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What will happen in 2015: A PropertyGuru outlook
The property market in 2014 remained lacklustre as existing property cooling and the Total Debt Servicing Ratio (TDSR) continued to influence buyers appetite for real estate. Signs of weakening demand for both resale HDBs and private property were visible in the form of an overall fall in transaction volumes, home prices and number of new launches.
Look back to 2014 - Further softening of property transactions and price
Non-landed private property
The non-landed private property market has been sluggish with transaction numbers showing successive declines on a quarterly basis in 2014. Despite transaction volumes showing a slight rebound of over 1,200 units in Q2 as compared to Q1, sales activity slid towards an average of 2,200 per quarter in the second half of the year. Total sales volume for 2014 closed at an estimated 11,550 units, an underwhelming performance in comparison to 25,633 transactions in 2013, more than double that of the current market situation. In fact, 2014 registered the least number of transactions recorded, lower than the 12,096 units sold during the property downturn of 2008.
As transaction volumes are a leading indicator of prices, it comes as no surprise that private home prices continued to trend lower as the effects of a tightening property market linger. The private residential property index followed a downward trajectory for 2014, albeit at a slow pace. In the second half of 2014, the index slipped marginally by 0.7 percent in Q3, followed by another 1.1 percent in Q4. In overall, prices registered a total decline of 4.3 percent for the year.
HDB resale
If the outlook for the non-landed private property market appears to be grim, then the same can be said about resale public housing. Property seekers holding off on their purchases resulted in just under 16,000 transactions in 2014, likely the lowest sales figures in the last five years. Looking at the data in detail, the HDB resale market seemed to have stabilised with an average of 4,000 units changing hands per quarter, with the exception of Q1 where an all-time low of 3,781 units was recorded.
HDB resale prices consistently experienced a steeper dip than private homes, falling 1.7 per cent in Q3 2014 from the quarter prior - the largest drop so far. Similarly, Q4 showed a sixth straight quarter of decline with a further 1.4 percent reduction. Compared to a year ago, overall resale prices have corrected by 6 per cent.
Fewer new condo launches garnering buyer interest
Developers confidence in project launches have also been adversely affected by current conditions in 2014. Cautiousness displayed by buyers meant that not only was there greater sensitivity to competitive pricing, but also illustrated their heightened selectivity over the developments available in the market. As prospective home buyers chose to play the waiting game, developers too withheld new project launches in order to observe the market situation and await any potential changes in market sentiments.
As a result, there were only 8,237 new private residential units launched in 2014, half of the15,885 launched in 2013. In fact, no new residential projects were launched in the month of August, with the majority of launches occurring in Q2 and Q4 - mostly in the Rest of Central Region (RCR) and Outside Central Region (OCR). Evidently, developers were more focused on selling their remaining inventory units in their existing projects rather than introducing new projects. Nonetheless, there are still some newly launched developments that managed to garner relatively healthy response from property buyers in spite of the restrictions imposed by the cooling measures. For these particular developments, about 75 -90 percent of their units launched in the quarter were sold.
Predicting 2015 trends
Number of transactions
The Guru View for private and HDB property in 2015 is formed based on several assumptions. These are:
- cooling measures will remain status quo throughout 2015, with financial limitations placed on ability of property seekers to borrow
- supply of new houses in 2015 will be more than that of 2014
- mortgage rates will remain relatively flat
- No new and unknown sources of demand for both types of properties
For the private property market, an average of 2,500 units were transacted in 2014 per quarter with the exception of Q2 where an estimate 3,550 units were sold. Following this trend, we foresee that transaction volumes are likely to continue to contract to approximately 2,000 between Q1 and Q3 in 2015 before experiencing a surge of 3,500 3,700 units in the last quarter. In total, we expect the number of transactions to trend downwards by at least 20 percent from 2014 figures.
Similarly, the HDB resale market also saw significant declines in transaction volumes to average around 4000 units per quarter in 2014. We are in the belief that total volume for the year will also decline by 15-18 percent, with a rather flat average of 3,000 3,300 units sold per quarter.
Changes in price
On the price front, we believe the further decline in transaction volumes predicted for the year will continue to impact prices, exerting downward pressure for both property types. Using the transaction forecast generated from our enquiry data above, we can then say that private property prices will face a decline of 4 6 percent in 2015, whereas prices for HDB resale will fall by a larger extent of 5 - 8 percent. What this means is that for the former, prices will have dipped to below Q1 2011 levels while prices for the latter will have declined lower than Q4 2011 prices.
To read more about the property outlook for 2015, download the PropertyGuru Property Outlook Report 2015 eBookhere
Adam Rahman, Senior Content Marketing Executive at PropertyGuru, edited this story. To contact him about this or other stories, emailadam@propertyguru.com.sg
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