More aiming for two-bedroom apartments

This is on the back of the recent property cooling measures and declining rental demand. Most investors have previously gone for one-bedders for the affordability and rental potential. But as the landscape changes under the bent of most recent adjustments in the real estate industry, market demand is now for two-bedders instead. Buyers are opting for this property type as they provide a better option should they wish to live in them instead of merely relying on their property purchase for rental purposes. Borrowing restrictions could also have played a big part in the change in the direction demand blows.

Urban Vista at Tanah Merah.

Urban Vista at Tanah Merah.

Property developers have also began reducing the number of one-bedroom units within a private residential development. For most suburban projects, two and three-bedders could be the most popular and numbered units. In prime units however, due to space restrictions and the high psf prices, the take-up rate of one-bedders are still high.

In a number of private properties launched only this year, such as Urban Vista, D’Nest, The Trilinq and Novena Regency, two-bedroom apartments were selling faster than one-bedders. Property buyers are apparently now purchase homes rather than properties. Meaning owner-occupation takes priority over investment yields. Two-bedders also have a lower psf prices with a more affordable quantum. In the long run, two-bedders are deemed more prudent investments against a weaker rental market as compared to one-bedders which may be more susceptible to market downswings.

CosmoloftThe dip in interest for shoebox units also shows in the slowed sales of units at the newly launched 56-unit freehold condominium in Balestier, Cosmo Loft. According to Urban Redevelopment Authority’s data, only 4 units were sold since its launch in June this year. In the previous couple of years, shoebox units have been all the rage, with one out of seven units sold in 2011 being a shoebox flat. Some of the most popular developments with shoebox units were Spottiswoode 18, Skysuites@Anson and The Interweave.

Does this shift in dynamics an early indication of the possible turning point of the Singapore property market? Is the bubble, if it could be called one, about to burst?

Migrating pool of property investors?

Last weekend’s new property curbs were targeted at property investors more than home buyers, according to the Ministry of National Development. So how exactly will property investors react against these new measures?

MAS

What the Monetary Authority of Singapore (MAS) has implemented is a Total Debt Servicing Ratio (TDSR) framework which not only applies to property loans but also all individuals. According to Barclays economist, Joan Chew, it is more a means of ensuring financial stability than a property cooling measure per se. Banks now also have to do more to ensure they have full knowledge of their clients’ borrowing capacity and any other financial commitments.

But there are still buyers with money to spend, possibly even an increasing number. Where will they head to then? Since this measure will be more likely to impact those looking to purchase their second or subsequent home and many are expected to opt for cheaper, smaller options.

Here are what the property analysts anticipating:

  • Sharper rise in property prices in
  • Property investors turning instead to foreign properties
  • Increased preference for smaller homes

Melbourne Australia propertyOverseas properties such as those in Malaysia, the United Kingdom, Australia, New Zealand and even New York have been in the radar of property investors and perhaps with this move, more will be heading for greener investment pastures.

 

Resale home prices – Blowing hot and cold

Barely three months after January’s cooling measure, property prices are soaring once again, perhaps even more than before. In March, prices of resale homes rose 1.1 per cent, but April brought it up to second gear with a 1.9 per cent rise, according to the latest Singapore Residential Price Index (SRPI) numbers.

Aspen Heights condominium in River Valley.

Aspen Heights condominium in River Valley.

As per the current trend, suburban homes continue to make a more resounding impact on the market, with prime district properties growing at a slower pace. Growth is evident, nevertheless. It seems unlikely that property prices are likely to cool, at least not based on the latest round of property cooling measures which only saw an increase in stamp duty. This is barely enough to deter determined property buyers and investors any longer. The effect of January’s cooling measures on cooling the market is yet unclear, but from the numbers, it certainly seems like the impact is shallow and not very long-lasting.

R’ST Research director Ong Kah Seng thinks resale properties may do better than new ones because of its immediate value. Since there is no wait for building completion, rental income could be immediate and since they come with a lower additional buyers’ stamp duty, more buyers looking to invest in a second property will be inclined to purchase a resale property instead of one from a newly launched residential project.

