Overall price decline in Q1 but buying sentiment remains upbeat

Price-declines across the board for private residential, commercial and resale public housing sectors could mean the bottom of property cycle is close. For the 14th consecutive quarter now, private home prices have fallen, the longest period in the past 13 years.

That said, the general market sentiment has recently picked up as slight tweaks in the property cooling measures and a series of new and exciting property launches have gotten buyers’ blood flowing once more. Private home prices have fallen 0.4 per cent in Q1, slightly lesser than the 0.5 per cent in Q4 of last year.

Paya Lebar Quarter_Lendlease PLQPhoto credit: Lendlease 

Values of private residential properties have fallen 11.6 per cent since its peak in 2013, and this difference has probably revived purchasing interest as most buyers still see the potential of well-located properties in Singapore.

Total private home transactions hit 5,202 units in Q1, the highest in 15 quarters thus far. Property analysts are expecting the market to remain bullish and continue its growth barring any unexpected economic circumstances. City fringe properties are faring particularly, propped up by the strong demand for newly launched projects such as The Clement Canopy, Grandeur Park Residences, Park Place Residences and the Paya Lebar Quarter. Non-landed home prices have in fact risen 0.3 per cent in the city fringes and 0.1 per cent in the suburbs. Core central region property prices fell 0.4 per cent however.

ParkPlaceResidencesLanded home prices fell 1.8 per cent last quarter, likely due to the restrictions placed on these rarer commodities. Foreigners are not allowed to own landed properties. On the resale HDB flat front, prices fell 0.5 per cent, though the decline is expected to reverse itself soon, in response to the positive sentiments from the private property market.

Bullish bid for land may mean higher home prices

A bid $65 million above the expected offer for a land plot is not something to scoff at. It also points to the site as having tremendous potential, are at the very least possesses characteristics which the winning developer is confident will eventually bring in profits.

The Creek in Bukit Timah.

The Creek in Bukit Timah.

Malaysian developer, S P Setia has offered $265 million for a 18,721.4 square metre site on Toh Tuck Road. The location, while tucked away behind Toh Yi Drive, is near enough to the Beauty World MRT station on the Downtown Line, as well as the series of shopping malls and eateries in the vicinity. Property analysts consider the bid bullish though understandable as the prices reflect the potential of the site’s location and size. It is also near the Bukit Timah housing district and schools such as Pei Hwa Presbyterian Primary and Ngee Ann Polytechnic.

The robust bid sets the benchmark for sites in the vicinity. Recent tweaks in the property cooling measures might have had developers in a slight tizzy over the procurement of land plots for future projects. While demand is strong, supply from the Government Land Sales (GLS) programme is slower this year.

For the consumer, the fierce bidding on recent land sites could be indicative of the direction home prices might be taking. The number of successful new launches this year could however account for the spending. The 99-year leasehold plot on Toh Tuck Road is expected to yield approximately 325 new private homes and is the first of 5 residential sites under the GLS confirmed list.

Resale condominium prices slide in February

The latest private resale condominium sales figures seem to slightly challenge industry experts’ expectations of the market bottoming out this year.

Marina One ResidencesFebruary’s resale condominium prices fell 0.3 per cent following a 0.1 per cent in January from December last year, indicating further decline in the private non-landed resale property sector. While the numbers could mean the market has yet to bottom out, the slower rate of decline does point towards a state of stabilisation.

The biggest impact was felt in the central region (made up of districts 1 to 4, 9 and 10, the financial district and Sentosa Cove) where a 1 per cent fall was registered following a hopeful 0.5 per cent rise in January. Even in the small-apartments (units 506 sq ft and below) segment, prices fell 0.6 per cent. Resale units outside of the central region however fared better, coming back up top with a 0.3 per cent rise following a 0.6 per cent fall from December.

Oceanfront Sentosa Cove CondoThough market sentiment has been picking up, the overall economic outlook and rising interest rates may not be enough to completely turn the market on its head. Recent tweaks in the property cooling measures may give the industry a little push towards to the direction of recovery, but property analysts are still expecting a 3 to 4 per cent price-decline by end of 2017.

Positive growth for new private homes

There is hope for the private property market yet, as budding signs of recovery peeked through not only in the resale property segment but also blossomed a little in the new private homes sector.SeasideResidencesFor the third consecutive month now, the new private homes sector has shown positive growth with 977 units sold in February, more than double the 382 sold in January, and despite there having only been one new launch last month. The Clement Canopy which was launched in February, did however put 250 new units into the market, selling 207 at a median price of $1,343 psf. A total of 550 units were released last month, compared to the 108 in January. Part of muted response the month prior to last could however be put to the Chinese New Year festive season which fell in late January.

Demand for executive condominiums (ECs) have also increased with 329 units sold, up 78.8 precent from January. The best-selling EC last month was Sol Acres with 82 units sold at the average price of $782 psf. Industry analysts are already seeing a more positive market sentiment this year, an overall sense of confidence from developers and buyers. With the recent relaxation of the Seller Stamp Duty (SSD) rules and new upcoming launches such as Seaside Residences, and as confidence ignites confidence, the hope is for the momentum to move the industry along as the year proceeds.

 

Winds of change in local property market

A decade or so ago, owning a second or third property might be the fastest way to secure your retirement funds or to even accumulate a tidy little kitty. Investment properties were considered a surefire way of earning additional income, but in the climate of today, property owners and investors have much more factors to consider and competition to battle against.

