Home prices are slated to fall this year. Question is, by how much?

Prices of private homes are poised to fall this year. This was foreshadowed in the official flash estimates for the fourth quarter of last year which showed a slowdown in growth.

Urban Redevelopment Authority’s private residential property price index rose a mere 0.2% quarter-on-quarter in Q4 2011, its most anaemic growth in 10 quarters since the index bottomed out in Q2 2009.

From the 15.8% q-o-q increase in Q3 2009, the index has now moderated for nine consecutive quarters, according to CBRE’s analysis. The 0.2% q-o-q hike in Q4 was lower than the 1.3% q-o-q rise for Q3 last year. For the whole of 2011, the index rose 5.9% – a marked slowdown from the 17.6% jump in 2010.

Most market watchers say it is a given that prices will go down this year, amid the weaker economic outlook and poorer sentiment, especially after the introduction of the additional buyer’s stamp duty (ABSD) last month.

“Developers know they need to cut prices but the difficulty is in gauging how much. If they don’t cut enough, buyers are not going to act. But if they give too much, there’s always a fear that buyers will expect a bit more. What you want to do is to give enough for the fence sitters to come back into the market. Despite the weaker economic outlook, there’s still a lot of cash and liquidity in the market,” says Knight Frank chairman Tan Tiong Cheng.

DTZ’s head of Asia Pacific research Chua Chor Hoon predicts a 10 – 15% drop in URA’s overall private home price index in 2012 citing the ABSD which took effect on Dec 8 and the economic slowdown. The luxury housing segment, where there are more foreign buyers, is expected to take the biggest hit given the top ABSD rate of 10% levied on their residential property purchases.

CBRE executive director Li Hiaw Ho expects overall demand for new private homes to be trimmed by 15 – 20% this year.

“Price of luxury/prime condos may fall by 10 – 15% in 2012, and the mass-market condos, by 5 – 10%,” he added.

URA’s flash estimates show that the price index for non-landed private homes in Outside Central Region (OCR) – where mass-market condo projects are located – was the star performer, though it has also dimmed somewhat. It rose 0.6% q-o-q in Q4 last year, a slower rise than the 2.1% increase in Q3 2011. The full-year 2011 increase of 7.7% was also slower than the 15% climb in 2010.

Prices of non-landed private homes in OCR increased the fastest as demand was supported by HDB upgraders as well as investors, notes DTZ’s Ms Chua.

Credo Real Estate executive director Ong Teck Hui notes: “The strong run in OCR market has led to their current (Q4 2011) prices being 28.3% above their pre-financial crisis peak in 2008, while prices in Core Central Region (CCR) and Rest of Central Region (RCR) are only 6% and 15.9% higher than their respective 2008 peaks.”

The price index for non-landed homes in CCR – which includes the traditional prime districts, financial district and Sentosa Cove – appreciated 0.5% q-o-q in Q4, following a 0.7% gain in Q3. The full-year 2011 increase was 4%, significantly lower than the 14.2% rise in 2010. The index for RCR for Q4 was unchanged from the preceding quarter, taking the full-year appreciation to 4.4%, after rising 17.6% in 2010.

Source: The Business Times

Most market analysts have said that prices for mass-market private homes will only fall by between 5 to 10% this year. However, the wife and I will go on a limb here by saying that we think mass-market home prices will drop by more than 10%. This is because:

1. More mass-market projects are expected to be launched this year, adding to the rather substantial inventory of launched but unsold units in the market.

2. The furious pace in which the Government is releasing land parcels through its Government Land Sales (GLS) scheme – most of these are slated for mass-market homes or ECs.

3. The new additional buyer’s stamp duty (ABSD) rule stipulating that all land parcels bought by developers have to be built and fully sold within 5 years – this is likely to put more downward pressure on home prices.

