T.D.S.R – What it means for the property market?

Total Debt Servicing Ratio. Or Total Damage to Singapore Residential as some industry players would put it?

The real estate sector is in a little bit of a sway at the moment. With the situation tilting this way then the other every other month, the outlook is clearly unclear. The latest loan curbs seem to be taking its toll on the property market, with a reported 73 per cent drop in sales in July, following an already considerable drop of 65 per cent in June.

Kensington SquareNot surprising at all since the immediate effect is that it is not as easy as before to borrow. Loan approval times have lengthened and loan amounts are restricted. Although sales are still happening, buyers are no longer able to commit to purchase as quickly as before. Unlike January’s measure which increased the Additional Buyer’s Stamp Duty (ABSD) percentage, developers are unable or have yet to find ways to soften the blow for their buyers.

But despite the sudden plunge in new home sales, industry experts are not worrying excessively over the numbers as it may be too early yet to tell if the effects will stick. With this month being the Hungry Ghost month, they are not expecting a sudden lift in sales. They are hoping to see a strong rebound in October when new properties will be launched once more.

And as home prices continue to rise, response from the market in the upcoming months may also be a good indicator of how resilient the market is and whether the pool of buyers  and renters will continue to grow.

Resale home sales slightly dented by New properties

As more new properties continue to launch, resale homes are seeing a slight dip in sales volume as many opt for the former. Resale home prices also fell a 0.4 per cent in June. This is a steeper decline compared to the 0.2 per cent drop from April to May. Industry experts are not too alarmed by the drop as the June holidays usually mark a decreased interest in property sales and buyers could also have been waiting out the rising interest rates. Another reason could be that resale home  owners were asking “optimistic prices”.

Liv on SophiaThere is some debate over whether this decline will deepen and lengthen. Some analysts noted that secondary property market sales volume has decreased from two-thirds of the total transacted sales to only one-third since the last quarter of 2008. But others defer on the point, saying that less than a quarter of declining sales does not necessarily indicate the future demise of the secondary market and despite a dip in sales volume, resale home prices remain high.

In the current market where new is constantly available, the competition is high and thus investors are seeing more potential in the primary housing market. But who is to say that when the market is saturated, buyers will not turn back to the secondary market with its pluses. Buying the right property in the right location early usually means higher potential, but as the society changes and as global economies adjust to one another, there are always possibilities of older properties rising in value over the years.

La Fiesta condominium in Sengkang.

La Fiesta condominium in Sengkang.

It should also be noted that the drop in resale prices was the largest in the Central Region. Outside of the central region, prices of private properties rose  0.5 per cent following a 1.5 per cent drop in May. Property prices are unlikely to rise much more in the quarter as the market adjusts to the stricter financing rules imposed by the Monetary Authority of Singapore (MAS) last month. However, most buyers are still strong in liquidity thus able to hold on to their properties thus prices are also unlikely to drop.

13 and 14 – Good numbers in the Property market

Considered unlucky numbers by some, 13 and 14 may not be so bad after all when it comes to property districts which are gaining in popularity and home prices.

The fact that it provides a relatively central location without the high prices of the prime districts lends it the credibility as the next area to watch. District 13 consists of Potong Pasir and MacPherson whilst Geylang, Eunos, Kembangan and Paya Lebar fall under district 14.

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.

In district 13, which falls along the North East and Circle MRT lines, Bartley Ridge is one of the hot sellers. This 99-year leasehold, 868-unit condominium development is just a stone’s throw from Bartley MRT station and the average asking price is currently at $1,241 psf. It was launched only in March this year. 8@Woodleigh is another new property which has drawn the attention of many home buyers. It has one of the highest asking prices at $1,627 psf.

Waterbank DakotaVenturing eastward into district 14, an area famous for good food amongst other facilities and amenities, Waterbank at Dakota is one of the noteworthy non-landed properties in the district. Just a short distance from the Dakota MRT station on the circle line, it averages from $1, 516 – $1,615 psf for its one-, two- and three-bedders. Nearer Kembangan MRT station on the East-West MRT line is the freehold residential project Vacanza@East, with lower asking prices of $1, 262 – $1,335 psf. Other properties in the area include Dakota Residences, Le Crescendo and Simsville.

Only 14% of resale private non-landed homes dipped in prices

From October 2012 to April 2013, only 4 districts out of Singapore’s 28 districts saw a dip in resale non-landed home prices. And most of them were in the city centre. Suburban homes outside of the Central Region all rose, whether slightly or by leaps and bounds.

The Interlace private condo apartments on Depot Road.

The Interlace private condo apartments on Depot Road.

The area where prices fell the most was District 8, where Little India stands. Resale home prices there dropped 12.2 per cent from $1,320 psf to $1,159 psf, according the the Urban Redevelopment Authority’s data. Most of the units which saw a decreasing psf pricing were those at the 44-unit Jalan Besar Plaza. The other district which registered a big dip in resale home prices was district 12, which includes Balestier, Toa Payoh and Serangoon. In districts 7, 10 an 26, prices dipped as well, but only very slightly.

Sales of new residential non-landed homes were the main reasons behind the drop of resale home prices. Buyers now have more to choose from within the same area and are attracted by all things ‘bright and beautiful’. In Balestier for example, a 154-unit condominium, Prestige Heights, sold their shoebox units at $2,119 psf in March, the highest so far for the development, bringing the median price up.

