The private home gentle wave

It’s an up and down ride for the private non-landed property market for more than a year now. Across the board, non-landed resale home prices dropped 6.2 per cent last year. Prices of homes in the central districts dipped an average of 7 per cent last year, though there were good months when some segments managed to bounce back slightly before falling again. That could mean that things were mainly level though there are outliers.

Duchess ResidencesResale private apartment prices fell 0.2 per cent last month, with a 3.9 per cent fall compared to the same month last year. But some city fringe properties bounced back with an average price rise of 0.4 per cent. Part of the yoyo-ing in prices could be due to the Chinese New Year period in February and buyers were just coming back into the fray in March.

The second quarter of this year would be a crucial point in almost determining how the rest of the year will flow, at least up to just before the Hungry Ghost month. Though the ride has been more a gentle wave of price fluctuations rather than a roller coaster ride, property experts are however not expecting a drastic change in prices unless there are major policy changes or a major interest rates hike.

The year could be a relatively quiet one with bright sparks and dull moments along the way, but the basics of good location and lowered total quantum prices will still move units.

Competitive pricing will help Property developer move units quicker

Home mortgage interest rates look set to rise sometime this year, and while new properties continue to come into the market, buyers will be spoiled for choice with executive condominiums, resale private apartments and new condominium units all competing for their attention.

Trilive KovanPricing might then be the differentiating factor in the current property market which is still finding its footing. In January, Symphony Suites in Yishun proved to be one of the best sellers in the non-landed private property market. Prices averaged at $1,010 psf, which was not considered to be on the higher end of the price spectrum. Most suburban properties fared better, making up 62 per cent of the total sales numbers last month. City fringe properties followed behind with 28 per cent and city centre homes took up only 10 per cent.

The TDSR (total debt servicing ratio) continues to be the main obstacle for buyers as the loan amounts they are now able to receive have been largely reduced. However, developers are unlikely to make drastic price reductions as land prices have been high for the past two years.

Contrary to concerns that new properties may outshine previous older launches and resale properties, some older developments have fared well in the last month. Trilive in Kovan sold 22 units at a $1,562 psf median price while 20 units in Jurong West’s Lakeville also exchanged hands at the average selling price of $1, 378 psf.

While the influx of new units and restrictive loan limits may be the way things go for the year ahead, the demand for residential properties may not necessarily have disappeared altogether. It may simply be a matter of buyers taking longer to weigh their options.

Developers offer more direct discounts

If you’re looking for a good property deal, you could be hitting the market at the right time as developers are now preferring to offer direct discounts instead of indirect ones such as renovation and furniture vouchers and the likes. And the buyers seem to prefer that too.

In a bid to attract buyers back into the property market, developers have realised that with the prevailing property cooling measures, especially the tighter loan limits, it’s the final number that counts. Defraying the total costs through offers of furniture and renovation may no longer seem as attractive to buyers who are now keeping a keen eye on the total quantum prices.

HomeReno1Home buyers are more discerning and aware of how these indirect discounts affect the final sale price and more importantly, the total loan quantum they are able to receive from the banks. Though the rule which states that all discounts, even indirect ones such as renovation discounts and furniture vouchers, have to be declared when applying for a loan were in place since 2002, the banks have only recently been stricter about their checks. What this means for the buyer could be a lesser loan quantum as the amount give in indirect discounts are taken off from the final sale price of the unit, before consideration is given on how much the bank is able to loan.

Now, what developers are doing instead of offering renovation and furniture discounts, are to refurbish unsold units and selling them at a lower price than if the buyer were to purchase the furnishings themselves. Thus, the buyer gets a fully renovated unit at a slightly higher price than an unfurnished one, but at a lower price than if they were to renovate and furnish it themselves. This may be more cost-effective for buyers who are looking to rent out the unit as it saves them money and time.

City fringe homes find their footing

Filling in the gap between luxury and mass-market homes are the city fringe properties. But sitting in this position means being more exposed to market forces such as a lull in the luxury property market, which may be a good thing as buyers may be looking at cheaper options. But a wider and possibly cheaper pool of options pop up in the suburbs in the form of mass-market suburban homes, this might be the first sector to suffer a backlash.

Sky Habitat condominium in Bishan.

Sky Habitat condominium in Bishan.

There has been a recent drop in city fringe home prices as developers are offering discounts to help boost sales. As the supply of these home increase, about 2,411 new units were launched in 2014, so will the urgency to move units. City fringe homes registered a 5.3 per cent price drop, as compared to 4.3 per cent in the luxury homes market and 2.2 per cent in suburban private homes.

Projects where prices were lowered include The Panorama in Ang Mo Kio, Sky Habitat in Bishan and D’Leedon on Farrer road. Though luxury homes hogged the headlines last year with their decline in sales volume, property analysts are confident that the price decline will be minimal as most owners of city-centre homes will have the holding power to hang on to their properties.