4. The ramping of supply of HDB flats (especially BTO) and easing of HDB flat purchase criteria (income ceiling increase, higher allocation for second-time buyers etc) may mean that some demand for mass-market private homes will be siphoned off to HDB flats.

Only time will tell if our observations are correct or just a load of bull…

But what do you think?

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November’s home sales up 22.3% month-on-month

Just before the cooling measures on Dec 7 changed the property landscape, private home sales had spiked sharply in November, the latest numbers released by the Urban Redevelopment Authority (URA) shows. But the immediate future looks starkly different, as consultants expect sales to slow by 20 to 30%.

Buyers snapped up 1,701 private homes in November, excluding executive condominiums (ECs) – a 22.3% increase from October’s 1,391 units.

Including ECs, 1,854 homes were sold, compared to 1,642 in October. This translates to 153 ECs being sold in November. (*shouldn’t the Nov EC sales be 212?!)

The cooling measures have changed the equation.

Png Poh Soon, director, consultancy and research at Knight Frank, says that excluding executive condominiums (ECs), sales could fall to some 1,000 units or fewer per month. After Chinese New Year, this could rise moderately to between 1,100 to 1,200 units he said.

ERA key executive officer, Eugene Lim agreed. “We expect the market to take a breather in December and January as developers and buyers take stock of the recent changes… We can expect slower sales by about 20 to 30% over this festive period,” he noted.

Added PropNex Realty chief executive Mohamed Ismail: “It will be interesting to see the results of private property sales from December onwards, especially after the ABSD (additional buyer’s stamp duty) has taken effect.”

On Dec 7, the government announced a series of cooling measures, which included an additional 10% stamp duty for foreign buyers.

According to Chia Siew Chuin, director of research and advisory, at Colliers International, these measures could result in an initial knee-jerk reaction in the market. That, coupled with potential homebuyers who may be sidelined during the year-end school holiday and festive season, is likely to put a cap on demand in December.

In the first 11 months of the year, developers had sold 15,393 private homes (excluding ECs), and 2,855 ECs. For the whole of last year, developers sold 16,292 private homes and 1,052 ECs.

The slowdown in December could mean that the total sale of private homes in the primary market may now be close to last year’s level – instead of easily surpassing it.

Taking into account the economic outlook and likely effects of the new measure, take-up for new homes sales in 2012 could potentially fall between 9,000 to 11,000 units, said Ms Chia.

Alan Cheong, associate director or Savills Research and consultancy added: : Transaction volumes should be tepid in the light of a standoff between local buyers who think they can get a better deal and developers who have the financial strength to stay put.”

Dennis Wee Group’s senior manager in research and consultancy, Lee Sze Teck, added: “It could be till February that we will see the full effect of the ABSD. Most developers are adopting a wait and see approach before deciding whether to offer relief package to offset the ABSD.”

According to CBRE, prices of luxury/prime residential properties could fall by 10 to 15% in 2012, whereas mass-market homes could fall by 5 – 10%. Landed home prices will likely see a smaller correction of less than 5% since foreigners are generally not allowed to buy and supply is limited.

“However, we are of the opinion that these measures are unlikely to be a permanent feature because of the nature of Singapore’s highly open economy,” CBRE added.

Savills’ Mr Cheong added: “Property prices were already moderating before these cooling measures were announced. In the face of global uncertainties, these measures came as a surprise, not in terms of timing, but in the form.”
The market had looked quite hot before the measures were announced. Top sellers in November included Bedok Residences (477 units sold at $1,359psf median price), The Palette (367 units sold at $895psf median price), Parc Vera (83 units at $825psf median price).

One of the drivers pushing sales was the supply of new units in the market, say consultants; in a move to launch projects before the year-end holiday period, developers released a total of 1,979 units for sale, a month-to-month increase of 47.9%.

This marks the second highest launch and sales volume this year, after April’s 2,055 units launched and 1,805 sold, said Colliers’ Ms Chia.

