Analysts believe that, in addition to the end of the holiday season driving the market, the widening price gap between new and resale private homes has also driven up demand for resale private homes. However, private resale price growth is expected to slow this year due to global economic uncertainty and high interest rates.
Estimates show that local resale prices of non-landed private homes stopped falling and rose by 1.4% overall in February, with the number of transactions increasing by 50.3% year-on-year to 756 units.
Resale prices rose by 2.3% and 1.4% respectively in February for private residential units in the Outer Central Region (OCR), which represents the mass market, and in the Other Central Region (RCR), which represents the mid-range segment. Resale prices in the Core Central Region (CCR), which represents the upper end of the private sector, fell by 0.3 per cent year-on-year.
Compared to the same period last year, overall non-landed private resale prices rose by 9.2 per cent, while upscale, midscale and mass market resale prices increased by 6.6 per cent, 7.3 per cent and 11.5 per cent respectively.
Private resale prices rebounded in February as buyers returned to the market after the year-end holidays and Lunar New Year. In addition, the widening price gap between new and resale private homes was a major factor driving up demand for resale private homes.
The number of viewings increased significantly last month compared to January. Investment buyers are looking to take advantage of the current hot rental market by purchasing resale homes that are ready for immediate rental returns.
The increase in Buyer's Stamp Duty on 15 February had little impact on resale private homes. Before the increase, resale private homes sold at $1.5 million and above accounted for 20% of total sales in the month; after the increase, they accounted for 28% of total sales.
Resale private home prices softened in January, making them more attractive to potential buyers. Buyers who were previously under budget due to high prices are also starting to consider entering.
However, despite the rebound in sales, they were still below the average number of transactions over the past 12 months and the same period last year, which stood at 965 units and 789 units respectively. With increased global economic uncertainty arising from the banking crisis, and with lending rates and borrowing costs likely to remain high for some time even if the US Federal Reserve will slow down the pace of interest rate hikes, the February sales rebound does not necessarily represent a market recovery.
Tighter home loans and a 15-month waiting period for private home owners to replace their HDB flats have had a dampening effect on the recent private resale market. Geopolitics and increased layoffs are also making buyers more cautious and resale private home price growth is likely to slow down next.
The banking crisis is not expected to have a significant impact on the housing market as the US government has acted quickly. A smaller interest rate hike by the Federal Reserve in March has slowed down the increase in home borrowing costs, helping to increase resale private home transactions. In addition, HDB upgraders will also continue to support the private resale market, with resale transactions expected to reach around 12,000 units this year.
On the other hand, the National University Institute of Real Estate and Urban Studies (IREUS) released on Tuesday the NUS SRPI estimates for February, showing that overall non-landed private home resale prices rose by 1.1% in February, up from 0.1% in January.
Prices of small private homes stopped falling and rose by 1.5 per cent, the largest price increase, while the Central and Non-Central (excluding small units) private home indices rose by 1 per cent and 1.1 per cent respectively.
With foreign buyers returning to the local market, larger units located in urban areas will be in demand and selling prices are expected to increase this year.
