Marina Bay home sales show positive signs

Private home sales in the suburbs have been showing sign of strain as the increasing number of new completed condominium units compete for the increasingly limited number of buyers, which could be further limited due to loan limits, a downtown project seemed to be bucking the trend and pulling in sales in the luxury apartment sector.

Marina One Residences in the Marina Bay precinct secured half of the total number of home sales in October alone. But that could also be due to the fact that it was the only new launch in the month. 334 units of the 1,042-unit condominium were sold at the average selling price of $2,228 psf. However, sales were still lagging behind its initial preview launch when earlybird discounts were given, and sale prices hovered between $1,960 and $3,100 psf.

Marina ONe iprop watermarkDevelopers are finding it harder to attract the buying crowd and have found they are now more sensitive to pricing as it became more difficult to secure bank loans. Though the price fight is not evident yet, as buyers are still willing to fork out a considerable amount for properties in good locations, it may only be a matter of time before the cracks show. Especially since 2015 and 2016 will see an even bigger influx of completed private homes in the market.

For now, developers are focusing their efforts on selling remaining units at previously launched projects such as DUO Residences, Coco Palms and Lakeville condominium, thus holding back on new launches. Will this drive consumers towards other property types such as executive condominiums (ECs) and resale HDB flats or will they continue to seek better deals with the existing private property market?

New private condos threaten Rental Market

As more new private condominiums in the suburbs attain their occupation-ready status, the number of apartments available for rental has increased significantly and fierce competition has brought rental prices down. Though concentrated mainly in the suburbs, where most of the new condominiums are situated, the decline has dragged the rental market down by 1.5 per cent.

FOresta Mount FaberAnd as most of these new condominiums are in close proximity to HDB flats, the HDB rental market has also been affected somewhat as tenants now realised they may be able to afford a private condo after all and instead choose this option over HDB flats. And as this pressure is exerted on the HDB market, some HDB flat owners may consider jumping over to the private property market and the HDB resale flat sector may see some shifting as a result of the spillover effect.

From January to September of this year, there were a total of 6,621 condominium units entering the market in the suburbs alone. This has pushed rental prices down 5.3 per cent and a 1.3 drop in the number of rental deals signed in September alone. However, a year-on-year comparison with 2013 showed an increase of 11.8 per cent in terms of the number of units leased. This could signify a shift of tenants leasing private properties as opposed to HDB flats as the price gap narrows.

Eight RiversuitesMoving forward, 2015 and 2016 may see a vacancy rate of 10 per cent and more if immigration policies remain the same and if rental prices become even more competitive with up to 20,000 new units reaching completion annually. Is this a sign that the cooling measures have worked? Or is it merely a sign that investing in residential property may have to take a different slant, to focus on long-term profits through property appreciation rather than on short-term rental profits? How does that then change the criteria for property selection?

Housing supply to slow down in 2015

The authorities have announced that public housing supply and land sales will slow down come 2015 as the market has showed signs of cooling and stablising after the many rounds of property cooling measures rolled out over the past year or two.

West Terra HDB Bukit BatokPhoto Credit: HDB

The Minister for National Development, Mr Khaw Boon Wan, has commented in a blog post that the supply of new HDB flats will slow by 25 per cent next year. There will only be 4 launches next year, compared to the usual 6 per year. Each launch usually puts out up to 4,000 new Build-to-order (BTO) flats. The rate of successful BTO flat applications has been on the rise as reflected in the few recent launches. More married couples achieve success in getting their new flats, and the authorities have been allowances for couples either opting to apply for a flat with their parents, or for one near their parents. In addition, parents who opt to apply for a flat in a non-mature estate to be near their married children, will also receive priority.

The slight shift in policies may ensure that families remain close-knit and are able to receive help when needed. It may also help with a shift in aging mature estates and introduce a more age-balanced population per HDB estate. Mr Khaw Boon Wan also hopes that the move will help newlyweds plan for a family more efficiently and in turn increase Singapore’s population with a higher birth rate.

In the private property sector, the number of land plots being sold for executive condominiums and private apartments has already been reduced this year, though the industry might see a further reduction come 2015. But will this mean a decline in the building, construction and property industries? Or has the previous land sales and launches been sufficient to keep the industry going for the next few years? Which part of the cycle is the property sector in at the moment and are we set for a boom or lull in the next year?

Rise in HDB Resale flat sales

As HDB resale flat prices continue to decline for the eighth month in September, buyers are taking the opportunity to suss out the best deals. The number of sales transactions for HDB resale flats rose to the highest since April this year. A total of 1, 469 flats were sold in September, up 10.7 per cent from August and almost 20 per cent from the same month last year.

St George Towers

Photo credit: HDB

It comes as no surprise that the larger flats saw the largest fall in prices. Five-room HDB flat prices fell 1.6 per cent, followed by three- and four-room flats dipping 0.2 per cent and ECs (executive condominiums) 0.1 per cent. The recent numbers also revealed the fact that buyers are willing to accept a smaller price difference between the selling price and the average market value when previously, they had expected larger margins before committing to a deal.

