68% drop in private home sales

In comparison to 2013′s Q1 home sales figures, the chasm is deep. And so are moods in the real estate market.

Private home sales have been on the decline for some time now. And recent figures are not exactly uplifting. Buyer sentiments are pessimistic, as the loan curbs implemented last year takes its toll on buyers and sellers alike.

Hillford Retirement Home
It has become much harder for buyers to secure loans, with the Money Authority of Singapore’s Total Debt Servicing Ratio framework in place. Buyers can no longer loan as much as they would like, which may place them just out of reach of their target property. The lack of new property launches this quarter has also dampened the mood somewhat. And property developers have been slow in introducing new units into the market as they are now accutely aware of a softer market.

Some properties nevertheless have beat the odds and continued to enjoy brisk sales. Topping the list is the 281-unit The Hillford in Jalan Jurong Kechil. Since its launch in January, units have been completely sold. Next up are a couple of neighbouring properties in Sengkang – Rivertrees Residences and Riverbank @ Fernvale. Most of the units went for an average of $1,000 to $1, 100 psf. Industry analysts are wondering if this could signify that buying power for suburban private properties will now hover around this ceiling.

Rivertrees condoThe rest of the year may see a tussle of prices between new and resale properties. As developers cut prices to make sales, resale home sellers may be forced to face the competition head on.

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.

Fixed rates home loans favored

As signs from the US point to a cutback on stimulus spending, borrowers are wary about the possible corresponding increase in interest rates. In turn, they are favoring banks which offer fixed rates home loans. Those who are on a floating rate home loan package may be burnt by sudden rise and unpredicted fluctuations in interest rates.

In terms of investment, property in Singapore is attractive for its relative safety.

In terms of investment, property in Singapore is attractive for its relative safety. But will interest rates change soon? How will that affect the market?

DBS bank for example, saw a rise of borrowers opting for the fixed rate home loans from 10 to 30 per cent. And the smart move is to do it now, when the interest rates are low. Fixed rate home loans often offer a low initial interest rate that is fixed for the first two to five years, depending on the plan and the bank. Home buyers are happier accepting these packages as they feel like they have better control of their finances and are better armed in planning their future.

Floating rate packages are still around however, and there are those who lean towards these precisely because of the flexibility it provides. ANZ for example, offers a “3-month combo package” that takes its 1.3 per cent rate from an average of the Sibor and Swap Offer Rate (SOR), which still gives a lower percentage than its fixed rate package of 1.65 per cent.

Tembusu1As 2013 drew to a close on lower resale and private home sales transactions, will this change the packages bank offer as the number of borrowers may also be on a decrease?

Resale home prices falling

As the supply of new homes continue to serve up options for property buyers, resale homes are somewhat relegated to the back seat as they compete to shine in the property market. The recent Singapore Residential Price Index (SRPI) numbers show that overall non-landed private home prices dropped by 2.1 per cent in October.

Industry experts are seeing an increasingly experienced pool of home buyers and investors who are much more price-sensitive than before. With so many options to compare between, buyers are often keen on newer establishments and tend to hold off looking for a resale unit, preferring instead to look out for new launches in the same area.

Sky Habitat condominium in Bishan.

Sky Habitat condominium in Bishan.

And with property developers offering competitive selling prices, new units are the bees knees especially for young families, professional couples and those looking for a good investment opportunity.  Sky Vue and Sky Habitat in Bishan are examples of recent new property launches which were offering discounted units and affordable and highly attractive prices. And should they be looking at similar resale units nearby, they are expecting them to be priced at least 20 per cent lower.

One other possible reason for the decline could be a weakening rental market. As immigration policies continue to tighten, and developers try all means to increase sales of their newer launches, resale homes might have to be satisfied being the wallflower for now.

Waterfront Singapore

URA Master Plan 2013As an island country, waterfront living seems like it should be a buzz word. And it certainly will be, come as early as 2023. A new blueprint, the Draft Master Plan 2013, for nation planning has been put in place, with promises of more and better homes, and a more sustainable green and ecological living environment. National Development Minister, Mr Khaw Boon Wan, has said in his blog post that “the underlying philosophy of making Singapore an endearing home and a clean, green, livable city remains unchanged”.

About half a million new homes have been planned for new housing areas. These include Bidadari, Tampines North and Punggol Matilda. Other older HDB estates will also see the injection of some new blood, in Sembawang, Yishun, Hougang and Choa Chu Kang. A strong focal point of the Master Plan is the Greater Southern Waterfront, a 1,000 hectare development along the south coastline.