Home prices expected to decline further in 2015

This year, the rate of decline for private home prices is expected to exceed that of 2014. Last year’s drop was estimated at 4 per cent whereas this year, industry analysts project an 8 per cent drop. This new estimate for the private property sector will put it on par with resale HDB flats. In 2014, the public housing market reflected a 6 per cent drop in prices.

Some market factors from last year are here to stay:
1) Tightened credit market
2) Stricter immigration policies
3) Weakening demand
4) Increasing supply of new homes
5) Higher stamp duties

The Luxurie - near Sengkang MRT/LRT Stations.

The Luxurie – near Sengkang MRT/LRT Stations.

And while interest rates were at a low at a point in time last year, they are expected to rise this year, which makes for an even less favourable environment for a thriving buy-and-sell of residential properties in particular.

This may put a fair bit of pressure on home sellers, who may find themselves having to lower prices in order to make a sale. With developers competing for the same buyers with offers of discounts, rebates and other enticing options, resale private properties might struggle to stand out.

Landlords may also find that it’s a tenants market as an onslaught of homes become ready for occupation this year. The most recent residential projects to come into the market this year include the 622-unit The Luxurie and 590-unit The Riversound Residences in Sengkang.

Coupled with a number of new launches planned for this year, and fewer foreign buyers taking the bite, the only properties which may remain popular are mass-market homes in locations close to MRT stations, schools and shopping malls.

2015 – Outlook for Asia’s property market?

2015 is nearly here, and there has been talk that come next year, the property scene in Asia might experience some changes.  Investment interest in Asia property looks to be on the rise as portfolios which have yet to establish a presence in this continent consider it time to do just that.

ScottsSkyParkIt is probable that some governments might ease up on property cooling measures, thus making it easier for foreign investors. China-based investors have already been buying properties within and out of Asia. And as sellers lower their expectations and prices, they look set to continue doing so, if not more voraciously.

In Singapore alone, the outlook for office space looks extremely positive as supply remains low. With many more developmental and redevelopment opportunities arising within the next few years, the demand for office space is likely to rise, thus supporting commercial property prices and rents.

On the residential front, property prices are expected to see a drop of up to 10 per cent as the full impact of the large and fast increase of new properties finally hit the market. However, the luxury home market may see an influx of new investment money, especially properties will good long-term value.

More transparency with Property prices

The Urban Redevelopment Authority (URA) has recently hinted that even clearer property transaction price trends will be provided publicly come 2015. Within the first half of the year, property players, the buying public, and even policymakers will be able to get their hands on prices of individual units in developer-sold properties.
URA 2

Photo credit: Urban Redevelopment Authority (URA).

This may level the playing field as currently, even though median prices of units in each residential project is shown on the URA website, only when units have been purchased, and only those with caveats lodged with the URA will have their prices disclosed.

Part of the reason for the change could be the fact that more developers have been offering discounts and rebates of sorts on new units, ever since the cooling measures kicked in, which meant affordability have decreased and total quantum value has now become the new unit of measurement. As these discounts are often not registered in the caveats, the prices disclosed may not paint the entire picture.
iProperty price transaction page

Source: iProperty.com.sg

Buyers may be able to now better negotiate their deals instead of relying on developers’ statistics. How will this impact the market and while transparency is a mature way of moving forward, will developers be able to withstand the continued price decline? Or perhaps the question would be, how long more before prices hit the bottom of the curve and begin its upward climb?

Good class bungalows still in demand

The private property, and perhaps more so landed property sector, has been the doldrums for most of the year. But the niche market for Good Class Bungalows (GCBs) has been thriving.

e704119a11f840b8865a9fb67a23b14eA total of 26 Good Class Bungalows were sold this year, with the total sales figure coming up to a whooping $587.75 million. Though it is nothing compared to the 133 sold for $2.38 billion at the height of the industry in 2010, it is comparable to the 29 sold last year for $682 million. But the average sf prices for GCBs have risen this year to $1,454 sf as compared to last year’s $1,388 psf. The Belmont Park, Chatsworth Park, Chestnut Avenue, Dalvey Estate, Raffles Park and White House Park areas received the most attention in 2014.

There are only 2,700 GCBs over 39 designated areas in Singapore, though the number may have increased slightly in the 1980s when GCB areas were gazetted. This resulted in some sites entering the good class bungalow market even though they are smaller than the usual 1,400 sq m size.

But property experts have noticed that the drop in transactions for these high-end properties were largely due to the  MAS-imposed TDSR (total debt servicing ratio) framework and ABSD (additional buyers’ stamp duty). Most buyers of these properties are likely to already have existing properties and the increased stamp duties will total up to a rather substantial sum.

They are expecting this market to fare similarly next year as the property cooling measures remain. But with buyers’ consideration possibly turning into long term value appreciation, the Good Class Bungalow sector will certainly stand its own.