Private home prices rose at a faster pace of 3.3 per cent in the first quarter of 2023 than the previous quarter, according to the Q1 data released by the Urban Redevelopment Authority (URA). This is in stark contrast to the slight increment of 0.4 per cent in the last quarter of 2022. Year-on-year, prices surged by 11.4 per cent last quarter.
Q1 2023’s price increases were driven by a higher proportion of new home sales, and new homes are usually sold at higher prices than resales. Based on URA data, new sales excluding EC constituted 30.5 per cent of total sales in Q1 2023, up from 19.2 per cent in Q4 2022.
Overall sales volume rebounded moderately last quarter as sales activities increased after September 2022's cooling measures, when borrowing criteria were made more stringent. More projects were also launched after the year-end holidays and Chinese New Year period.
According to URA data, overall sales excluding EC rose by 14.9 per cent from 3,588 units in Q4 2022 to 4,121 units.
Although sales rebounded last quarter, they were lower than the number of units sold last year. Compared to Q1 2022, sales dipped by 22.9 per cent from 5,343 units. Last quarter's sales were below the quarterly average of 5,473 units in 2022.
Volumes picked up only moderately as falling housing affordability may have affected some buyers. Buyers face higher borrowing costs, tighter lending limits and soaring home prices. Further, inflation drove consumer prices broadly higher and caused buyers to be more budget conscious in general.
Last quarter, slightly fewer resale homes were sold, which dipped by 2.7 per cent from 2,694 units in Q4 2022 to 2,622 units in Q1 2023. Conversely, new home sales, excluding EC, surged by 82 per cent from 690 units in Q4 2022 to 1,256 units in the first quarter of this year.
The sales increase was driven by the launch of a few mid-sized projects, such as The Botany at Dairy Farm, Sceneca Residence and Terra Hill.
New home sales may continue to recover as a number of high-profile projects were launched in the second quarter, and more are slated for launch in the coming months. Some developers may not hold back their launches as first-timers are not hit by the ABSD increase.
Rental
According to URA data, rents climbed higher to an all-time record in Q1 2023. In the first quarter of this year, rents rose further by 7.2 per cent q-o-q, after surging 7.4 per cent in the fourth quarter of last year.
With more completions, the vacancy rate rose to a five-quarter high. Nevertheless, occupancy rates remained robust above 90 per cent at 94 per cent last quarter.
As rents continue to rise, the leasing market is experiencing a growing disparity in price expectations between landlords and tenants. Many tenants are now facing the strain of rising rents and struggling to pay higher rentals. On the other hand, landlords are factoring in higher inflation, mortgage repayments and property taxes in their lease negotiations.
Most landlords are unwilling to accept lower rents as mortgage payments have risen. Lease tenures are also getting longer and many would want to lock in higher rents as they expect inflation to be sustained next year with another GST hike.
With more completions, rent prices may grow slower by around 13 to 16 per cent this year. About 85,000 to 90,000 homes may be leased in 2023.
According to URA data, rents climbed higher to an all-time record in Q1 2023. In the first quarter of this year, rents rose further by 7.2 per cent q-o-q, after surging 7.4 per cent in the fourth quarter of last year.
With more completions, the vacancy rate rose to a five-quarter high. Nevertheless, occupancy rates remained robust above 90 per cent at 94 per cent last quarter.
As rents continue to rise, the leasing market is experiencing a growing disparity in price expectations between landlords and tenants. Many tenants are now facing the strain of rising rents and struggling to pay higher rentals. On the other hand, landlords are factoring in higher inflation, mortgage repayments and property taxes in their lease negotiations.
Most landlords are unwilling to accept lower rents as mortgage payments have risen. Lease tenures are also getting longer and many would want to lock in higher rents as they expect inflation to be sustained next year with another GST hike.
With more completions, rent prices may grow slower by around 13 to 16 per cent this year. About 85,000 to 90,000 homes may be leased in 2023.
There are some silver linings on the horizon as rate hikes have slowed in recent months. Interest rates may peak in the first half of this year as the Federal Reserve (Fed) is considering a pause on hikes amid recessionary fears and more bank fallouts.
The fallout of a few big banks has prompted the Fed to slow the pace of rate hikes recently, by a quarter point in March. They believe that the banking industry stress could trigger a credit crunch in the US and have a significant ripple effect on the macroeconomy.
As fears of bank contagion displace inflationary concerns, many economists expect the Fed to stop hiking interest rates. This spells good news to potential buyers as they will face less interest rate volatility and increased stability in borrowing costs. If interest rates stabilise and ease from the second half of this year, more buyers may return to the market.
The cooling measures will probably dampen demand over the next few months. This may allow time for more homes to be completed and housing supply to catch up. When there is better market equilibrium, prices are likely to stabilize. Price gains may also slow down when demand contracts. This will benefit first-timers and HDB upgraders buying their first private homes.
We have adjusted our price projections slightly lower from 5-8 per cent to 4-7 per cent for the whole of 2023.