few quarters on softer economic conditions, elevated mortgage rates and recent cooling measures.
Flash estimates show that private home prices rose marginally by 0.5% q-o-q in Q3 2023, reversing the 0.2% q-o-q decline in Q2 2023. With this, private home prices have risen 3.6% year-to-date 2023, and up 28.5% since bottoming in Q1 2020.
Price momentum picked up in the city fringe and suburban market segments, but overall home price growth was offset by a moderate decline in the CCR and a steep correction in landed property prices. Prices of non-landed properties increased 2.1% q-o-q, while prices of landed properties saw a steep correction of 4.9%, the largest quarterly decline since Q1 2009 when prices fell 9.2% q-o-q and ending the 25.1% run-up since prices last bottomed in Q2 2021.
Increase in prices of non-landed properties was mainly driven by properties in the Outside of Central Region (OCR) and RCR where prices rose by 5.1% q-o-q and 2.3% q-o-q respectively in Q3 2023, supported by resilient demand from local owner-occupiers.
• During the quarter, new launches in the RCR included Grand Dunman, Pinetree Hill and TMW Maxwell which all set benchmark launch prices but response has been mixed.
• New launches in OCR included Lentor Hills Residences, The Lakegarden Residences, The Myst, The Arden and The Altura EC, and response has also been mixed and sell-through rate has been lower than last year’s, as buyer fatigue and resistance to high price points set in.
• The increases in price index in OCR and RCR could have been driven by resale transactions in projects newly completed such as Parc Esta, Treasure at Tampines, The Riverfront Residences in the OCR, and to a lesser extent - Jadescape and The Stirling Residences in the RCR, which could present better value as they are readily available and also trade at a large price gap with the new launches.
The CCR saw a price decline of 2.6% q-o-q, as developers continued to dangle discounts to clear unsold inventory, and sentiment remained tentative after the 60% foreigners’ ABSD measure in April 2023. We note that CCR projects under construction such as The Atelier and The Avenir sold their last unit respectively in August and are now fully sold.
Outlook
Based on caveats downloaded from realis on October 1 (today), 1,905 new private homes (excluding ECs) were sold in Q3 2023, 10.4% lower than the 2,127 units moved in Q2 2023 despite a larger number of new projects and more units launched. This could be attributed to weaker economic conditions and an indication of increased buyer selectiveness amid the myriad of available new launch options. Pent-up demand has also been mostly absorbed and genuine buyers are now spoilt for choice. In addition, prices have already moved up significantly and investors could feel that there is limited room for upside. Some of the projects which are targeted at investors or typically have a higher proportion of foreigner buyers will continue to face some resistance given the recent cooling measures doubling foreigners’ ABSD to 60% as well as a further increase in ABSD rate for investors. These investors will reassess their options and take a longer time to shop around.
Preliminary numbers show that 5,288 new homes were sold in the year-to-September. Overall, CBRE Research expects 6,500 – 7,000 new private homes to be sold in 2023, slightly lower than the 7,099 units in 2022, which was a 14-year low since 2008’s 4,264 units. Attractive developer pricing and stabilising interest rates in Q4 2023 remain key to bringing buyer confidence to the market.
Correspondingly, CBRE Research believes home prices which have risen 3.6% year-to-September have peaked and are likely to flatten out in the next few quarters. Barring widespread retrenchments and a sustained recession, a significant price correction is not expected given low unsold inventory and generally healthy household balance sheets. As such, CBRE Research maintains its full year 2023 forecast for private home price growth of 3%, slower than the 8.6% seen in 2022 due mainly to a weaker economic outlook -- MTI forecasts 0.5 – 1.5% GDP growth for 2023, vs 3.6% for 2022.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2022 revenue). The company has approximately 115,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