Punggol Matilda HDB1And as recent property news have signaled, the Kampong Bugis and Marina South areas will be a hotbed for private residential home activity, with the possible yield of 13, 000 new homes. Out of the 13,000, 9,000 private properties are designated for the Marina South area, which will only be developed once the Thomson Line is completed in 2017 or 2018. And cyclists may have something to cheer for, with URA setting the wheels in place to make Singapore more cyclist-friendly.

As the nation becomes more congested, it now becomes less practical to travel too far from home for work, and the constant development and setting up of regional commercial centres will make the most sense. The Woodlands Regional Centre and North Coast Innovation Corridor are just two of the many scattered around the country.  There were also talks about a new commercial centre in Punggol, and new industrial sites at the Seletar Aerospace Park, and also in Defu and an area called 2 West near the Nanyang Technological University. Since properties near commercial and financial hubs usually fetch the highest prices,  could this also cause property prices to rise overall?

204, 500 properties to be completed by 2016

At 6,508 more units than the 197,566 units projected earlier this year, there will be 204,500 executive condominium and private apartment units built by 2016, according to data released by the Urban Redevelopment Authority (URA).

Completed condominium units are increasing in number as developers pour fresh new stock into the market mix. Despite having held back on some major launches as the year-end lull draws close, the number of properties available in the market continues to rise. Industry experts are however expecting developers to lower their launch prices in order to boost sales.

The CreekFrom the looks of the recent Inflora condominium launch, selling prices, of new properties at least, may indeed be on the slippery slope. But that perhaps might be good news for those looking to invest. Properties in the prime city centre spots are dropping by as much as 0.5 per cent whereas city fringe and suburban areas enjoy continued growth, however slight.

Over the next 3 years, 4, 884 more private homes will be built as National Development Minister, Mr. Khaw Boon Wan considers it “making good progress in our ramp-up of the home-building programme”. The number of HDB flats to be built will remain the same as projected. 1, 355 executive condominiums will be ready within the same time frame. What does this heightened supply mean for Singapore’s housing market and will the population growth be a reflection of a cause of this increased property growth?

Some Private home launches may spill over to 2014

Those who wait may have good things coming to them. New property launches will be back in full force starting end October as developers release units following pent-up supply. A total of 18, 157 units are expected to be 2013′s tally. That is still much lesser that the 21, 657 units launched in 2012.

Be prepared for an overwhelming force of 17 launches and 4, 800 units. The sheer number of launches may mean a gradual roll-out, but it also means there is not much time left in 2013 (about six weeks before the December festive season brings business to a year-end close) for developers to grab the property-buying crowd’s attention.

The Creek1Hence, some of these launches may be forced to launch in 2014 instead. But if you’re looking to buy now, some recent launches include Nine Residences, The Venue Residences and The Inflora at Flora Drive. The massive development, DUO Residences in Bugis looks set to go on sale in November at $2, 000 psf. Alex Residences at Alexandra View will also be going to sale soon, at a projected price of $1, 500 to $1, 700 psf and at The Creek in Bukit Timah, units are expected to go for around the same.

With an early Chinese New Year in 2014, it might just be a matter of skilled timing for buyers and sellers alike.

Smaller homes take the cake once more

Shoebox apartments are back on the popularity charts. Chalk it up to the new home loan restrictions.

Instead of entirely deterring home buyers, the new loan curbs have instead steered buyers towards cheaper home options, in order to fit the smaller loans made available. And these cheaper options often mean the smaller homes, such as shoebox units or one-bedders. Smaller homes mean lower total quantum costs in accordance to the total debt servicing ratio (TDSR) framework put out by the Monetary Authority of Singapore.

eCO condominium in Bedok. Its developer, Far East Organization, has offered a 2 per cent furniture voucher to take the edge off MAS' latest home loan ruling.

eCO condominium in Bedok.

The lack of new units could also have contributed to the herding of sales towards the secondary market. 481 private home units were sold in July compared to the 1,806 in June. But that’s not to say demand has dropped 73 per cent. Only 557 units were launched in July, thus the 481 sold would mean a 86 per cent success rate.

Overall resale prices have risen by 0.2 per cent in July, according to the Singapore Residential Price Index (SRPI). In June, there was a 0.4 per cent drop. But with the other recent shift in housing policy for PRs, the further rise in private property prices may be quick and sharp. How will the resale HDB flat market fare in comparison?