New property Herencia on Kim Yan Road.

New property Herencia on Kim Yan Road.

In February this year, the number and prices of homes sold dipped for a month, partly also because of the Chinese New Year lull. But already in March, a rise is seen and it continues well into the second quarter of the year. The SRPI showed an increase in home prices particularly in the Outside Central Region (OCR). Properties in these areas jumped 2.4 per cent. Another notable increase is in the prices of smaller units. Units of 506 sq ft and less climbed 1.8 per cent in April. Although the seventh round of property curbs implemented in January were described as one of the most comprehensive since the series of cooling measures started in 2009, there is apparently a proportionately decreasing effect with the increasing number of cooling measures. Is there an end to Singapore’s home pricing saga or should we brace ourselves for a continued increase?

Foreign buyers back in the market

Have the cooling measures done their job in managing property prices? Foreign property buyers have held back for the last quarter,  but are now back in full force. Instead of aiming high for prime district properties, they have instead gone for cheaper options, namely suburban condominiums,

La Fiesta condominium in Sengkang.

La Fiesta condominium in Sengkang.

Foreign buyers made up 10.7 per cent of 4,884 private homes sold in Q1 of 2013. Chinese and Indonesians made up the largest numbers, followed by Malaysians. The number of Mainland Chinese buyers particularly has been on the rise once more. This could be partly due to the tightening of property buying policies in their own country.

Almost half of the 108 foreign buyers in March alone were Chinese nationals. With their strong buying power, even with the newly raised 15 per cent Additional Buyers’ Stamp Duty (ABSD), a private condominium of $1.53 million is still very much affordable in their books. One of the most popular suburban condominiums in district 19 was La Fiesta in Sengkang and in prime district 10, D’Leedon.

d'Leedon condo project on Farrer Road.

d’Leedon condo project on Farrer Road.

Before December 2011, when the ABSD was first introduced, foreign buyers made up 21.2 per cent of the total home sales. By the first quarter of 2012, the proportion has dropped to 5.7 per cent. The current level is at 10.7 per cent. Jones Lang LaSalle Singapore research director Ong Teck Hui has said that Singaporean investors seemed to be more affected by the cooling measures than PRs and foreigners.

In short, the additional buyers’ stamp duty has merely herded the buying crowd in another direction. Are they competing with local buyers? If there are sufficient private homes to go around, then market forces will keep the real estate machine chugging on its own. Does this answer what Singaporeans have been asking for in terms of housing prices and supply?

New private homes sales may match 2012′s high

D'nest condominium.

D’nest condominium.

If anything, worries about the property cooling measures affecting the property market in a big way should be allayed, for now, by the way Q1′s new homes sales figures go. March’s sales gave it a big boost, as buyers returned after the Chinese New year  lull in February. Many buyers were first-timers, and out of the 5,564 units launched in Q1, almost all (5,533  units) were sold.

Property developers had kept launches out of the market in February, and the release of numerous new properties near MRT stations in March could have made up for the pent up demand from buyers who flooded the showflats and new property launches in March, snapping up units in new suburban condominiums such as D’Nest, Urban Vista, Bartley Ridge and Sennett Residence.

According to the Urban Redevelopment Authority’s (URA) data of new home sales, March alone saw 2,793 units sold, breaking the previous record of 2,772 in July 2009. It goes to show that despite the cooling measures, demand is well ahead in the race to balance property prices and inflation at large.

Shoebox apartments were top sellers for HDB upgraders. Seen here is the Bartley Ridge condominium.

Shoebox apartments were top sellers for HDB upgraders. Seen here is the Bartley Ridge condominium.

Property analysts are however not expecting similar sales numbers this month, since March’s bumper crop of new units would have satisfied the pent up demand from previous months. D’Nest emerged the clear winner with 699 units of its 912 units sold. Once again, location and proximity to transport were cited as top reasons for great sales.

New HDB flats 30% cheaper

National MInister Khaw Boon Wan has pledged last Friday to keep prices new HDB flats 30 per cent cheaper, keeping to their promise to help Singaporeans own a home.

