Varied market response to declining property prices

Home prices in both the private and resale HDB markets have continued to dip in the second quarter of 2014. In the first three months of the year, the decline was 1.6 per cent. Perhaps buoyed by the increased number of launched in Q2, the rate of decline was somewhat less steep at 1.3 per cent the quarter past.

Rezi 3 TwoBuyers who have been on the lookout for opportunities such as this may be happy to find that more than a few property developments have been offering discounts. Though the overall number of sales have picked up in the second quarter, mostly due to new launches, the private homes market saw a more obvious slowdown in both the city centre and suburbs. The drop was 1.5 per cent in the city centre and 1.1 per cent in the suburbs. Properties in the city fringe fared better with a 0.6 per cent drop, an improvement considering the 3.3 per cent dive in the earlier part of the year.

But there are those who are concerned about the longevity of their investment should they purchase now. The question they may ask is, is this the lowest prices can go? If I were to buy now, will the prices continue to drop? Though property analysts are doubtful that the prices will bottom out anytime soon, they are expecting the maximum of a 5 per cent decline.

As long as the supply continues at a steady pace, prices will not vary far from the current levels. Perhaps true change will only come with a shift in policies. Considering the elections will be here in a couple of years’ time, the time leading up to that might be a period of uncertainty.

Private property buyers holding out on post-launches

New residential developments usually draw large crowds at their previews and initial launches, with some selling out within weeks as eager house hunters scramble for the best units. But buyers are holding back during post-launches, opting instead to wait for newer projects or other post-launches to see which developers offer the best deals. City Developments’ Coco Palms sold only 20 units over the weekend. In its debut, 52 per cent of its 944 units were sold. Prices range from $880,000 for a three-bedder to $1.21 million for four-bedder though units available range from 463 sq ft one-bedders to 3, 111 sq ft penthouses.

Commonwealth TowersSome developers have been dishing considerable discounts on their post-launch offerings. The Panorama in Ang Mo Kio just a couple of weekends ago saw developers giving up to 12 per cent discounts on their second launch. Property hunters are likely to compare between new project launches and previous projects’ re-launches, weighing the potential of rental possibilities and asset appreciation.

The increased number of mass-market property launches in May has lent some joy to the market and transaction volume is expected to reach 1,600 units. Projects which are offering prices lower than the projected buyers’ total quantum will be likely to still get buyers coming to their doorsteps. When it was first launched, units at Waterfront@Faber condominium went for $1, 100 to $1, 350 psf. Since then, only 6 more were sold, at an average of $1, 280 psf. Another May baby was the 845-unit Commonwealth Towers, where more than 66 per cent of the 400 units released have been sold.

As we move into the middle of 2014, the next half will be a time to watch. It may show signs of what 2015 will bring.

City fringe districts going strong

In the current softening property market, where private home sales and prices are on the downhill slide, it takes a good location to help a new launch stand its pricing ground.

The Thomson and Bishan area saw 3 such promising launches – Thomson Three, Three 11 and Sky Vue. Throw their proximity to current and future mrt stations, good schools, heartland shopping malls and other eateries into the mix, and it’s a recipe for success.

Thomson ThreeAll 65 units at Three 11 along Upper Thomson Road has been sold, whilst Thomson Three on Bright Hill Drive has already seen a 87 per cent take-up rate of its 445 units. Prices at the former were around $1,368 psf and $1, 308 psf at the latter.

Closer to Bishan, prices were even more positive, with units at the Sky Vue going at a median of $1, 465 psf. Prices have however dipped slightly. At its launch last September, prices were higher at $1, 500 psf. Closer to the Bishan MRT station, the massive 505-unit development, Sky Habitat, relaunched with encouraging sales figures last week. Prices were quite a bit lower than its launch price of $1, 700 psf. Discounts of 10 to 15 per cent were not rare, with units going at $1, 279 to $1, 590 psf. Perhaps these prices were more realistic and are sitting well with buyers still looking for a potential investment buy.

Sky Vue2In short, private home sales has been affected across the island, but there are still buyers out there looking for property worth their buck. And if the price is right, they might just bite.

Luxury condominiums going at lower prices

$2,200 psf to $1, 800 psf.
$3.7 million to $3.4 million.

That’s how far lower the prices for high-end luxury apartment units are going for.

Perhaps it’s a case of when the going gets tough, the tough gets going, at lower prices. It’s no secret that while luxury properties are the creme de la creme for property agents and developers, when investment money is slow in coming, these are one of the hardest to sell.

Hallmark residencesAnd the going looks like it is going to be tough for quite some time more. Property developers are struggling to move unsold stock, and depending on whether their holding power is strong enough, they may be forced to make other moves sooner. There were news earlier on this month that developers are looking to convert condominiums into serviced apartments as the pressure of the deadline to sell looms closer.

At MCL Land’s Hallmark Residences in Bukit Timah, the uncompleted condominium development is already advertising sales of units at discounts of up to $300,000. A 969 to 990 sq ft 2-bedroom unit was originally priced at $2 million but is now at a lower $1.8 million. Since its release of the first 20 units in January, 5 have been sold. They are however planning for a proper launch sometime in the first half of 2014. At the 999-year leasehold St Regis Residences on Tanglin Road, prices have dropped from $4,653 to $2, 349 psf. Of the over 10,000 private homes still under construction in the prime districts 9, 10 and 11, nearly half remain unsold.

