However, URA price index for private homes still shows fall in Q2, confounding analysts
LATEST government numbers are offering clues as to why some developers are busy looking for land and nudging up home prices. The supply pipeline for private homes has shrunk, from about 71,600 units at end-Q2 last year to 62,600 units as at end-Q2 2009. The stock of unsold units in uncompleted projects with planning approvals has also contracted from about 43,500 units to around 38,500 units over the same period.
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Developers had not acquired much residential land over the past year or so in the aftermath of the financial crisis but have enjoyed a spectacular revival in home sales over the past six months. Lately, however, two sites from the government reserve list were triggered for launch by developers.
Developers have also regained some pricing power of late. Urban Redevelopment Authority’s (URA) price index for private homes fell 4.7 per cent in Q2 over the preceding quarter. The fall was less steep than the 5.9 per cent decline for the period that URA’s flash estimate had shown earlier this month. The latest decline is also much less than the 14.1 per cent quarter-on-quarter price drop in Q1. While a debate rages on why URA’s Q2 price index lags the price gains seen in the market during the period, property consultants are expecting further price increases in the current half.
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‘But we’re not going to see runaway prices as there will be price resistance from buyers, especially in the upgraders market as there’s the issue of affordability,’ says Knight Frank chairman Tan Tiong Cheng. ‘Developers will be mindful of competition from the secondary market as new projects are completed. From a consumer’s viewpoint, if prices get too high, they could either give the market a miss or look for alternatives – like picking up a home from earlier investors who can afford to sell below developers’ prices,’ he said.
‘There’s another reason why prices are unlikely to run away, at least not in the mass market – and that’s because the government has, under its reserve list, a substantial supply of land for this segment,’ Mr Tan added.
Giving a more bullish take, Credo Real Estate managing director Karamjit Singh says private home prices started to turn in April/May and estimates that depending on market segment, prices have increased anywhere between 15 and 30 per cent from the bottom in Q1. He forecasts the total increase between April and year-end could be in the order of 20 to 60 per cent, with the biggest hikes in the high-end segment. ‘So far, the home buying has been led mainly by Singaporeans and PRs. When foreigners and institutional funds buy in a bigger way, then momentum in the high-end residential sector will receive a boost.’ Continue reading
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