The Outside Central Region (OCR) – where suburban mass-market condominiums are located – dominated November’s launch and sale figures. Sales in the OCR jumped 49% month-on-month in November to 1,328 units, or 78.1% of all units sold.

This is also the highest monthly sales in the region, since July 2009.

New launches were also up, helping drive new demand, with 1,518 new units launched to the (OCR) market in November, an increase of some 123% compared to October, pointed out Chua Yang Liang, from Jones Lang LaSalle.

Colliers International’s analysis showed that about 37% of the 1,701 homes sold by developers were priced at $1,000psf or less. More than half of the transactions (about 52%) fell between $1,000 and $1,500psf.

Source: The Business Times

The wife and I were reminded by the fact that last year’s total private home sales of 16,292 units was a record. So given the slew of cooling measures announced by the Government (SSD, ABSD etc) so far this year and the poorer global economic situation compared to last year, the property market (15,393 units as of November) has done spectacularly well year to date. 

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September new home sales up 26%!

The private residential market saw a rebound in September.

Figures released by the Urban Redevelopment Authority (URA) on Monday showed 2,064 units, including executive condominiums (ECs), were transacted.

This is the highest number of monthly transactions this year and a significant 26% increase from August’s 1,638 units.

Treasure Trove, a development in Punggol, accounted for about 40% of the transactions with more than 680 units sold.

PropNex Realty said the homebuyers are mainly HDB upgraders, attracted to the pricing and the proximity of the development to the Punggol MRT.

It said the revision of income ceiling had prompted many to purchase ECs.

Excluding ECs, the number of units sold in the mass market with units costing $1,200psf or less, accounted for more than three quarters of the transactions.

Jones Lang LaSalle said the surprise upside in September monthly sales only confirms the view of an underlying market need for homes.

Dr Chua Yang Liang, head of Research, Southeast Asia, said the market remains price sensitive with projects in the suburban areas seeing more take-up compared to projects in the city and its fringes.

PropNex said it expects October’s sales to hold steady, with over 1,400 units sold. This is due to the fact that developers will be launching more projects in the coming months.

It added that it expects both home buyers and investors to take a more cautious approach on prices.

Source: Channel News Asia

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August private home sales drops 3.6%

Private home sales in Singapore dipped 3.6% in August. This follows the 17% rebound in July.

The dip comes after the government increased the income ceiling for public flats and executive condominiums (ECs) in August.

Some 1,348 units were sold in August, excluding ECs. That’s 50 units fewer than the 1,398 units sold in the previous month.

More than eight in ten units – 1,114 of the total units sold in August – were sold in the suburbs, while 169 units came from city fringe areas with 65 units sold in the city centre.

The most expensive unit sold in August was at The Marq on Paterson Hill in District 9, which went for $6,394psf.

Source: Channel News Asia

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Good news for developers, not so great for resellers/subsellers…

While private home sales by developers have held up despite global economic gloom, the secondary market has turned noticeably sluggish.

This could point to investment demand slowing down and January’s cooling measures hitting speculative activity.

Credo Real Estate’s analysis of URA Realis caveats shows that 9,194 caveats were lodged for resales of private homes (excluding executive condos) in January – July 2011, down 21.1% from the same period a year ago.

Subsale caveats declined 24.2% to 1,601 over the same period.

The drop was much smaller in the primary market, with the number of caveats lodged for units sold by developers down 9.5% to 7,324.

Primary sales have been helped by competitive pricing of late, while subsales have been hit by January’s cooling measures.

Market watchers expect URA numbers today to show that developers sold in August close to 1,386 private homes (excluding executive condos) transacted in July. This is on the back of strong sales from new projects released last month such as euHabitat in Jalan Eunos (426 units sold in August), Boathouse Residences in Upper Serangoon (202 units sold last month) and The Luxurie in Sengkang.

Developer sales for September may pip the August figures – with sales at Sim Lian’s A Treasure Trove, released last week, already said to have surpassed the 500-unit mark.

