Property makes a comeback

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Dec 25, 2010
look back at 2010
Property makes a comeback

Activity-filled year marked by record prices and sales volumes, then cooling measures
By Esther Teo and Cheryl Lim

THE property market turned in a very lively year, to say the least, with record prices and sales volumes and then the dousing effects of the Government's latest round of cooling measures.

It was also a year of comebacks, with executive condominiums (ECs) staging a return after a five-year absence. Collective sales rebounded strongly and are poised for an even bigger comeback next year, whetting the appetite of developers eager to plump up land banks.

After 12 months chock-full of surprises, however, more flux might be in store next year with some market watchers predicting a possible round of government intervention to cool the still buoyant market.

This follows three sets of cooling measures unveiled in September last year, and then in February and August this year, as private home prices eclipsed the previous 1996 peak in the second quarter.

In fact, home prices were already up 14.4 per cent in the first nine months of this year according to Urban Redevelopment Authority's (URA) data, with new private home sales volumes rocketing to an all-time high of 15,025 units as at last month.

What's in store for 2011

EXPERTS say the overall outlook for the property market remains strong.

Despite recent government moves, real estate as an asset class remains appealing, having proven its resilience during the global financial crisis, they added.

Interest rates are rock bottom - setting the stage for even cheaper home loans and other carrots to lure buyers. Experts added that these low rates are likely to be sustained into the coming year, which will also witness more foreign buying interest diverted here owing to stringent property curbs in the region.

Up-and-coming districts to watch include Tanjong Pagar, given the Government's goal of rejuvenating the area to create a vibrant place to 'live, work and play'.

The prime districts of 9, 10 and 11 are also worth watching as prime freehold land is very scarce. New high-end launches include CapitaLand's The Nassim, Wing Tai's Le Nouvel Ardmore and City Developments' former Lucky Tower in Grange Road.

Mass market homes: Saturated

EXPERTS expect prices of mass market homes to plateau or even dip somewhat in a slight correction in the coming year. Some say this is the only segment here close to saturation point, and which might therefore face a slip in prices.

The bumper supply of mostly suburban land sites in the government land sales (GLS) programme is likely to replenish developers' land banks and meet consumer demand, taking the heat off the segment and stalling any further price gains.

The GLS for the first half of next year is expected to yield about 14,310 new homes, an even larger offering than the release of residential land in the second half of this year, which was able to yield up to 13,905 homes - itself a record.

Kim Eng property analyst Ooi Yi Tung said that the ample supply of suburban land is a clear indication of the Government's intentions and will discourage overly aggressive bids by developers that could eventually mean higher prices.

He does not expect prices to rise much more, and in fact sees a downward correction in prices of about 5 per cent next year.

Mid to high-end homes: Star performers

MOVING upmarket, however, it is a different story. The mid- to high-end segments are expected to be the star performers among non-landed homes as Singapore steps up its transformation into a cosmopolitan global city. Both segments are set to gain 5 per cent to 10 per cent next year.

Mr Png Poh Soon, Knight Frank head of research and consultancy, said most buyers in the mid- to upper-tier market are young local professionals in their 30s as well as foreign buyers.

'The solid economy and growing financial sector will bring in foreign interest and provide income support for locals. (These), combined with high liquidity, low interest rates and rising employment, will sustain demand and prices.'

Credo Real Estate managing director Karamjit Singh said the segment is often dependent on wealthy locals - both Singaporeans and permanent residents (PRs). With Singapore's economy powering ahead and creating wealth, these homes are likely to remain firmly supported.

Kim Eng's Mr Ooi expects high-end home prices to gain by 10 per cent next year, while mid-level homes are set to enjoy spillover effects and rise 5 per cent in price.

Luxury homes: Might finally surpass peak

LUXURY homes are likely to see price gains of between 5 per cent and 8 per cent, supported by the expansion of the financial sector and Singapore's growing status as a financial hub in the region.

The segment - which depends largely on foreign buyers - has yet to surpass its 2007 peak both in terms of prices and volumes.

Experts said, however, that with more property cooling measures being introduced in economies such as mainland China and Hong Kong, some investors are likely to look here instead.

Ms Phylicia Ang, Savills Singapore's executive director of residential sales, added: 'The external demand together with the optimism surrounding the integrated resorts and robust economic recovery should continue to lend support to the private residential market.'

There is also a possibility of luxury home prices - currently 6.3 per cent below their 2007 peak - regaining this high point by the end of next year, she added.

Landed: Moderated price growth

LANDED home prices surged by 24 per cent in the first nine months of this year, according to URA data.

Experts said, however, that despite the limited supply of these homes, price gains are likely to moderate as buyers adjust to new highs. CB Richard Ellis' data shows average landed home prices was up by almost 34 per cent compared to 2007's peak.

Mr Ong Kah Seng, senior manager of Asia-Pacific research at Cushman & Wakefield, expects positive demand to continue into next year but at a moderated pace of 3 per cent per quarter.

Knight Frank's Mr Png said that the good class bungalow segment - which notched up price jumps of more than 30 per cent - can expect to post further 10 per cent to 15 per cent price gains next year.

RealStar Premier Property managing director William Wong estimated that prices in prime locations such as the Tanglin neighbourhood could hit a record $2,000 per sq ft (psf) - eclipsing the current record of $1,899 psf set in 2007 for a Nassim Road bungalow.

Fresh anti-speculation steps may be taken

Collective sales are back - with $4b-6b expected in 2011

THIS year also saw a turnaround in the collective sale market, with strong developer interest returning and owners eager to sell as property prices soared.

