The private home gentle wave

It’s an up and down ride for the private non-landed property market for more than a year now. Across the board, non-landed resale home prices dropped 6.2 per cent last year. Prices of homes in the central districts dipped an average of 7 per cent last year, though there were good months when some segments managed to bounce back slightly before falling again. That could mean that things were mainly level though there are outliers.

Duchess ResidencesResale private apartment prices fell 0.2 per cent last month, with a 3.9 per cent fall compared to the same month last year. But some city fringe properties bounced back with an average price rise of 0.4 per cent. Part of the yoyo-ing in prices could be due to the Chinese New Year period in February and buyers were just coming back into the fray in March.

The second quarter of this year would be a crucial point in almost determining how the rest of the year will flow, at least up to just before the Hungry Ghost month. Though the ride has been more a gentle wave of price fluctuations rather than a roller coaster ride, property experts are however not expecting a drastic change in prices unless there are major policy changes or a major interest rates hike.

The year could be a relatively quiet one with bright sparks and dull moments along the way, but the basics of good location and lowered total quantum prices will still move units.

Private properties – Not all in the slumps

Recent figures showed that the property cooling measures have only really affected the luxury market, which has slipped into the red.

Even then, there are properties within the private property market which have not been as drastically affected by the measures and market slump. At Cote d’Azur in Marine Parade for example, prices rose by 4.3 per cent. Prices of resale units at Costal del Sol also rose 4.5 per cent. And for the new property market, in Chestnut Avenue, selling prices of units at Eco Sanctuary showed a promising increase of 4.1 per cent.

Eco SanctuaryAlthough this could be caused by developers choosing to release juicier units later in their launch schedule, enticing buyers to purchase at their latest launches, this nevertheless gives hope to the market. Buyers are still wiling to fork out the cash to get the units they want. And there is no lack of these savvy folks.

Naturally as with all market movements, effects are never seldom felt the same way across the board, there will be units with more potential than others. It takes a keen eye and a close followup of market trends to make a killing at the right time.

While this is good news for property developers and sellers, it raises the question of whether the property cooling measures have really been effective in making property purchasing affordable for the majority, or only instead stymied the inflow of foreign cash earnings in the high-end property market?

 

Competitive pricing will help Property developer move units quicker

Home mortgage interest rates look set to rise sometime this year, and while new properties continue to come into the market, buyers will be spoiled for choice with executive condominiums, resale private apartments and new condominium units all competing for their attention.

Trilive KovanPricing might then be the differentiating factor in the current property market which is still finding its footing. In January, Symphony Suites in Yishun proved to be one of the best sellers in the non-landed private property market. Prices averaged at $1,010 psf, which was not considered to be on the higher end of the price spectrum. Most suburban properties fared better, making up 62 per cent of the total sales numbers last month. City fringe properties followed behind with 28 per cent and city centre homes took up only 10 per cent.

The TDSR (total debt servicing ratio) continues to be the main obstacle for buyers as the loan amounts they are now able to receive have been largely reduced. However, developers are unlikely to make drastic price reductions as land prices have been high for the past two years.

Contrary to concerns that new properties may outshine previous older launches and resale properties, some older developments have fared well in the last month. Trilive in Kovan sold 22 units at a $1,562 psf median price while 20 units in Jurong West’s Lakeville also exchanged hands at the average selling price of $1, 378 psf.

While the influx of new units and restrictive loan limits may be the way things go for the year ahead, the demand for residential properties may not necessarily have disappeared altogether. It may simply be a matter of buyers taking longer to weigh their options.

Resale DBSS flats in demand

With four-room resale DBSS HDB flats at The Premiere @ Tampines going for $570,000 to $590,000, a marked rise from its original $278,000 to $410,000 price tags, interest in newer DBSS launches may continue as resale units just became available last year. Units at The Premiere were the first to come on the market.

The Premiere at Tampines

The Premiere at Tampines

The Design Build and Sell Scheme (DBSS) was suspended in 2011 due to the high prices of flats at The Centrale 8 in Tampines. But since its suspension, majority of units at the existing DBSS projects have been successfully sold. At Pasir Ris One, only 53 units are left, with 88 per cent sold, and owners will be receiving their keys in about a months’ time. Trivelis in Clementi only has 28 units left and is ready for occupation. Lake Vista in Jurong West and Parkland Residences in Upper Serangoon have been fully sold.

Property experts are however aware that the earlier of these DBSS developments were launched when property prices were considerably lower, thus allowing for a higher profit margin. Newer projects may have been launched at higher prices. Coupled with the MSR (Mortgage servicing ratio) cap, this may mean a lower yield for future DBSS resale unit sales. With executive condominiums (ECs) and BTO flats covering the needs of most families, the role of the DBSS may not be as relevant today as before.

But demand seems to be quite positive as there will still be buyers who do not mind paying a bit more for units at a good location and with all the interior fittings and finishings done at no extra costs.