It’s been a different story in the resale market. One agency said that the volume in the first 14 days of September is up about 5% in the same period last month but 60% lower than the same year-ago period.

ERA Realty’s key executive officer Eugene Lim said the volume of resale private residential deals brokered by ERA in August was 20% lower than in July, due partly to the slowdown during the Hungry Ghosts Month and the stock market slide. “In the past years, we have seen a strong recovery after Ghosts Month, but so far in September, there’s been only a slight pick-up from August.”

PropNex CEO Mohamed Ismail said his firm achieved a marginal month-on-month increase in resale volume of private homes in August, supported by sales of completed mass-market condos. “However, sales of high-end homes costing above $5 million have not been as brisk as before,” he added.

Resales are secondary- market transactions involving projects with a Certificate of Statutory Completion (CSC), while subsales refer to secondary-market deals in projects that have yet to receive CSC.

Explaining the relatively more robust performance in the primary market, Credo executive director Ong Teck Hui said: “The new sales market has been dominated by projects in the Outer Central Region, where buying is supported by HDB upgraders purchasing their first private home, typically for their own occupation.

“On the other hand, there is greater element of investment demand in the resale market, and this may have been affected by the seller’s stamp duty as well as a lower loan-to-value limit for investors who could be making their second or third property purchase.”

January’s measures could also have hit subsales.

Those buying a private home on or after Jan 14, 2011, will have to pay a seller’s stamp duty of 16,12, 8 and 4% respectively if they sell their property in the first, second, third and fourth year of purchase respectively.

Knight Frank chairman Tan Tiong Cheng says most buyers who don’t need to move into a new home straightaway, prefer new launches. This lets them take a mortgage slightly later, given the progressive payment schedule. “Most people are drawn by showflats. “This is the lifestyle I want; therefore I buy.”

Also, developers are pricing projects more attractively. Sim Lian released its Treasure Trove (about 220 metres from Punggol MRT Station) at an average price of $866psf – compared with H2O Residences (next to Layar LRT Station but about 1.6km from Sengkang MRT Station), released at an average of $910-920psf in March.

Source: The Business Times

Many market watchers (yours truly included) have expected that the August new home sales would not go beyond 1,000 units. So much for making predictions!

We will post the official URA data once it is released today.

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Private home sales continue to rise in Q2 2011

Sales of private home rose 21.6% quarter on quarter in Q2 2011 and the number of units bought by mainland Chinese buyers hit a new high, according to a new report from DTZ.

The property firm, which analysed caveats lodged for both new and secondary sales, said that the number of transactions rose to 8,458 in the second quarter of this year from 6,958 deals in Q1.

Mainland Chinese buyers continued to be the top non-Singaporean purchasers of residential properties in Singapore for the second consecutive quarter. In absolute terms, purchases by mainland Chinese buyers accounted for 640 units of all private residential transactions – which is a new high and more than the 527 units purchased in Q1 2011.

The total proportion of private homes bought by all foreigners stayed at a record high of 16% in the second quarter of 2011 – the same ratio as in the first three months of the year and the highest quarterly percentage recorded since data was made available for analysis in Q1 1995.

“The bulk of private residential purchases by foreigners continued to be in the high-end market segment,” said DTZ’s head of South-east Asia research Chua Chor Hoon. Of the total private residential purchases by foreigners, 43.3% cost $1.5 million or more.

DTZ, which downloaded the caveats from URA Realis on August 5, also found that the ratio of buyers with HDB addresses has been inching up over the last three quarters.

Such buyers bought 38.7% of all private homes in Q2 2011, up from 37% in Q1 2011 and the 34.6% in Q4 2010.

And in a reversal from past trends in 2010 and Q1 2011, more purchasers with HDB addresses bought units of sizes below 1,000sqft as compared to purchasers with private addresses.

DTZ found that 50.3% of buyers who picked up units below 1,000sqft in Q2 2011 had HDB addresses, which is an increase over the 47.5% in Q1.