Collective sale activity this year was healthy with 32 sales sealed, worth a total of $1.6 billion - a striking change from last year, when the $100.8 million Dragon Mansion sale was the only deal.

Larger deals are also at hand with former HUDC estate Pine Grove, Tulip Garden and Hawaii Towers just some of the mega collective sales, each of more than $600 million, that have entered the market or are expected to.

Credo's Mr Singh said that these are just 'the tip of the iceberg' with more deals of more than $100 million expected next year. He expects a total of between $4 billion and $6 billion in collective sales to be sealed next year.

Mr Steven Ming, Savills executive director of investment, said that collective sale sites priced under $200 million are likely to be favoured as small to mid-sized developers that lack the capacity to undertake large-scale developments shy away from GLS tenders, turning to the collective sales market instead.

'Freehold sites that are located in the prime areas such as districts 9, 10, 11 and 15 will be favoured as developers seek to landbank in locations where there could be limited redevelopment land purchase opportunities. Well-located commercial sites for an office or retail development will also be of interest,' he added.

Successful collective sales are also expected to further buoy the landed homes market as home owners look for a new and upgraded asset to park their cash.

Executive condominiums (ECs)

AFTER a hiatus of five years, since La Casa in Woodlands, ECs are back with a vengeance. Launches are coming fast and furious, with three since October and another - the 540-unit Austville Residences next to Punggol Park - by next month.

Demand from the so-called sandwich class - households earning $8,000 to $10,000 a month - has been strong, with EC sales accounting for almost 20 per cent of the 3,678 new homes sold in October and last month.

More EC launches are also on the cards, with the GLS programme in the first half of next year offering four more EC sites - in Tampines, Chua Chu Kang, Punggol and Upper Serangoon - leaving home buyers spoilt for choice.

Experts, however, caution that although the initial launches have been well-received, buyers might start getting choosier in their purchases, with well-located ECs such as those near MRT stations likely to pull ahead.

Another round of measures?

SURGING private homes sales, especially a higher-than-expected 1,909 new units sold last month, have also raised red flags, with some experts predicting a fresh round of finely tuned cooling measures.

Ms Tay Huey Ying, associate director of research and consultancy at Colliers International, described the rocketing sales figures as quite 'worrying'.

Jones Lang LaSalle's head of research for South-east Asia, Dr Chua Yang Liang, said the growing numbers of overseas buyers and investors are clouding the picture and making it difficult to tell if sales activity is influenced by foreign or local policies.

He added, however, that although Singapore has increasingly seen more intervention in the property segment, overtly aggressive policies are unlikely as they could damage the market and so hit economic growth.

If measures are taken, the Government is likely to favour a 'softer' approach, allowing the market space to correct itself, he said.

Steps that analysts have speculated the Government could take include further lowering the ratio of a property's value that a borrower may obtain as a mortgage on second and third mortgages, ortightening Central Provident Fund withdrawal limits.

My Value Investing Blog:
Last year aro 80k-100k new immigrants become PR, these grp of people apparently rush into buying property using their CPF either for own stay or rental income.

2 decade ago, my that 2 in-law only own a 4 & 5 room flat each. Now, both possesses more than 2 properties, instead of upgrading 1 to 1. they go for more & more…1 of my ex-colleagues 15 yrs ago own a 5 rm HDB flat in TPY , today amazing he own 8 units of properties, 5 fully paid..wonderful man.

Supply & demand mismatch, 2007 market peak property pick up but short life, by Oct’08 pung jiak liao, but after May'09 the long life bull dash thru all the way till to-date, My point is supply in 2007/08 is inadequate, only late 09 more new project started to launch. Usually it take aro 4 yrs to complete a project. So my estimate by 2014, supply will out weigh demand…but depend on the govt open immigrant policy, proven population really can boost economy but also can cause inflation & asset bubble.

All time low interest rate, plus QE money created out from thin air will take quite sometimes to vaporize. Hot money pouring in like waterfall. So my take interest rate will remain low for the next 2 yrs. China RMB will force to appreciate in due time, and economy will then start to flow reverse from east to west.

If you have spare cash or had just cash in yr property sale, consider this strategy (focus on your Affordability):

Bring forward future money to invest into prime location LH property for long term investment. Take moderate loan abt 50% or less and paid down quickly over next 5 yrs, after the fifth year make sure your loan amt is only 100k, hehe…by then interest shot up to 8% , you also no sweat, A sure way to retire early, Angel……see the mortgage loan table below:

Say balance mortgage loan amt is 100k, for 5 yrs term, your mthly installation after TOP as follows:
Interest rate @1.03% = $1,710 per mth
Interest rate @ 8.0% = $2,027 per mth; only $317 different

Moving forward, world population will keep on increasing in geometrical progression…imagination during Genghis Khan time about 800 yrs ago, world population only 500 millions, now China & India alone already 2.5 billions. Hence, food, shelter and transportation will be forever on the inflationary mode.Angry
hi koh_52,

always like your post re property as they are thought-provoking.

like your strategy of focusing on one's affordability in buying any property at this pt of time.

to invest into a prime location LH property with a 50% or less loan, coupled with a yr 5yr + 5 yr repayment plan requires a super deep pocket...with the following assumptions:

LH property = 1M to 1.4M;
Loan = 500k - 700k;
Cash + cpf needed = 500k - 700k.
1st 5 yrs monthly repayment = 6.5k - 10.5k.

are above figures correct?

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