Slowing down of property market slowdown

The first quarter of 2015 has proved to be a slow one for the property industry. But the slowdown has lost some speed. Compared to the previous quarters, the decline for both private and public housing was at around 1 per cent for the past three months.

Property prices and sales have been slowing down since mid-2013. In the resale HDB flat market, prices have fallen for 7 consecutive quarters and private property prices have fallen 6 quarters in a row. What will the rest of the year hold for these market segments?

Northpark Residences1For the private property sector, property analysts are predicting:

  1.  A further dip in prices as the number of unsold units are on the rise.
  2. Continued fall in rental prices as more completed new homes enter the fold. The decline in the first quarter of the year was 1.7 per cent; rental prices fell 1 per cent in the last quarter of 2014.
  3. As interest rates rise, home owners and developers may be pushed to lower prices further to secure deals. The competition between resale and new properties may also heat up.
  4.  A 5 to 8 per cent fall in private home prices for the year as buyers delay their market entry, possibly waiting for prices to fall further before making a buy.

In the HDB resale flat market, the prospects seem slightly more positive:

  1. HDB resale prices are expected to fall at a slower pace of 4 to 7 per cent and perhaps even stabilise.
  2. But as more new BTO (build-to-order) flats and ECs (executive condominiums) are completed this year,  flat owners may feel the imminent pressure to sell their existing flats at lower prices in order to move into their new units.

A fall in home prices seem inevitable this year, but the good news may come in the form of increasing sales and reaching a balance between sellers and buyers in terms of home prices.

Resale HDB flats in prime locations command high prices

Even though the resale HDB flat market seems to be following the general downhill trend of the property market over the last year or so, bigger and newer units in the town’s hottest locations are still bringing in big bucks.

Of the 20 five-room HDB flats which sold at over $900,000 this year, as compared to just one in the same period last year, 14 were from the lauded Pinnacle @ Duxton. The other sales came from units in Bukit Merah and Queenstown.

View from PInnacleAs units at the Pinncale@Duxton were only recently released into the market, after their statutory five-year MOP (minimum occupation period), part of the increase in sales could be accounted for by these units. At their time of launch in 2004, five-room units were only priced between $345, 100 to $439, 400. Prices have since more than doubled. With their astounding views (for a public housing facility) and close proximity to the CBD (Central Business District), chinatown and city centre, the reasons for their expensive price tags could hardly be disputed.

Most of the other flats which sold in Strathmore Avenue and Holland Drive, were also newer ones which came under the Selective En Bloc Redevelopment Scheme (SERS). These flats were newly built in order to house owners of older flats nearby which were scheduled to be demolished. Many of these owners were luckily enough to secure a new flat at almost no additional cost, and now are able to sell at a profit.

Other areas with a higher ratio of newer resale flats include the less mature estates such as Punggol and Sengkang. Here, the units may not command as high a price due to their far flung location and higher number of sellers. But that said, it could be early days yet and in years to come, another tune may be sung.

Offers galore in blossoming EC market

Executive condominium launches in the recent months haev proved attractive to the buying crowd, especially after years of quiet on the ground.

But with 7 more launches planned for the later part of the year, will the market be poised for a saturation point? Or will buyers welcome the competition and options? Most of the new launches will be near existing EC sites in the North and North-east regions, which could mean stiffer competition for the developers.

Westwood ResidencesOne project which may however prove promising is the Westwood Residences in Boon Lay. Together with Lake Life EC, they could the only 2 executive condominiums in Jurong since 2010. The rarity, coupled with the pent-up demand could means buyers may be willing to pay slightly higher than average prices for units here as compared to ECs elsewhere. Property experts are expecting the median prices for ECs launched later this year to hover between $750 to $770 psf.

Currently, the average selling prices for ECs are at around $800 psf. But buyers have not been particularly responsive to this pricing level and with the introduction of thousands of new units over this and next year could bring the competition higher and prices lower. The dip in resale HDB and private condominium prices since the high in 2013, would also mean that ECs have to priced realistically in order to entice HDB upgraders and buyers.

As the market segments react to one another, the EC being hybrid between private and public properties, may also find themselves having to price themselves appropriately between these two market segments.

 

Resale HDB flats – Sales go up as prices do down?

2014 saw a record low number of HDB resale flats exchanging hands. It could be due to the effects of the property cooling measures, in particular the TDSR (Total Debt Servicing Ratio) framework set by the Monetary Authority of Singapore,  just starting to kick in. Buyers were more wary and more careful in weighing their options while sellers were still unwilling to lower prices. The tussle was just beginning.

SeaHorizonECBut this year, it seems one side is starting to give, slightly; especially for those who need to sell their current flat within the stipulated time of collecting the keys to their new flat, or face forfeiting their deposit. Prices of resale HDB flats have dropped 0.8 per cent in March this year, and the number of transactions increase from 1,148 to 1,349., As the number of new BTO (Build-to-order) HDB flats which will be launched this year decrease, buyers may also begin turning to resale flats to fulfil their needs. Prices of four- and five-room flats fell the most at 1.1 per cent and prices have been dropping since a year ago.