Once again the story of low demand versus high supply dogs the real estate industry. With the government’s many cooling measures, a bubble is unlikely to happen especially since loans are harder to get. It will be interesting to see how the property market plans for a rebound.

Change is in the wind for resale HDB market

And buyers too. More for buyers perhaps, as new rules regarding the cash-over-valuation (COV) for HDB resale flats kicked in at 5pm yesterday:

  • Sellers will no longer be the ones getting a valuation of their flats from HDB. Buyers instead are responsible for that part of the procedure.
  • HDB flat valuations can only be secured after the seller and buyer have agreed on a price. Previously, the seller could obtain a flat valuation prior to seller and then offer the valued price to the buyer, and on top of that demand a COV price.
  • The Option-to-purchase (OTP) period will now be 21 days instead of the previous 14.
Photo by ThinkStock.

Photo by ThinkStock.

Most of these new rulings were to help buyers obtain a home loan, especially since the loan limits have decreased. According to the National Development Minister, Mr Khaw Boon Wan, this move will also help “restore the original intention of valuation, which is to help buyers get a housing loan”.

The government is keen to make the HDB resale market less dependent on COV prices. Recent HDB sales have seen the COV prices drop to almost zero in many cases and some even selling below valuation. Just last year, median COV prices have sky-rocketed to $38,000 with some even garnering six-figures.

HDB will also now be publishing HDB transaction figures on a daily basis instead of fortnightly. These recent moves may be the push towards transparency the public housing market needs.

HDB dwellers invest in shoebox apartments

With a private home market which fell 40 per cent last year, 2014 looks like it might continue to be in the home buyer’s favour. But more HDB dwellers have been snapping up shoebox apartments in light of the fall in home prices.

J GatewayConsidering the fact that most HDB flats are more than 500 sq ft in size, these smaller homes are more likely than not for investment purposes. In 2013, 13.3 per cent of private home transactions were from HDB dwellers, with them making up a whooping 62 per cent of sales in the shoebox apartment category.  Some of the more popular choices from this group were the Bartley Ridge, J Gateway and D’Nest condominium developments.

But it seems buyers are letting their nest eggs lay for longer, with secondary home sales dropping to a 10-year low. With smaller apartments being possibly easier to rent, with its overall lower rental price, it is an easy entry-level property investment and suited to HDB owners who are looking to ease their way into the private property market.

Who exactly are still buying up private properties then? The foreign buying force, it seems. The fall in foreigners purchasing homes here is marginal and in fact increased from 6 to 9 per cent in 2013. Mainland Chinese were the top buyers, closely followed by Malaysians and Indonesians.

Real estate market fluctuations hard to predict

It might be a matter of long and in-depth research. Or perhaps a intuitive touch to reading the markets. Maybe it’s a matter of luck. Whichever it is you possess, perhaps even a combination of all three, the property market has always been a delicate and somewhat temperamental creature to handle. As we reach the end of the first quarter of 2014, many may be wondering if this year of the horse may gallop into the horizon or merely trot on the spot. The three factors creating the most effect on the current real estate market are:

  • Property curbs
  • Weak demand
  • Oversupply of homes
Property-related rules may be updated often, thus it would be helpful to keep track of new or amended rulings.

Where are home prices headed?

For buyers looking for a place to live, it might be a good time to jump in. Those waiting for a market crash to scoop up the best deals may be waiting in vain as that is rather unlikely. Singapore’s growing population will make for a constant demand for housing, and since home buyers usually have a fixed idea of which areas they would rather live in, other factors such as location, proximity to transport and schools, may still determine the price they pay.

Property upgraders may find themselves in a good spot as well. As the private property market becomes increasingly competitive, the price difference between their current and desired property may be diminishing, thus in turn save them a rather substantial amount.

Property investors may be those finding themselves most in a bind as mortgage limitations and rising interest rates create boundaries which may hinder their progress. Analysts advice against hasty decisions as properties may not be the easiest to manage within an investment portfolio. They suggest that investors look at all possible angles when considering a property, such as the number of bathrooms, size and shape of the unit, hidden spaces which may not suit the taste of most buyers etc. All-in-all, investors need to plan for future interest rate hikes, the possible lack of tenancy, financial holding power and governmental policy changes.

Shadows cast on property market

New properties are revving up their engines once more. As the market prepares themselves for these launches, what could the consumer expect?

Resale private properties situated near the sites of new properties to be launched this year may be slightly affected by the prices set by these new kids on the block. And as resale HDB flat prices dip, HDB upgraders may also not have as much as before to spend.   As developers find it harder to attract buyers since some have since redrawn from the investment pool as their finances are restricted by loan limits and mortgage curbs, prices of these new properties may be lower than expected. Properties nearby may then be forced to do the same with their resale units.

Tanglin ViewIn areas with potential for redevelopment and growth, such as Alexandra and Tanglin, competition may be fiercer. For example at Tanglin View condominium, the going rate used to be $1,600 psf a year ago, but now the average selling price stands at $1,400 psf. Similarly for Ascentia Sky apartments, prices have dropped from $1,900 psf to the current $1,500 psf.

But there are still profits to be made for private property sellers. Even though prices may not be as high as a couple of years ago, properties which were purchased 10 to 20 years ago may still find suitable buyers. Property prices today are definitely still much higher than a decade ago. Those who were hoping to rake in a quick profit with properties bought less than five years ago may find themselves having to hold on to their properties for slightly longer to wait out this year’s lull.

For the serious home buyer, it could be the prime time to buy.