Prices remain low for private properties

With a drop of 0.3%, private home prices have slipped down the slope a little further in July. Property experts are taking this dip, 2 months in a row, to mean that prices could be stablising.

Bijou1Despite four new launches of private apartments Bijou, City Gate, Robin Residences and Citron Residences, which also meant a spill-over effect on surrounding resale properties, the market remained soft. Shoebox apartment units saw the largest difference, with a 0.8 per cent drop, with the non-central regions showing the most promise. Prices in the central region fell 0.7 per cent.

The biggest factor suppressing prices is the TDSR (total debt servicing ratio) framework. Since the authorities have expressed the fact that this cooling measure will not be reduced or removed anytime soon, the property market may see more slipping and sliding for now. The new year may bring a breathe of fresh air with new launches and some new properties reaching completion, though that could also mean a further dampening of the market with a larger supply and a diminishing demand.

Resale homes are expected to receive a larger blow as they often have older designs in comparison to the newer units and property buyers could be drawn by the discounts offered by developers.

Commonwealth – Properties not so common

Considered on the city fringe, just a little way off Alexandra which is an area popular with expatriates, Commonwealth may see renewed buyers’ interest as new private condominiums enter the mix.

The latest launch is Commonwealth Towers on Commonwealth Avenue. It will be officially launched on May 1 and is expected to be priced at $1, 600 to $1, 800 psf, it is relatively more expensive than similar properties in its vicinity, such as Queens condominium, Alexis, The Metropolitan, Ascentia Sky and The Anchorage private apartments. These are older residential developments and units are available on the resale market. Rental demand has been strong, though property experts are expecting competition to heat up once the newer condominiums are up and running.

The AnchorageAccording to URA figures, rental prices at the Queens averages at $4.32 psf per month. Sale prices were at $1, 350 psf. The Alexis commanded even higher prices at $6.65 psf and units sold at an average of $1, 939 psf, possibly because at 2 years old,  it is much newer than the Queens which was completed in 2002. Also, a third of the 293-unit The Alexis are shoebox apartments and are easier to rent out.

Alexis @ Alexandra CondoHowever the tightening foreign workforce rulings and immigration regulations may prove challenging for landlords looking to rent out their property especially with the rise in new units in the Redhill and Tiong Bahru area. Competition will always be present, but good location, providing attractive rental conditions and ultimately good timing may beat all that.

2013 closed with weak demand for resale homes

Although a 0.1% rise was registered, the last quarter of last year saw a resale private home market which was relatively quiet, and where demand was low. But industry experts were none too ecstatic about the rise, with most recognizing that this might be a mere “technical rebound” which will not be sustained.

The Montana1Homes in the central region which sold above the median market prices could have accounted for this rise in numbers. A few units at The Montana in Jalan Mutiara for example, sold at $1, 832 to $2, 130 psf. The market prices were at an average of $1, 600 to $1, 800 psf. Another high-floor unit at The Orchard Residences also went at $4, 312 psf, above the $3,600 psf market price, possibly due to the rarity of the unit.

The largest dip came from the shoebox apartments sector. For these small apartments of less than 500 sq ft, which were the best sellers of earlier in the year, a 0.6 per cent drop could signify a saturation of the market with these types of units, and where rental demand may not yet make up for the sheer number in existence. As new non-landed residential developments flaunt their remaining units, resale units in the suburbs may be forced to lower seller expectations. Will 2013 purely be a buyers’ market?

Singapore Re-zoned for homes

In the next decade, be prepared for half a million new homes as land everywhere around the island will be re-zoned to home Singapore’s growing population. With plans for most of them to be in the Paya Lebar and Greater Southern Waterfront areas. In the Holland Village, Kampong Bugis and Marina South areas alone, 14, 500 new homes are expected to take root.

Tampiens North

In the greater scheme of things, 3 other major districts are expected to see a boom in residential properties, both public and private:

And planning even further ahead past 2030, the Paya Lebar area will welcome up to 500, 000 new homes as there are plans to move the Paya Lebar airbase to Changi East, yielding 800ha of land for re-zoning purposes.

BidadariThis shift of land use and rearrangement of population across the island is all part of a growing country’s historical progress, and depending very much on how Singapore’s economy performs in light of the global situation will determine other policies which may in turn affect the direction property growth takes. But in the meantime, prospects seem positive and for a quick investment turnaround, shoebox apartments in the suburbs are still considered one of the most profitable investments.

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.

Inflora in bloom

The new condominium on Flora Drive has bloomed. At its launch last Friday, 250 of its 396 units at The Inflora were already sold. That leaves only slightly more than one-third. Situated conveniently near the Changi Airport and also the Japanese Primary School and the new Singapore University of Technology and Design, it were the smaller apartments which flew off the shelves first.

This trend of investing in smaller units which have a more affordable quantum and higher target rate for rentals seem to continue well into the fourth quarter of the year. And because of the cap on the number smaller sized units, its rarity helps increase its salability as well as rental popularity.

The Inflora1At The Inflora, a one-bedder goes for around $400, 000. Very affordable as an initial foray into property investment. All of its 128 one-bedders and 136 two-bedders have be fully sold. The apartments ranged between 462 sq ft to 882 sq ft. In addition, there are 84 three-bedroom apartments of around 1, 033 to 1, 583 sq ft. Its four-bedders are a little smaller sized at 1, 302 to 1, 334 sq ft. Dual-key units which are also popular with families looking to purchase a unit for their own occupation area also available, with sizes ranging between 1, 463 to 1, 584 sq ft. The attractively low total prices, around $960 psf, have been the main draw.

Home buyers quick on their feet have leaped at the opportunity as the area is relatively undeveloped. But as more properties are built in the area, they are expecting prices to follow the same thread.

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?

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?