Property experts continued to stick to their forecast of a 5 to 6 per cent drop in resale flat prices this year, and hope for a higher sales volume than last year. It all depends on how the market fares from now till June, just before the traditional lull period of the Hungry Ghost Month.

Prices of rare HDB flats such as ECs (executive condominiums) remained high however, in fact showing a rise of 1 per cent last month.

Condominium prices wavering

It may be a year of fluctuations for the private non-landed property market. Condominium sales have been slow, though it picked up slightly in February.

Both new and resale private condominiums were affected by the market slowdown, much of it attributed to the TDSR (Total debt servicing ratio) framework set by the Monetary Authority of Singapore (MAS). But some property analysts are also connecting the dots between the lowered Cash-Over-Valuation (COV) prices of resale HDB flats. When COVs were high, potential HDB upgraders were able to leverage on these to leap into the private property market by using the COVs as part of the cash down payment for their new private homes. With the lack of this financial impetus, more are finding themselves in between an rock and a hard place when it comes to scaling up.

Sims Urban OasisWeaker buyers may find themselves having to hold back for now while those with the financial abilities will still be able to well afford what the market currently offers, and perhaps even more so as prices have been coming down for sometime now.

There has however, been a shift of interest from newer units to resale ones, in favour of larger floor area. HDB buyers have been purchasing units with an average of 926 sq ft in size, while private buyers leaned towards units averaging 1,119 sq ft in size. The sweet spot of affordability is now between $1.28 million to $1.46 million for private buyers and $950,000 to $1,09 million for HDB upgraders.

Will adjusting HDB income ceiling help “Sandwich class” own a home?

As earning power climbs, the combined household income for an increasing number of families now fall just above the income ceiling for public housing. This puts them just out of reach of a new HDB flat yet still quite a distance away from being able to afford a private property, especially as inflation and the financial stress of providing for a family kick in.

Forestville Executive Condominium.

Forestville Executive Condominium.

The combined household income ceiling for a new HDB flat currently stands at $10,000 while the same for an executive condominium (EC) is $12,000. The income ceiling was last raised in 2011, from $8,000 to $10,000 for HDB flats and $10,000 to $12,000 for ECs. Over the last five years, there has been a significant increase in the number of couples and families falling into the “sandwiched class” of middle-income households in Singapore. Especially as Singaporeans now tend to marry late in life, when the husband and wife’s earning capabilities are at a certain level which puts them just beyond qualifying for a new HDB flat might be facing the most headaches.

Is there a way around it as public housing was originally aimed at helping those in need. But since there might always be a section of the population who will find public housing out of reach and private housing too much of a financial burden or risk, will raising the income ceiling really help elevate their circumstances only to be a burden to yet another group of citizens? What other options are available for these middle class families? Will they be looking at resale HDB flats as the only viable and affordable option?

Could lower resale HDB flat prices be a good thing?

Although HDB resale prices have dipped 0.6% last month, sellers could  turn the seemingly negative into a positive as this may mean that more buyers will see the market as flattening and be willing to purchase from the resale market instead of applying for a new one directly from HDB.

As HDB has been active in rolling out a massive number of new BTO and EC flats in the past few years to comply to demand from citizens, especially young families and multi-generational families. Even singles now have an option of buying new 2-room flats directly from HDB. Previously they could only purchase from the resale market. The increased supply of HDB flats has meant that more families and young couples have been successful in securing their new HDB flat, leaving less buyers for the resale market.

DoverHDB flatBut may sellers find themselves unable to raise their asking prices by too much as most buyers will be restricted by the TDSR (total debt servicing ratio) line which banks now have to toe. Loans will now be capped at 30 per cent of the gross monthly income. Part of last month’s drop in sales volume and prices could be due also to the Chinese New Year festive season.

Industry experts are expecting prices to drop further or maintain its status quo at least for awhile more. Any rise will be short-lived and a temporary anomaly. It may only be a question of how soon the buyers will return to the market. Are they waiting for prices to lower even further? What will make them change their mind and give them the push to purchase now?

HDB property market – Has balance been struck?

The last four years saw aggressive moves by the Housing Development Board to release and build new HDB flats. In 2014 alone, 51, 598 new HDB flats were added.

Has this supply of new flats been effective in stabilising the property market? Is the supply and demand scale now balanced? Minister for National Development, Mr Khaw Boon Wan, has mentioned that the increased supply has helped move the selling price of HDB flats down, yet at a gradual pace and margin which buyers are still able to stomach.

WEst Rock HDB FlatFrom this year on, the number of new HDB flats will begin to decrease, from 50,796 this year to 38,316 in 2018. Which could mean that this year might be the watershed year for the HDB market. Will buyers be taking the opportunity to purchase before supply becomes tighter once more? Or will the number of HDB flats which have been released thus far be able to provide for a stable resale market, keeping a level playing field between buyers and sellers?

As Singapore grows in population size, and global and domestic economies fluctuate, all this would also be tightly linked to population and immigration policies. With the election possibly coming our way next year, buyers may take the chance to look out for opportunities to upgrade property-wise this year, or perhaps wait and see what the post-election changes may bring.