It seems that everyone has their own opinion about which way Singapore’s residential property market is heading.
Almost all will agree that the stratospheric price rises of last year will not be repeated anytime in the near future, however the most recent figure shows that prices at least are still below pre-global financial crisis levels.
The most recent data from the Urban Redevelopment Authority (URA) showed private residential property prices rose 2.1 per cent during Q1 2011 to record levels. The latest figures were slightly down from the 2.7 per cent growth recorded in Q4 2010. The URA noted that prices have now climbed for seven straight quarters, shooting up some 18 per cent in 2010 after falling close to 25 per cent in the 12 months ending mid-2009.
But while prices are on the rise, the number of sales slowed in February to 1,101 units – down from 1,209 units in January. Some experts are suggesting this dip is a result of the Chinese New Year holidays while others disagree, arguing this is a sign that the raft of government cooling measures is finally starting to bite.
“Sales activity in February was stimulated by the launch of new upgradetypes of projects at locations with good accessibility,” said Li Hiaw Ho, executive director of CB Richard Ellis Singapore Research. The best performer was the 561-unit Waterfront Isle which sold a total of 282 units at an average price of S$997 (US$781) per sq ft. My Manhattan condominium, located opposite Simei MRT station, reported sales of 69 units at an average price of S$1,219 per sq ft (US$955), while Canberra Residences in Sembawang reported 59 units were sold at an average of S$819 (US$641) per sq ft.
“Activity in the high-end market during February was subdued,” said Li. “We observed that just seven units priced at more than S$2,500 (US$1,958) per sq ft were sold, compared to more than 30 units during the previous month.”
The highest price of S$3,277 per sq ft (US$2,566) during that month was achieved for a unit in Tomlinson Heights. During the previous month that accolade was held by a unit in Scotts Square which sold at S$4,626 per sq ft (US$3,263). CB Richard Ellis noted that luxury property investors are in no hurry to jump into the market right now, and are instead waiting for the right opportunity and the right price before making their move.
While some industry watches are predicting a slowing of price growth and further dips in the number of units being sold, many developers are racing to launch new projects while buyer sentiment remains positive. As many as 20 projects were planned to launch in one form or another during April. And these launches are coming in all shapes and sizes – from ones like the compact 36-unit Everit Edge in suburban Everitt Road, to larger developments such as the 360-unit Sky Suites @ Anson in Tanjong Pagar.
Chua Chor Hoon, Head of DTZ South East Asia, said the number of units released into the market during February alone was up 45 per cent compared with debuts in January and December. She said that if the cooling measures passed in January work like they’re supposed to, developers will be keen to move units now ahead of a predicted decline in sales later in the year. But on the other hand, she said, if prices and demand both remain robust the government will be more inclined to pass additional cooling measures. Both these scenarios are causing developers to want to launch projects now, but that same dilemma is also causing potential property buyers and investors to sit on the sidelines and play a wait-and-see game.
Speaking at the recent SMART Property Expo, Mohd Ismail, chief executive officer of PropNex Realty, told a packed audience that prices for new launches could well be heading north. He pointed to the record prices paid for land during many recent competitive tenders, and said these costs will eventually have to be borne by buyers.
He said: “ Buyers should look carefully at whether buying ‘shoebox’ or compact units is a wise choice. There is a limit to the rents that can be charged, the capital appreciation is limited and there will be a lot of such units coming online in the next two years.” How the market will react to such a large supply of new supply is the big unknown.
Ismail, who is also a prolific property investor himself, felt the mass market is “over excited” at the moment, and suggested buyers should take a close look at resale units. He also urged a packed audience of property buyers and investors to consider buying landed homes. He pointed to the fact that prices in this sector are, in some cases, comparable to new condominium units, and in many cases have lower prices per sq ft. “Landed homes will always be in demand as they are a decreasing commodity,” he said. So with Ismail suggesting that buyers and investors look at the resale market, just what is happening in this sector? At the end of March preliminary estimates from Jones Lang LaSalle showed island-wide resale capital values increased during the first quarter, although more upward pressure was seen outside the prime districts in the Central and East Coast areas – echoing the observations seen in the National University of Singapore’s Housing Index where the Central region (districts 1-4 and 9-10) posted stronger gains than elsewhere.
While resale capital values for luxury properties posted marginal increases, capital values in the Central and East Coast regions enjoyed growth of between 2 per cent and 2.5 per cent quarter-on-quarter during the first three months. Average non-prime capital values now stand at a record S$1,043 (US$828) per sq ft, having exceeded the previous high of S$1,020 (US$809) per sq ft achieved in 4Q 2010.
When it comes to the rental sector, the story is not so bright.
While typical prime East Coast and Central region rental values have remained stable at 4Q 2010 levels, luxury prime properties experienced a marginal growth in rental values of 0.7 per cent quarter-on-quarter as leasing demand softened. Smaller units were a key factor behind the slowing with both two- and three-bedroom units seeing rental values soften during the quarter. In the prime districts it was the larger four-bedroom units that remain in demand, and such units were the only residential unit type to see an increase in rental values over the period.
Jacqueline Wong, head of residential at Jones Lang LaSalle said: “.. the preference of the expatriate community is for larger four bedroom apartments of at least 2,800 sq ft. The smaller size units are not particularly attractive as the majority of middle and upper management families relocating prefer spacious four-bedroom units that come with entertainment areas.
Going forward, we think this trend is likely to sustain and we will continue to see disparity in the housing market where small size leasing stock continues to face downward pressure while larger units continue to see upside”.
One thing is for sure. Singapore is attractive to overseas buyers and buyers from elsewhere in the Asia Pacific region continue to dominate the sales at the top end of the market. Looking at the top ten countries in terms of number of units purchased (excluding Singaporean buyers), Chinese, Indonesian and Malaysian buyers purchased more than 50 per cent of the units sold in the prime market during the first three months of this year. The largest proportion of sales of prime residential units went to Indonesian buyers (24 per cent), and Chinese buyers have overtaken Malaysians to purchase 16 per cent and 14 per cent of prime residential units respectively. Indeed, Chinese buyers were second only to Singaporean buyers in terms of total number of units purchased island-wide during the first quarter.
A total of 241 units were sold to Chinese buyers, and some 63 per cent of these were in the mass market and priced between S$500,000 (US$397,000) and S$1.5 million (US$1.19 million). Chinese buyers also make up the largest proportion of buyers spending S$5 million (US$3.97 million) or more on residential properties in the central and prime markets. Of the 54 units sold in the first quarter for $5 million or more in the central and prime markets 31 per cent, or 17 units, were bought by Chinese buyers.
But despite the fall in rental values yields have remained relatively stable. “The surge in Chinese buyers in Singapore coincided with policy tightening in China. While we do not expect a repeat of what is observed this past quarter, we can expect the number of Chinese buyers to continue at a healthy level as seen in previous quarters as the fiscal and monetary policy in China remains conducive to overseas investment by the wealthier Chinese” said Jones Lang LaSalle’s Dr. Chua Yang Liang. Continue reading