But govt cooling measures expected to mitigate hikes; resale HDB prices continue to climb

(SINGAPORE) Private home prices in Singapore have now surpassed the former all-time peak they achieved in 1996, official data shows.

Flash estimates released yesterday said that private home prices in Singapore rose 5.2 per cent in Q2 2010 after climbing 5.6 per cent in the first three months of the year.

This brings the Urban Redevelopment Authority’s (URA) price index for private residential property to 184.1 points – 1.5 per cent higher than the previous pre-Asian crisis peak of 181.4 points in Q2 1996.

Prices of resale HDB flats also continued to climb and set another record in the second quarter. Resale prices rose a steeper 3.8 per cent in Q2, higher than the 2.8 per cent climb seen in Q1.

For the private residential market, homes in the ‘outside central region’ (a proxy for suburban mass- market locations) led the price increase with a 5.7 per cent quarter-on-quarter climb in Q2.

Prices in the ‘core central region’ (which includes the prime Districts 9 and 10, the financial district and Sentosa Cove) rose 5.1 per cent while prices in the ‘rest of central region’ rose 4.5 per cent.

Home prices in the outside central region and rest of central region are higher than they were during the recent 2008 peaks. But prices in the high-end core central region are still about 2 per cent below the 2008 peak.

While prices climbed across all three regions, analysts pointed out that recent government measures to cool the market have worked to some extent as the price growth has now slowed down for three consecutive quarters – although the deceleration in growth has been slower than what was hoped for, particularly in the mass- market segment.

‘There will be a time lag before we will see a more moderate increase in prices,’ said Knight Frank chairman Tan Tiong Cheng. ‘The market has been positive but the government has mitigated this by providing a lot of land. But the supply needs some time to come onto the market.’

There is also increasing price resistance, as demonstrated by the more than 50 per cent drop in sales of new homes in May. This should help to further moderate price increases – especially in the mass-market segment – to within 5 per cent for each of the next two quarters, said Tay Huey Ying, Colliers International’s director of research and advisory.

Jones Lang LaSalle’s head of research for South-east Asia, Chua Yang Liang, added: ‘Overall, the falling sales volume in both primary and secondary markets suggests that the overall URA property price index, a lagging indicator of demand, may soften in the next few months.’

Developers sold just 1,078 private homes in May – about half the 2,208 units they transacted in April.

Analysts also said that further anti-speculation measures are unlikely as prices in the primary market, which are thought to be a better reflection of current market sentiment, are pointing towards a slowdown. Most analysts expect private home prices to rise a total of 12-15 per cent for the whole of 2010.

But for the HDB resale market, it is a very different story. The rate of price growth seems to be increasing.

Eugene Lim, associate director of ERA Asia-Pacific, pointed out that on average, HDB resale prices are increasing at a rate of 3.3 per cent per quarter this year, compared to just 2 per cent per quarter last year.

The 3.8 per cent increase in prices in Q2 to another new high can be attributed to higher cash- over-valuation (COV) amounts, industry players said.

‘Our Q2 2010 transactions show a median COV of $30,000 for all flat types across all estates, while HDB’s Q1 2010 results showed an overall median COV of $25,000,’ said PropNex chief executive Mohamed Ismail.

ERA’s transactions also show that the median COV has increased across all flat types. For three-room flats, the median COV is now $29,000 compared to $22,000 in Q1; four-room flats $32,000 ($25,000 in Q1); five-room flats $36,000 ($28,000); and executive flats $40,000 ($30,000).

HDB on Wednesday said it has launched 2,696 new build-to-order (BTO) flats to ensure that there is an adequate supply of new flats to meet housing demand – the largest number of such flats ever offered at one go.

But this might not satisfy demand from all corners.

‘Though HDB has increased the supply of new flats, these cater predominantly to the first-timers and those who can wait three years for these new flats to be built,’ said ERA’s Mr Lim.

‘For upgraders, permanent residents and those who have immediate housing needs, the resale market is the only source.’

He expects HDB resale prices to increase 12-15 per cent for the whole year.

Source: Business Times, 2 Jul 2010

With private property prices hitting their highest levels in the last two years, young professionals are feeling the pinch when it comes to buying their first home.

Mr John Ng, a newly-wed entrepreneur, said he is looking only at options that are within his means.

“We won’t be looking at brand new units because they are very expensive, we will be looking at 10 to 15 year-old units because they are still within our budget,” said Mr Ng, who has allocated $600,000 to $700,000 for a property in the suburbs.

