The Urban Redevelopment Authority has released their Q2 real estate statistics. 2 major property agencies, CB Richard Ellis and PropNex, have responded with their views. What do the property veterans have to say?
In their second quarter real estate statistics released yesterday, the URA has pointed out that:
Prices and Rentals
– The rate of price increases continues to moderate. Prices of private residential properties increased by 2.0% in 2nd Quarter 2011, lower than the 2.2% increase in the previous quarter.
– Prices of non-landed properties in Rest of Central Region (RCR) and Outside Central Region (OCR) increased at a more moderated pace.
– Rentals of private residential properties4 increased by 1.3% in 2nd Quarter 2011, compared with the 1.2% increase in the previous quarter.
Supply in the Pipeline
– The supply of residential units in the pipeline continues to build up. As at the end of 2nd Quarter 2011, there was a total supply of 71,111 uncompleted private residential units from projects in the pipeline.
– Of the supply in the pipeline, 33,899 units remained unsold as at 2Q2011.
– The unsold units comprised 10,309 units in CCR, 7,610 units in RCR and 15,980 units in OCR.
Launches and Take-up
– A total of 4,802 uncompleted private residential units were launched for sale by developers in 2nd Quarter 2011, compared with 4,130 units in 1st Quarter 2011.
– At the same time, 4,325 uncompleted private residential units were sold by developers, compared with 3,430 units in 1st Quarter 2011. Developers also sold 119 completed private residential units in 2nd Quarter 2011.
How active have home buyers been?
In response to URA’s numbers, Mr Li Hiaw Ho, Executive Director, CB Richard Ellis has this to say, “The volumes of new and resale homes (excluding ECs) sold in Q2 2011 outnumbered the corresponding numbers in the first quarter by 23.6% and 12.0% respectively.
A total of 4,444 new homes were sold in Q2 2011, most of which were located in Outside Central Region (OCR) as developers actively pushed out their projects built on leasehold sites bought from the government land sales programme in 2010.”
Of the 4,444 units sold in Q2 2011, 61.4% were located in OCR. Major projects in OCR that sold well include Eight Courtyards, Hedges Park and Terrasse. Small-format projects in Geylang area seemed to be popular as seen in the sell-out of Centra Heights, Melosa and Sims Edge. In the EC market, all the 315 units of Belysa were sold during the quarter as it was attractively priced at $670 psf.
The strong activity in the primary market spilled over to the secondary market resulting in 3,945 resale homes and 670 sub-sales in Q2 2011. Despite the slightly higher number of sub-sales in Q2 2011, it represents only 7.4% of the total sales volume, showing that the property measures are effective in keeping speculative activity at bay.
Residential prices in Q2 2011 rose by 2.0% q-o-q according to preliminary estimates by the URA, a smaller increase than the 2.2% in the previous quarter. This shows that home prices are stabilising. Home rents moved up 1.3% q-o-q, a shade better than the 1.2% chalked up in Q1 2011. The rise in rents was led by rents in OCR in both quarters, which is possible as an increasing number of expatriates take up local packages without separate housing allowances.
Going forward, they expect the take-up in Q3 2011 to be lower than Q2 2011’s volume as uncertainty of the debt crisis of the European Union and the U.S. have somewhat dampened market sentiments. In addition, the record supply of public housing being released to the market as well as a possible tweaking of government policies in the coming months is likely to affect the demand of private suburban homes.
How much more will COV levels rise?
PropNex’s CEO, Mohamed Ismail, has other opinions on the property market and predicts a further rise in COV for resale HDB flats.
He says, “Those who took 1Q11 to understand the cooling measures have come back to buy on the resale market. However, there are still many owners who, due to the effects of the cooling measures—especially the lower 60% Loan-To-Value ratio and revised Minimum Occupation Periods, are reluctant to move or sell their flat, resulting in a supply crunch and driving median resale prices as well as COV levels up.”
According to data from PropNex data, which has a 25% market share in the HDB resale market, COV levels have risen.
Mr Ismail also noted that for the months of April, May and June—which constitutes 2Q11—PropNex data showed a 1%, 4% and 10% increase respectively in the number of HDB resale flats being transacted at COVs of $50,000 and above.“Home sellers must remain realistic about their COV demands,” pronounces Mr Ismail, “because if not, there will be resistance from the buyers.”His predictions? The overall median COV looks set to rise to $38,000 in the third quarter before plateauing in the beginning of next year.”Will the resale market be affected by the new BTO launches? HDB’s latest BTO flats launch in July 2011.
“In the latest Build-to-Order (BTO) exercise in which 3,556 flats were launched,” continues Mr Ismail, “the over subscription rate was between three to four times, which demonstrated a continued strong demand for public housing.”
His sentiments are that some would-be upgraders are hanging on to their HDB flats because of the widening price gap between HDB resale flats and private property. As such, potential HDB upgraders could have found private property prices to be out of reach so they postponed their upgrading plans.
“In addition, those with existing home loans could be put off upgrading because of the rule that they cannot borrow more than 60% of the value of the property they want to buy,” continues Mr Ismail, “the 40% cash upfront is a substantial amount for those who are taking bank loans, which have a close to 25%, also means they would have to sell before getting another loan and have nowhere to stay in the interim.”
Source: Urban Redevelopment Authority (URA); Mr Li Hiaw Ho, Executive Director, CB Richard Ellis; PropNex.
Now into the second half of 2011, 3 months after the stirring General Elections in May, the housing situation seems to be in a standstill despite HDB’s announcements that many more BTO flats are being built. The income ceiling and DBSS reviews are perhaps what the public is looking for? And what about resale HDB flat prices, will they fall when the new flats are ready?