SunshinePlazaResidencesWith the rental market weakening, property agents are finding that it takes twice as long and also many more viewings before a property is successfully tenanted. And even then, for much less than before. Some property owners have had to reduce rents by almost half. Leaving the units empty are simply not an option for some investors as the rents go towards the mortgage or mortgages of their properties. It is after all better to have less help than none at all.

SerangoonHDBflatFor new investors looking to enter the market, the environment is a lot tougher than before. Considerations such as whether there is a large pool of HDB flats available for rental nearby, the long-term potential of the property, competition from other new launches or even within the same property, whether the local and global economy will affect businesses and commercial hubs nearby thus reducing the pool of foreign tenants, and so forth.

Before the market makes a complete recovery, a possibly lengthy period of stabilisation will ensue, despite the governments having made some allowances in the are of the property cooling curbs.

February’s dip in resale flat prices points to market stabilisation

February was a little slow for the resale HDB flat market as prices fell by 0.3% and transactions by 8.5%. This was following a promising start to the year. But industry experts are not too quick to dismiss the possibilities for the sector as the year moves ahead.

ClementiHDBflatThe slight dip last month was most likely due to the post Chinese New year lull which is a common occurence. Rather than being indicative of a falling resale flat market, the decline simply points at a stabilizing  market enironment. Though resale flat buyers paid about $2,000 less than market value across  the board, some HDB estates continued to clock more than 10 transactions and at prices above market value

In Bedok, some buyers paid $10,000 and more for their resale flats while in Clementi, some transactions closed at $4,000 above market value. That comes as no surprise as these are mature HDB estates where demand is high. There were also some recent private property launches in the vicinity, for example the Clement Canopy, which may have had some residual effect on the resale HDB  flat market.

Aerial view of HDB flats in Ang Mo Kio

Aerial view of HDB flats in Ang Mo Kio

There were however a couple of HDB towns which did not post as promising figures despite being popular locations for flat seekers. In Queenstown, the lowest below-market prices were clocked at $12,500,  followed by $10,000 in Ang Mo Kio. Prices of 3-room flats rose by 0.2% while executive flat prices fell by 1.7%. Overall, prices of resale flats in mature estates rose by 1.1%.

 

Property cooling curbs working in China

Many Asian-pacific countries have placed property cooling curbs on their housing and real estate industry as prices climbed rapidly within the past half a decade. Cities such as Hong Kong, Tokyo, Sydney, Melbourne, Beijing, Shanghai and Singapore are facing not only space and housing issues but also rapid inflation and increasing property prices.

Aerial view of suburban neighborhood, Wuhan, Hubei, China on 11th March 2016. (Photo by Jie Zhao/Corbis via Getty Images)

Aerial view of suburban neighborhood, Wuhan, Hubei, China on 11th March 2016. (Photo by Jie Zhao/Corbis via Getty Images)

The Chinese government has been placing curbs upon curbs on their real estate industry, with perhaps conflicting sentiments as the sector accounts for a large part of the country’s economic growth. But housing prices have been skyrocketing at an alarming rate and for the first time in the past few years, the measures seem to be taking effect.

In Shenzhen, currently the country’s hottest market for new homes, property prices have fallen 0.5 per cent after consecutive dips over the past 4 months. In Shanghai, prices fell by 0.1 per cent, also following a 3-consecutive-month decline. While prices remained unchanged in Beijing, the stabilisation is a start to possible price deflation. News of a possible reduction of land release by more than 3 times that released in 2016 could further reign in price increase.

Park yoho venezia Hong Kong propertyThe price-increase in January was reflected in the smallest number of cities in a year. Home prices have fallen in 20 cities while 45 out of 70 cities saw a gain in prices, down from 46 in December last year. Part of the reason could be the curbs placed not only on buyers but also on banks. Some bank branches in major Chinese cities such as Beijing, Guangzhou and Chongqing have recently increased mortgage rates for first-time buyers. China’s central bank is likely to have even stricter restrictions on credit and housing loans put in place, in particular targeting developers and households, in order to prevent a property bubble.

 

Property cooling measures to stay put

National Development Ministry Lawrence Wong has recently mentioned that the curbs placed on the property industry are here to stay as demand for property not declined.

HillsTwoOneThough property prices may have fallen, the dip has been gradual and slow. Coupled with the fertile bedrock of low interest rate and affordable quantum pricing of residential properties, the authorities may be afraid of a sudden and unmanageable spike in demand from investors should the curbs be lifted anytime soon.

And their fears may not be entirely unfounded as the market has been showing budding signs of recovery in the past couple of months. Demand, in particular for smaller units in well-located properties, from local and foreign investors alike, have been on the rise while prices are beginning to hold steady. Pent-up demand from previous quarters of muted activity have meant a rise in sales volume.

SignatureECYishunBigger Central Provident Fund housing grants will be included in the upcoming Budget talks, which may sustain resale HDB flat volume as more buyers qualify for subsidies. Resale volume for the public housing sector has already risen 7.8 per cent last year. As demand for resale flat increases, so will pricing and sales volume. A stabilising resale flat market could also mean an increase in the number of HDB upgraders who are buying off the private property market, in turn boosting sales in the private housing sector as well.