Mr Colin Tan, head of research and consultancy at Chesteron Suntec International, suggested that someone like Mr Ng should consider older properties such as those with 10 to 15 years to the expiry of their lease tenure.

Properties without facilities, such as an old walk-up apartment, are also an option.

For someone with Mr Ng’s budget, some condo developments that remain affordable include: Double Bay Residences, Simei, $565 psf with unit sizes from 538 square feet; Rosewood Suites, Woodlands, $586 psf with unit sizes from 678 square feet; Elliot at the East Coast, Marine Parade, $842 psf with unit sizes from 506 square feet.

Source: Today, 2 Jul 2010

PRICES of private residential properties have crossed the peak reached in 1996 in the second quarter, according to flash estimates by the Urban Redevelopment Authority (URA).

The private-residential-property price index, based on URA estimates, rose from 175.0 points in Q1 to 184.1 points in Q2.

While this increase of 5.2 per cent is lower compared with the 5.6 per cent rise in the previous quarter, the preliminary estimate of the Q2 residential price index, at 184.1 points, is higher than the market peak of 181.4 points back in Q2 1996, said Mr Joseph Tan, executive director (residential) at CB Richard Ellis.

Prices rose the most, by 5.7 per cent in the quarter, among non-landed private residential properties in the Outside Central Region.

“This could be attributed to the price points set by new launches such as Tree House and The Minton, as well as rising prices of resale transactions in locations where several sites from the government land sales (GLS) programme had been sold in the past six to nine months,” said Mr Tan.

It was reported last month in The Business Times that May’s top seller was The Minton in Hougang, with 204 units sold at a median price of $849 psf. Tree House in Chestnut Avenue was one of April’s top sellers, at a median price of $835 psf.
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Successful tenders for three residential GLS sites awarded in May were bullish. For example, Keppel Land (Mayfair), the developer which won the site located in Boon Lay Way/Lakeside Drive, bid $499 psf per plot ratio, which could translate into a break-even price of $800-$850 psf, said Ngee Ann Polytechnic real-estate lecturer Nicholas Mak. That would outprice other condominiums in the same vicinity by as much as 40 per cent.

In the Core Central Region (CCR), properties in the same category rose by 5.1 per cent and, in the Rest of Central Region (RCR), by 4.5 per cent.

Back in Q1 2010, it was the price index for the RCR which showed the highest increase of 7.2 per cent, followed by 4.5 per cent in the CCR and 3.9 per cent in the OCR, noted Mr Tan.

Mr Mak expects that home prices will rise at a slower pace this year, at a year-on-year rate of 12 to 18 per cent.

“By the fourth quarter of 2010, the overall price level in the high-end CCR may finally surpass the peak price level that was last seen in Q1 2008,” he said.

In the long term, ample supply of residential land by the Government through its land sales programme will ensure a more stable supply, said Mr Tan.

“As sales momentum becomes less frenzied, home prices will stabilise,” he said. Earlier this year, to discourage short-term speculative investment in property, the Government imposed a 1 per cent to 3 per cent tax on residential properties sold within one year of purchase and lowered the loan-to-value limit on private housing loans to 80 per cent, from 90 per cent.

It also said it would release more residential-development sites, as well as build more Housing Board flats, to meet demand and curb rising prices.

The property peak of 1996 had been fomenting in 1994 and 1995, when home prices raced ahead of gross domestic product growth. However, the Government’s anti-speculative measures and the Asian financial crisis reversed the rise in prices.

Source: my paper, 2 Jul 2010

There’s an insatiable demand for owner-occupied property now, but what happens later?

The spectre of a possible looming oversupply in Singapore’s housing market – including both the private and public sectors – in the not-to-distant future was again brought back to the fore when the HDB announced on Wednesday its biggest launch ever of new Build To Order (BTO) flats.

The 2,696 flats offered brings the total number of new BTO flats launched to 8,828 flats for the first six months of this year. This is equivalent to the BTO supply for the whole of last year.

At this rate, the HDB will likely double the number of BTO flats by the end of the year to about 17,000 units.

For the time being, demand for BTO flats appear insatiable. Unlike most purchases of private homes, this is real demand for owner occupation. It is just that rising resale prices and fears of further increases in flat prices drove many to book their flats many years in advance.

