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Home supply pipeline shrinks, prices stiffen

Posted on 25 Jul 2009 | Comments Off

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.

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.

‘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.’

URA’s real estate data yesterday showed a 79 per cent quarter-on-quarter jump in private home sales by developers to 4,654 units in Q2 – the third highest quarterly figure on record, according to CB Richard Ellis (CBRE). Significantly, there was a more even spread of sales across the regions in Q2, unlike Q1, when developer sales were concentrated in the Outside Central Region (OCR), where mass-market suburban condos are located.

In Q2, the Core Central Region (CCR), which includes the prime districts 9, 10 and 11, financial district and Sentosa Cove, accounted for 31.2 per cent of homes sold by developers. The Rest of Central Region (RCR) had a 39.2 per cent share, thanks to projects such as 8 @ Woodleigh, The Arte, The Mezzo and Vista Residences; while OCR’s share was 29.6 per cent. The housing recovery is filtering up.

The momentum of sales in the secondary market was also strong, with 3,059 units sold in the resale market in Q2, almost three times the 1,144 units in Q1. Subsale deals more than doubled from 412 in Q1 to 940 in Q2. In the residential leasing market, 10,327 leases were contracted in the April-June period, 7.8 per cent above the 9,579 leases done in Jan-March, CBRE said. With more expats being hired on local terms or smaller housing allowances, rents continued to slide in Q2, albeit more moderately.

Source : Business Times – 25 Jul 2009

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Posted in Property Market / Real Estate

Tagged Market Report, Property Price, Singapore Property Market

Mass market buyers prop up home prices

Posted on 25 Jul 2009 | Comments Off

THEY were shut out of the property market during the most recent boom in 2007, when furious demand for luxury homes drove up home prices far beyond their reach.

Now, buyers of cheaper mass market homes – defined loosely as bigger HDB flats and condominiums in the suburbs – are back in the market with a vengeance.

They doubled their purchases of five-room and executive HDB flats between March and June, pushing overall HDB prices up 1.4 per cent to hit a new high in the quarter, according to Housing Board (HDB) data released yesterday.

Mass market buyers also picked up four out of every 10 private homes sold, a shopping spree that resulted in twice the number of homes being sold in the second quarter than the first quarter, said the Urban Redevelopment Authority (URA). The number of resales nearly trebled while sub-sales more than doubled.

The strong demand for cheaper condos meant that while private home prices still fell 4.7 per cent in the second quarter, it was a far smaller decline than the plunge of 14.1 per cent in the first quarter.

What helped jam the brakes on the decline were suburban homes, which saw the smallest price drop in the quarter – 2.3 per cent – compared to pricier prime and city-fringe properties, which saw prices fall by double that amount.

Rents for private homes continued to fall 5.2 per cent in the quarter, though 8 per cent more leases were signed.

Consultants had actually expected prices to increase in the second quarter, as home buyers flooded back and developers started to selectively raise prices.

‘Our own analysis showed that private home prices in the second quarter rose,’ said DTZ’s head of South-east Asia research Chua Chor Hoon. She said the price increases ranged from 3 per cent for some suburban resale homes, to 11 per cent for homes in the prime districts.

In response to queries, the URA said that while prices have risen in some projects, there were still other developments that saw prices fall in the quarter.

But private home prices are likely to show a definite pickup from the third quarter, consultants say. ‘The second quarter will possibly be the last quarter of price declines,’ said Ms Tay Huey Ying, director of research and advisory at property firm Colliers International.

‘If developers remain cautious and tread carefully with price increases, this momentum in the market could continue. But if developers are impatient and jack up prices too quickly, that may hurt demand as buyers are still price-sensitive.’

Mr Nicholas Mak, a long-time property consultant, said he expects overall prices to show an increase in the second half of this year. His reasons: the recovery in global stock markets, relief buying due to a shorter-than-expected recession, and low interest rates that make property purchases look more attractive.

The outlook has also been boosted by the fact that demand is no longer restricted to the mass market, he said. In recent months, more buyers have been keen on mid-tier and high-end condos such as The Arte at Thomson or One Devonshire in Somerset. Even at suburban condos, buyers seem to be opting for larger, more expensive units. Yesterday, developer UOL Group sold 180 units in a single day at Meadows@Peirce in Upper Thomson.

While the project offers smaller units from 517 sq ft in size, most units sold had at least three bedrooms and were priced at $1 million and above, said UOL’s chief operating officer Liam Wee Sin.

The improved economic outlook also meant that offices and shops also saw slower declines in prices and rentals in the second quarter. Office prices fell 3.9 per cent, while rents fell 7.7 per cent.

But these numbers are unlikely to turn positive soon as recent retrenchment exercises dampen the office sector, said Mr Li Hiaw Ho, executive director of CBRE Research. He was more upbeat about shopping malls, as there is still ‘healthy demand’ for existing shop space. Shop rents eased 2 per cent in the second quarter and prices fell just 1.4 per cent.

Source : Straits Times – 25 Jul 2009