H20 Residences

H20 Residences

Over at district 28, Seletar’s media prices fell 18.3 per cent from $1,179 psf to $963 psf. Again, new launches in the area could have directed attention away from resale homes.  Units at the newly launched H20 Residences sold at $908 to $1, 006 psf. Seletar Park Residence, launched October last year, registered an average price of $1,191 psf the same month.

Other properties which may have lowered their selling prices are newly launched units at The Interlace and Harbour View Towers in district 4. The former sold at a 24.5% lower median price of $913 psf and the latter at $838 psf in April, a drop of 34%.

But the question remains: Are the drop in home prices are a true reflection of the effectiveness of the cooling measures from 2012 and 2013? And are further measures are required.

New Homes sales halved

New properties rode the big wave earlier this year in the first quarter. Now, the tide has brought them back on the ground.

Sant Ritz near Potong Pasir MRT station.

Sant Ritz near Potong Pasir MRT station.

But the reason may not be because the fish are not biting. There are simply fewer launches in April. Although new home sales saw a spike in March, industry analysts are putting it down to pent-up demand following January’s cooling measures. Are April’s numbers more reflective of the actual effect of the property curbs? As the heat from Q1′s fever dies down, home buyers who are shopping for a home may be holding back in wait of potential launches in the coming months.

The most recent launches were Sant Ritz in Potong Pasir , Jade Residences in Upper Serangoon, Cosmoloft in Balestier and The Siena at Farrer Road. Data from the Urban Redevelopment Authority (URA) indicated 104 units sold at the 214-unit Sant Ritz, at an average of $1,494 psf. At Jade Residences, buyers snapped up nearly half of the 171 units at a medai of $1, 592 psf.

cosmoloftBuyers are becoming more savvy, and are increasingly not only drawn by a property’s location but also design and potential investment value. Do buyers now have the upper hand and will developers be pressed to lower selling prices? CBRE executive director of residnetial Joseph Tan believes that buyers now draw the line at properties ranging between $900 to $1, 600 psf. Properties selling above that price line may not see as many takers. For now.

Deputy Prime Minister Tharman Shanmugaratnam’s statement last month which spoke to the unlikelihood of more cooling measures could also mean buyers are now in less of a hurry to buy up properties and can well afford to play the waiting game. It may seem like a supply glut could be near, but as soon as population increases, and depending on how fast a rate, demand will soon rise as well. Is it better to buy now than to wait for prices to drop?

Upcoming launches include KAP Residences at King Albert Part, Corals at Keppel Bay, Liv on Sophia near Dhoby Ghaut MRT station and Stratum in Pasir Ris.

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.

Property developers discounts may be cut

If you’re waiting to see if the developer of your property of choice might dangle discounts to counter the recent cooling measures, you might have to reconsider. The authorities have caught on to property developers‘ tactics of offering discounts as a means to entice customers to buy new properties, especially since the cooling measures have taken a huge chunk out of the business.
House

But fear not, only the indirect discounts are under review by the Urban Redevelopment Authority. These mostly refer to the rebates and vouchers that the buyer receives only after purchasing the property. Since these are not reflected in the upfront price which the buyer pays, it may make the cooling measures seem ineffective, which also means URA’s quarterly price index based on caveats lodged might not be a true reflection of the market situation.

Property developers on the other hand tend to lean towards indirect discounts as this helps placate early buyers who may not be happy that they had gotten the raw end of the deal. Keeping the upfront price high also helps to keep prices high all around.

Other ways which developers have been trying to help buyers out are through the partial or full absorption of the Additional Buyers Stamp Duty (ABSD) which has been increased in the most recent round of measures. The frequency and fervency of this practice might be what the authorities are watching as it negates the effect of the property measures.

Another concern is also that the true value of the property needs to be conveyed truthfully to the home buyer, but with the discounts and cuts, it might not be the case and it might only confuse consumers. Not forgetting that home loans are based on the property value, thus might buyers be paying more in the end through bank loan interests for a higher priced property?

So are the cooling measures truly working? If it seems that discounts are offered more frequently, then it might be.

$1-million ECs the norm?

Are average home prices adjusting ever upwards, especially now with news that an increasingly number of Executive Condominiums (EC) are selling above the $1m mark?

Since the relaunch of the EC housing property type in late 2010, ECs have been flying off the HDB shelves, price tag notwithstanding. More than 340 new EC units have been sold over the $1-million mark and with 100 in the second quarter of 2012 alone, putting the average price for executive condo units at $822, 000.

One of the highest selling units was at The Arc in Tampines, and a One Canberra executive condominium penthouse unit in Yishun sold for $1.6 million. Most of the buyers were HDB upgraders, who are now more affluent, and have deeper pockets that can last them through the property cooling curbs, rising resale HDB flat prices may have also buoyed their spending power. The lowered interest rates and rising incomes of buyers all round could also be reasons these units are going for higher prices, industry experts say.

Executive condominiums come with the possibility of selling them on the private property market within 5 years of purchase. But with a monthly income cap of $12, 000, there are questions of whether EC units are truly affordable enough for those who are hoping to upgrade to the private residential property market. Which home buyer market do these hybrid properties really serve?