Some of the factors contributing to the drop in HDB flat prices could be:

The first and last two factors in the list may have more lasting effects that expected. And it may change the value and purpose of HDB flats. But would the change be all that bad? Or will it help refocus investments into the private property market?

EC options widen with new launches

Property market activity may be back on track as new EC launches inject some much-needed cheer. Bellewoods executive condominium in Woodlands just opened for applications last weekend. And this is after a year-long hiatus with the last major EC launch of Skypark Residences in Sembawang last September.

Bellewoods ECUnits at the Bellwoods were going at an average of $750 to $820 psf and industry experts are expecting prices to go up as construction and land costs increase. A change in policy earlier this year, with the authorities placing a 15-month time frame between the time a developer secures a land plot and the time they can begin selling. At the Lake Life executive condominium in Yuan Ching road, prices are expected to hover between $880 to $980psf. There is also worry that buyers who had originally intended to purchase an EC unit may by the end of 15 months, have received a pay raise and thus moving above the income ceiling which disqualifies him from being eligible to apply for one.

But despite these obstacles, developers remain ositive about the market response as pent-up demand may bring the crowd back despite the seemingly quiet market of recent months. There will also be another round of EC launches planned for the second quarter of 2015. Although there may be more options available, an oversupply seems unlikely as the government has reduced the supply of EC land this year. For the HDB upgrader, ECs now seems like it is truly fulfilling what it set out to do, to fill the gap between public and private housing.

Do upgraded HDB flats bring higher resale prices?

Given an older resale HDB flat in a prime location and a recently upgraded one in a less popular HDB estate, which would you choose?

HDB recently announced that they will be speeding up the Home Improvement Programme, the Neighbourhood Renewal Programme and the Selective Lift Replacement Programme. Some sellers and property agents are putting a higher price tag on flats which have be selected for such programmes. But with caveats.

HDB MUPPhoto credit: HDB

Only HDB flats whose owners have already paid for the upgrading may have an edge in the resale market. As the upgrading is usually only billed and paid for after the work is completed, some buyers may find themselves having to foot the bill for the flat or estate’s upgrading work if the seller has not already done so. Though it may seem like a significant difference, property agents are saying that it will not affect resale prices on the whole. The most it will do is slow down the price decline.

In fact, some buyers may prefer not to purchase flats which have yet been upgraded as it may bring inconveniences such as dust and noise for a significant period of time. Only flats which have been completely upgraded can command a higher selling price. But buyers who are thinking ahead may consider these older flats for the potential they hold once upgrading has been completed. With elderly-friendly facilities, newer amenities, perhaps even more room, the future could be more promising than you think.

Private property out of reach for HDB Upgraders?

If home prices are falling, most would think that the upgrade from public housing or HDB flats to the private home market should be getting easier. But it seems the opposite is true.

Prices of HDB flats and a private condominium apartment are perhaps softening at around the same rate, or that of HDB flats possibly even quicker. This creates a widening price gap between resale HDB flats and private condominiums, and HDB sellers can no longer depend on the sales proceeds of their HDB flats to balance out the price of their new private condominium.

BellewoodsECPhoto Credit: Bellewoodsec.com

Does this also mean that more HDB flat owners will now be forced to stay put and thus decrease the number of HDB flats available in the resale market? What about those who may have already purchase a private property and have a limited time period within which to sell their HDB flats? WIll they be pushed to sell at lower prices hence suffering the growing amount they need to top up?

Property experts are expecting ECs or executive condominiums to be the bridging properties between these two markets. As a hybrid between public and private housing, buyers qualify for public housing subsidies but after a 10-year period, can sell their units as private properties.  There is also the question of home sizes, will HDB upgraders be willing to settle for lesser space and a higher psf price to make the leap from HDB to private home?

New private homes – Sales lacklustre

The hungry ghost month and the lack of new property launches during that time have affected new home sales in August. Sales were down 15% and only 432 units were sold although 351 units in previously-launched developments were put up for sale.

The PanoramaMost of the sales came from suburban properties, especially from newer launches such as The Panorama in Ang Mo Kio and Coco Palms in Pasir Ris. Median selling prices at the former was $1,249 psf and $1,046 psf at the latter. Whilst Eight Riversuites launched around the same time as Coco Palms in May 2012, the Whampoa East property fared better with average prices at $1, 345 psf. Positive sales at these few developments could be due to the lower prices at its re-launch. The Panorama for example saw sales picking up once median prices were lowered during its relaunch in May. It was official launched in January this year.

But in the upcoming months, home sales may see a rebound as new launches in the pipeline bring a surge of buying interest. New launches include Marina One Residences, Highline Residences, Seventy St Patrick’s., and a few executive condominium developments such as Bellewoods and Bellewaters EC.

Property analysts are however cautious about the amount of increase in home sales, and the overall sales figures for 2014. The TDSR (total debt servicing ratio) framework and other property cooling measures such as stamp duties for additional properties, may keep the numbers suppressed. Some developers could also be holding their launches for next year in wait of any policy or market shifts.