A separate analysis of caveats by Knight Frank similarly found that more HDB upgraders bought small, or “shoebox”, units in Q2.

Some 16.4% of home buyers with HDB addresses bought shoebox units (which Knight Frank defined as units with sizes up to 550sqft) in Q 2 2011, higher than the 14.6% in Q1 2011 and significantly higher than the 8.6% in Q2 2010, Knight Frank said. The firm downloaded caveats on August 16. “A significant group of HDB buyers may be investors looking for rental yields in a low interest rate environment,” said Knight Frank research head Png Poh Soon.

“Based on their budget, shoebox units with a lower price quantum appeal to these buyers.”

Looking ahead, analysts noted that concerns over the US and Europe debt problems and the slowing economy have led to more cautious sentiments in the private residential market.

Said OCBC Investment Research analyst Eli Lee in a recent report: “We expect developers and buyers alike to remain cautious for the remainder of H2 2011 and sales volume to soften going forward”

In Singapore, purchase demand for private homes will still be supported by economic growth and the low-interest rate environment in Singapore, DTZ’s Ms Chua said.

Source: The Business Times

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What if Godot really appears?

The wife and I chanced upon this really interesting research article by Associate Professor Lum Sau Kim from the National University of Singapore. It provides a good insight on the various policies and measures that the Singapore Government has implemented on the private housing market during the past decades.

http://www.ires.nus.edu.sg/workingpapers/IRES2011-005.pdf

What we find most intriguing is factors that prevailed prior to the last two economic downturns (i.e. the 1997 Asian Financial Crisis and the 2008 Subprime Crisis) are very much evident today:

• Bullish sentiments at the back of sustained economic growth and low inflation expectations
• Spectacular bull run in the stock market
• Record job creation
• Increasing concerns about the sustainability of US economic growth
• Ample capital inflow keeping domestic interest rate and risk premia low and encouraged more risk taking in the property market.

We recall reading comments from certain industry expert that even if the Eurozone crisis unfolds, the impact on Singapore property prices is only perhaps 20% below today’s prices.

The wife and I are definitely no experts but if our memories served us right, property prices actually fell by more than 30% during the 18 months following the Asian Financial Crisis.

We understand that the Urban Redevelopment Authority’s (URA) Private Residential Property Price Index has climbed about 50% in the last 18 months. On a year-on-year basis, the private residential index has shown growth every quarter for the last six quarters.

And looking at the chart below, would you bet against a significant price correction or even a property market “perfect storm” if one or more of the major economies around the world falter?

So even if you have been staying in the sideline for the past 18 months (and possibly missing out on the action and returns), while the property you are eyeing (especially for investment purpose) has only increased by less than 20% in price and trading well below their newer neighbours, we remain skeptical on whether it is really the opportune time to enter the market now.

Then again, we are not the experts…

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URA release of 3Q2010 Real Estate Statistics

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For your reading pleasure.

3Q2010 Statistics http://d1.scribdassets.com/ScribdViewer.swf?document_id=41376765&access_key=key-xuncx4bclytufc4i7bx&page=1&viewMode=list

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Private Residential Units Sold (Sep 2010)

The following data is courtesy of Urban Redevelopment Authorities (URA).

The list includes projects (with unsold units) that the wife and I have reviewed to date.

URA (Sep 2010) http://d1.scribdassets.com/ScribdViewer.swf?document_id=39984597&access_key=key-c9kodorhgn66pdbkkjt&page=1&viewMode=list

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Private Residential Units Sold (July 2010)

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The following data is courtesy of Urban Redevelopment Authorities (URA).

The list includes projects that the wife and I have reviewed to date. 

URA (July 2010) http://d1.scribdassets.com/ScribdViewer.swf?document_id=36541411&access_key=key-d0n0vcd1w5bw3c7rotq&page=1&viewMode=list
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