Their aim? To make new HDB flats affordable once again, before the property bull run which sped well ahead since 2005, to have one in a non-mature estate paid off within “four years of salary”.  Current HDB flat prices are at about “5.5 years of salary”.

HDB Flats THinkStockThe Government’s new moves and announcements are clear indications that they plan to play an active part in Singapore’s real estate situation, at least in providing “alternative housing options”. Beyond price stabilisation, Mr Khaw has said that bringing down BTO flat prices are also part of the property cooling measures.

He has also raised a series of questions pertaining to Singapore’s long term housing plans:

  1. Should Housing Board flats continue to be an appreciating asset or return to being treated simply as a social need?
  2. Should the HDB build to meet sophisticated tastes or go back to the basics?
  3. How to keep flats affordable while continuing to encourage couples to be prudent?
  4. How should public housing respond to the needs of an ageing population?
Tampines Green Forest BTO Flats. Photo by HDB.

Tampines Green Forest BTO Flats. Photo by HDB.

There is still the issue of whether these low starting prices of HDB flats will be kept around the same affordable rates or will resale HDB flats continue their flight to higher heights. This may only be revealed in 10 to 15 years’ time but how immigration and housing policies are structured may very well be the rudder that steers the ship. To troubled waters or calm ones. Those at the helm will have an important role to play. And they have to act now.

Will Singapore homes ever be truly ‘affordable”?

Not for some time yet, according to Finance Minister and Deputy Prime Minister Tharman Shanmugaratnam.

Waterfront living in Sentosa. Is this the area for expansion in SIngapore's future?

Waterfront living in Sentosa. Is this the area for expansion in SIngapore’s future?

Stuck in the part of the property cycle where home prices run high, all are in wait to see if they run even higher. The Government is doing all they can to cool the market. The previous seven round of property cooling measures since 2009 will attest to that. But Singapore’s real estate market still stands for some price correction before it could get moving and complete the cycle it is apparently in.

It will not amaze most Singaporeans to know that housing prices have risen sharply in the past four years. 30 per cent is a huge leap. In the time where the global economy struggles to right itself from its humpty-dumpty fall, Singapore’s economic growth, lower interest rates and strong capital flow has kept the property market buoyant.

Is the private property market quietening? Image courtesy of Singapore Tourism Board

When will homes truly be affordable for the average Singaporean? Image courtesy of Singapore Tourism Board

Even though the cooling measures may have slowed the rate of increase of home prices, the pricing rise is still significant. We return once again to the question of whether the Government should be responsible for keeping market prices low or simply stall the rise in prices, which is inevitable and should be left to market forces to dictate.

Mr Thaman said as ‘Singapore’s highly open economy lives by being global and regional, the Government’s key priority is to raise productivity to a new level”, since raising incomes for the average person and for the median household is at the top of their to-do list for now.

No demand for High-end private apartments

Not yet. But the supply is still going strong.

For the last quarter of 2012 and perhaps even the first quarter of this year, the luxury apartment market is seeing depressed prices, with many more completed but yet unsold. The global financial crisis and string of cooling measures have left in their wake almost 500 completed but unsold units in the prime districts of 9, 10 and 11 alone, according to R’ST Research‘s analysis.

Hamilton Scotts

Hamilton Scotts

These include:

Treasure on Balmoral

Treasure on Balmoral

Slightly less than half of the 9, 295 non-landed upmarket homes in-the-making are currently unsold. Reports have shown that luxury home prices dropped 5.6 per cent in 2012. The high for these type of properties was in 2007, but property analysts figured this drop in price was merely a matter of time, since the sky-high prices were most likely not firm in property fundamentals. In fact, prices are expected to correct further this year as older luxury properties enter the resale market and are likely to compete with new ones in the vicinity.

The cooling measures seem to have impacted this market strongly, but is this what is really helpful to Singapore’s real estate industry and what have the cooling measures really done? Have they merely herded buyers from one market into another?