_URA Flash Estimate Q2 2022 Commentary
In a reversal of the marginal 0.7% q-o-q increase in Q1 2022, the URA All Residential Price Index rose by 3.2% in Q2 2022 based on the flash estimates released today. The price growth was stunted in the first three months of the year by the initial reaction of homebuyers and developers to the cooling measures announced in December 2021 and consequently a lack of new project launches. However, the launch of Piccadilly Grand at Northumberland Road and LIV@MB at Arthur Road in May reignited the market. With these two projects in the Rest of Central Region (RCR) capturing homebuyer attention and rekindling public interest, the non-landed price index for the RCR jumped by 6.0% in Q2 2022 after having fallen by 2.7% in Q1 2022. Notwithstanding the cooling measures and the increase in Additional Buyer’s Stamp Duty (ABSD) rates, all it took were a couple of launches to jumpstart sales activity, given that there is strong underlying demand for new product. There are more buyers than there are sellers in the current home market, exacerbated by the current tight supply of saleable inventory as the new home market plays catch-up with a backlog of delayed new completions and lack of development land acquisition during the pandemic years.
Aside from the RCR leading price growth in Q2 2022, the Core Central Region (CCR), which generally characterises prime homes, increased by 1.6%. The increase in prices coincides with the opening of air travel lanes from April onwards. High-Net-Worth-Individuals from around Asia are now looking towards Singapore for private home investment opportunities, including luxury properties in prime areas despite the increased ABSD for foreigners. Examples of foreign homebuyer interest include the purchase of 20 units at CanningHill Piers (RCR) for over S$85 million by a Chinese national, as well as an Indonesian family reported to be in exclusive due diligence to buy 22 units at Draycott Eight (CCR). Developers with projects in the CCR and RCR can now make use of the opportunity to sell the remaining stock of units in their new projects, especially if these developments will be completing within 2022, as the wealthy from the region are looking for completed units that are new and ready to occupy.
In the Outside Central Region (OCR), which represents mass market suburban homes, prices rose by 1.7% in Q2 2022. HDB upgraders and new family formations continued to drive sales in the OCR. HDB upgraders are using profits from selling their units at robust prices (the flash estimate for the HBD Resale Index is at an all-time high in Q2 2022 at 163.7) to finance the transit to the private market, while some young families buying a home are also supported by the wealth and savings accrued by earlier generations of Singaporeans who enjoyed capital gains in their own property investments or have done well in their careers/businesses.
The URA All Residential Price Index has now increased by 3.9% in the first half of the year despite the cooling measures. The sheer weight of demand is simply outpacing the backlog of supply as Singapore normalises from the pandemic years. Nevertheless, price increases could taper in the coming months as rising interest rates will be a natural cooling measure in H2 2022, reining in homebuyer purchasing power. Overall private residential prices are now projected to increase around 5% to 7% for the whole of 2022, against the initial conservative forecast of 1% to 3% growth when the cooling measures were announced in December 2021. Buyers have shown an unanticipated resilience, the kind that will now embolden developers to launch projects, tapping on this resilient buyer demand before interest rates rise further.