Huttons’ comments on URA and HDB 4Q 2020 flash estimates
Private home prices increased 2.1% in 4Q 2020 and 2.2% for 2020. This is the fourth year of price increase and capped a remarkable turnaround for the property market after a soft first quarter.
After the circuit breaker, transactions in the property market spiked in 3Q 2020 due to pent-up demand, government policies to support the economy and the property market and a favourable interest rate environment. Transactions in 3Q and 4Q are the highest since 2Q 2018 and full year transacted numbers in 2020 are expected to exceed 2019.
The sales momentum in 2020 is largely expected to spill over to 2021 as more positive news emerged – strong economic rebound in 2021, stabilising employment figures and availability of vaccines for the entire population by end-2021.
In 1H 2021, up to 20 new launches can be expected - 32% in CCR, 47% in RCR and 21% in OCR based on units. We are expecting up to 9,000 new sales and a price increase up to 3% in 2021. Selling prices are expected to edge up because of recent firm land tender prices and higher construction costs because of Covid-19 safety management measures.
As unsold stock reduces in the next few months, developers will be keen to replenish their land bank. However the sites on 1H 2021 GLS programme are concentrated in two areas. To satisfy demand in other parts of the island, developers are likely to turn to the en-bloc market and a new en-bloc cycle may start in 2021. Small and medium sites up to 500 units may find favour among developers as the development risks are relatively lower.
The HDB resale market increased by 2.9% in 4Q 2020 and 4.8% for 2020. This is the strongest quarterly price gain since 4Q 2012 and largest yearly.
When the HDB BTO exercise resumed in August, many buyers realised that the completion period has been extended because of Covid-19 and turned their attention to the resale market. There was a large influx of buyers and demand outstripped supply and pushed up prices. Transaction volume in 2020 could exceed 2019.
Buoyant conditions in the HDB resale market are expected to stabilise in 2021. More private homes are expected to be completed in 2021 and upgraders will be seeking to sell their flat to qualify for ABSD remission.
We could see transaction volume between 23,000 and 24,000 flats and price growth between 0 and 2% in 2021.