Have private home prices peaked?

The Straits Times reported today that private housing prices—on a continual incline for the past two years—may have finally reached their turning point as it records a miniscule incline for the last quarter of 2011.

( Despite reaching a new high, private home prices have charted the smallest quarterly growth in years. Image courtesy of Thinkstock.)

Flash estimates released by the Urban Redevelopment Authority (URA) yesterday indicated that prices rose just 0.2% in Q4 last year—a drop from the previous quarter’s 1.3%.

Analysts The Straits Times spoke to let on that while the figures show a new high for private home prices, they also indicate the smallest quarterly growth since Q2 2009, when the market bottomed out, adding that this figure could be a signal that the market is close to doing so again, and that a price correction could appear as early as the first quarter of URA’s price index.

PropNex chief executive Mohamed Ismail predicted that private home prices would further soften, sliding 3-4% this year. He told The Straits Times it was “very likely” prices will drop by less than 1% in Q1 2012, and for the bulk of the price correction to happen in the second half of the year.

Depending on how the economy turns out and how the housing market does after the Lunar New Year, research and consultancy head at Credo Real Estate Ong Teck Hui said that the price index for the first three months of 2012 could indicate either a marginal growth or a mild correction.

Zooming in to the luxury segment, home to the largest share of foreigners among all housing segments in Singapore, DTZ head of Asia-Pacific research Chua Chor Hoon expects a price fall greater than that of mass and mid-market segments.

Li Hiaw Ho, CBRE Research executive director told The Straits Times that demand for new private homes would also probably be cut by up to 20%, partly because some buyers would turn to executive condominiums (ECs). ECs are a public and private housing hybrid. Authorities previously revealed that it would supply sites for up to 5,000 EC units via its land sales programme this year. “Prices of luxury and prime residential properties may fall by 10-15% in 2012, and mass market homes by 5-10,” added Li. “Separately, landed home prices will likely see a smaller correction of less than 5% since foreigners are generally not allowed to buy and supply is limited.”

According to The Straits Times, housing prices upped 5.9% last year, well under the 17.6% growth recorded in 2010, thanks to the five rounds of property cooling measures implemented by the authorities. However, the last two quarters saw the non-landed suburban homes market reaping the biggest price gains. Prices rose 0.6% in Q4 last year. The previous quarter they jumped 2.1%.

Meanwhile, there was no difference in prices of homes found on the city fringe, which recorded a 1.2% incline in previously. Additionally, city centre home prices inched up 0.5%, down from 0.7% in the previous quarter.

Analysts noted that the flash estimates were compiled based on transactions occurring during the first 10 weeks of Q4 2011, when the December 8 cooling measures—including an additional 10% buyer’s stamp duty on all foreign home buys—were unlikely to have made their impact on the figures yet.

Similarly, URA also pointed out that it was possible for a significant difference between its flash estimates and the actual price changes (which will be updated about four weeks later as more data is captured), especially since the change is small.