The widening price gap between new and resale flats coupled with many more innovative schemes such as the new eco-friendly Waterway Terraces have also added to the attraction of BTO flats.

If we tag these numbers to the robust sales of over 14,000 private homes each in 2007 and last year with a strong possibility that these numbers may yet be matched this year, are we looking at a looming housing oversupply within the next two to three years or even earlier?

The current strong demand for BTO flats is not sustainable. There will come a time when demand will drop off as those wanting to buy would have already secured their flats or have already booked theirs.

The rise in HDB resale flat prices may then plateau off. This may act as a cap on the future number of upgraders to the lower end of the private housing market particularly if private home prices continue to rise.

Do we then depend on foreigners to make up this shortfall? The percentage of foreign and permanent residents buying has certainly gone up in recent months but they are fair weather market participants. They can go as quickly as they come.

While discussing property at a recent business lunch, a few Hong Kong professionals told me laughingly that some of their friends are no longer able to visit Singapore as they are “wanted” people.

It transpired that these friends bought high-end properties in 2007 and chose to walk away when prices turned south.

Will recent buyers walk away again when things do not go their way?

If I were the owner who recently sold off his Sentosa Cove detached house for $36 million, I will put off celebrations until I actually have my hands on the money. Anything can happen between now and sale completion.

The greatest drawback in attacking the real estate bubble from the supply side is that it places a huge strain on the limited industry resources.

Lest we forget, the ramping up of supply in recent months have yet to make a dent in demand. If demand does not abate due to excessive liquidity, what happens then?

With the total number of homes – both private and public – sold having more than double in recent years, is the real estate industry particularly the construction sector able to similarly doubled its capacity.

Let us say we have the labour capacity, what about material costs? Even if we are prepared to pay more, are we able to get them? The problem of sand imports comes quickly to mind.

With such nagging problems, it is possible that we will see the return of ever rising construction costs and project delays.

It was not so long ago that skyrocketing construction prices and the credit crunch led to a indefinite postponement in the development of our Kallang Sports Hub.

It has since been revived but it had better take off quickly before the same problems resurface once again.

The writer is the head of research and consultancy at Chesterton Suntec International.

Source: Today, 2 Jul 2010

2nd-quarter spike sends property price index to record-high of 184.1 pts

SINGAPORE – The crowds at showflats have dwindled in recent weeks but private home prices continued their unabated rise in the second quarter, sending the residential property price index to a record high of 184.1 points.

Estimates released by the Urban Redevelopment Authority (URA) show that private property prices shot up by 5.2 per cent, compared to a 5.6-per-cent increase in the previous quarter and beating analysts’ forecast of a 3 per cent increase.

The increase also pushed the residential property price index to an all-time high, surpassing the market peak of 181.4 points in the second quarter of 1996.

Still, analysts say it is too early to call for additional cooling measures.

Colliers International director of research and advisory Tay Huey Ying said that further cooling measures by the Government are unlikely as May sales dropped to 1,078 units from 2,208 in April – a sign that the earlier measures have taken effect.

Echoing a similar view was Credo Real Estate executive director of residential services, Mr Liang Thow Ming. who noted that “a lot of good measures have been put in to make sure that speculation has been weeded out of the market”.

He added: “Compared to 1996, I think we are a little bit above – especially in mass market – in terms of prices. However, in terms of income, I think we are also well above the 1996 level. So in that sense where affordability is concerned, it’s still pretty well-maintained. So, I don’t think there is a bubble over here.”

Meanwhile, private homes in the city and prime districts or Core Central Region cost 5.1 per cent more while those in the city fringe or rest of the central region saw price increases of 4.5 per cent.

The index that measures private home prices in the outside central region also hit more than 170 points and surpassed its 150 point peak in the first quarter of 2008.

At the same time, private home prices in the suburbs or outside central region rose 5.7 per cent.

Looking ahead, home prices are expected to soften as the Government rolls out more state land for tender in the second half.

“The mass market has already gone beyond the last peak, so we don’t expect it to increase by that much of a percentage but we still expect some growth in that area as well,” said Credo’s Mr Liang.

Analysts expect prices to grow by up to 3 per cent for the next two quarters, bringing the full year price increase to about 20 per cent.

“Should the buying fever returns and put pressure for private home prices to escalate beyond 5 per cent per quarter for the mass-market segment, more cooling measures can then be expected,” said Ms Tay.

Source: Today, 2 Jul 2010