High-end condos can't keep pace with mass-market hikes

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Business Times - 29 Dec 2010

High-end condos can't keep pace with mass-market hikes

Prices in Non-Central region top pre-crisis high, Central region 3.7% below peak


(SINGAPORE) The latest flash estimates for November from the National University of Singapore (NUS) show that prices of non-landed private homes in Singapore's Central region (districts 1-4 and 9-11) have appreciated 7.9 per cent in the first 11 months of this year from end-2009.

Over the same period, the Singapore Residential Price Index (SRPI) sub-index for the Non-Central region rose at a faster clip of 12.9 per cent. As a result, the overall SRPI increased 10.7 per cent year to date.

SRPI, compiled by the NUS Institute of Real Estate Studies, covers only completed properties.

The Central region sub-index for November is still 3.7 per cent shy of its pre-Global Financial Crisis peak in November 2007. On the other hand, the sub-index for the Non-Central region in November has already surpassed its January 2008 pre-crisis peak by 15 per cent. As a result, the overall November 2010 index is about 7.6 per cent above its November 2007 pre-crisis high.

The latest indices from NUS tally with what property agents have been reporting from the ground - that mass-market condo prices have scaled fresh records this year while prices of prime and luxury condos have yet to touch their 2007 records.

DTZ executive director (consulting) Ong Choon Fah said that entry-level suburban condos have enjoyed strong demand this year, riding on upgrader demand amid a buoyant HDB resale market.

'In addition, the trend of developing a higher proportion of smaller units in private residential projects has spread from the prime districts (where rental demand is stronger) to the suburbs - and this has also helped to boost sales of mass-market projects by making the lump sum investment more palatable to buyers.'

Mrs Ong also pointed out that these days, developers of suburban projects are offering some of the innovative features which in the past were available only in prime district projects - such as sky gardens.

Knight Frank chairman Tan Tiong Cheng said that the increase in high-end condo prices had not been so sparkling this year due to more subdued foreign buying compared with the previous bull run in 2007.

'The foreign buying back then was from a wider spectrum. These days, buyers from the West, Middle East and Russia seem to be out of the equation. Also Western bankers were a significant buying contingent in 2007 but post-crisis, banks are less generous with remuneration.'

Month on month, the overall SRPI dipped 0.2 per cent in November. The sub-index for the Non-Central region too eased 0.3 per cent but the Central region sub-index was flat.

Since the last round of property cooling measures on Aug 30, the Central region sub-index has eased 0.4 per cent while the non-Central index has strengthened 0.9 per cent. As a result, the overall index in November was 0.4 per cent ahead of the August level.

Despite being proven wrong with their earlier forecast of stronger price appreciation for high-end condos compared to mass-market ones for 2010, analysts continue to predict the same trend in 2011, pointing to the already substantial price hikes posted in the mass-market segment. And if the government succeeds in taming HDB resale prices, that will also have an impact on upgrader demand for entry-level condos. Also, any interest rate hike, as well as further property cooling measures, is likely to make a bigger dent on demand in the mass-market segment than on upmarket condos.

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