Decline of home prices not reflective of cooling measures’ power

It all boils down to holding power. Of both buyers with their mortgages and home loans; and developers with their unsold units. Despite a year of seemingly repressed property market growth, the actual decline in home prices as a direct effect of the property cooling measures may not be as steep as it feels like. In fact, URA figures show only a 3.9 per cent drop in prices since Oct 1 of 2013 to 30 Sept of this year.

TheVermontCairnhillSince the property boom of 2009, home prices have increased 65 per cent till the end of 2013. Whereas the drop this year is a mere 4 per cent. Which means, property prices are still more than double of what they were before 2009.

Though the average total quantum price of homes may have dropped, the psf prices are maintained at a reasonable level as the main change comes from the diminishing property sizes. Though buyers’ affordability now ranges between $1million to $1.3 million, figures which have held steady for the past 5 years; the median sizes of new homes have fallen from 1, 195 sq ft in 2009 to 753 sq ft in 2014. This is a sure sign that developers are still holding on to their asking prices while giving less in terms of liveable space.

Resale homes are holding up better than new homes however, with a 3 per cent drop as compared to a 6 per cent drop of the latter. This is largely due to developers’ offers of discounts on unsold units. Examples of these can be seen at The Vermont At Cairnhill, and also at Sky Habitat, where more units were moved after a 10 to 15 per cent cut in prices.

Moving into the new year, property analysts are expecting sales volume of next year to be similar to 2014’s, though home prices are unlikely to experience a drastic drop. Rather, a gentle decline into a comfortable equilibrium is what most experts are prone to agree on.

More transparency with Property prices

The Urban Redevelopment Authority (URA) has recently hinted that even clearer property transaction price trends will be provided publicly come 2015. Within the first half of the year, property players, the buying public, and even policymakers will be able to get their hands on prices of individual units in developer-sold properties.
URA 2

Photo credit: Urban Redevelopment Authority (URA).

This may level the playing field as currently, even though median prices of units in each residential project is shown on the URA website, only when units have been purchased, and only those with caveats lodged with the URA will have their prices disclosed.

Part of the reason for the change could be the fact that more developers have been offering discounts and rebates of sorts on new units, ever since the cooling measures kicked in, which meant affordability have decreased and total quantum value has now become the new unit of measurement. As these discounts are often not registered in the caveats, the prices disclosed may not paint the entire picture.
iProperty price transaction page

Source: iProperty.com.sg

Buyers may be able to now better negotiate their deals instead of relying on developers’ statistics. How will this impact the market and while transparency is a mature way of moving forward, will developers be able to withstand the continued price decline? Or perhaps the question would be, how long more before prices hit the bottom of the curve and begin its upward climb?

Varied market response to declining property prices

Home prices in both the private and resale HDB markets have continued to dip in the second quarter of 2014. In the first three months of the year, the decline was 1.6 per cent. Perhaps buoyed by the increased number of launched in Q2, the rate of decline was somewhat less steep at 1.3 per cent the quarter past.

Rezi 3 TwoBuyers who have been on the lookout for opportunities such as this may be happy to find that more than a few property developments have been offering discounts. Though the overall number of sales have picked up in the second quarter, mostly due to new launches, the private homes market saw a more obvious slowdown in both the city centre and suburbs. The drop was 1.5 per cent in the city centre and 1.1 per cent in the suburbs. Properties in the city fringe fared better with a 0.6 per cent drop, an improvement considering the 3.3 per cent dive in the earlier part of the year.

But there are those who are concerned about the longevity of their investment should they purchase now. The question they may ask is, is this the lowest prices can go? If I were to buy now, will the prices continue to drop? Though property analysts are doubtful that the prices will bottom out anytime soon, they are expecting the maximum of a 5 per cent decline.

As long as the supply continues at a steady pace, prices will not vary far from the current levels. Perhaps true change will only come with a shift in policies. Considering the elections will be here in a couple of years’ time, the time leading up to that might be a period of uncertainty.

Resale HDB flats prices dip

The number of resale HDB flat buyers is diminishing. At its two-year low last month, the number of flats which exchanged hands in May was 1, 320. In April, 1, 484 resale flats were sold. Prices also fell 1.2 per cent in May, the lowest since April 2012 according to the Singapore Real Estate Exchange’s (SRX) price index.

Marsiling Greenview BTO HDB FlatThe most common reason for the drop was the loan curbs. This has prevented many buyers from securing a desired loan amount, thus unless they have a large enough cash reserve, it usually puts a resale flat out of sight. The number of transactions in March and April were more positive but that could be due to the pent out demand following the festive season in January and February. Other possible reasons for May’s drop could be the release of new BTO and SBF (sale of balance) flats by HDB in the same month. The latter SBF flats are usually more popular with location- and price-conscious buyers as they are cheaper than resale flats but yet are situated in mature estates.

But what about HDB upgraders who are have purchased private properties? Unlike private property owners who are not allowed to purchase HDB flats, HDB flat owners are allowed to purchase private properties. But as buyers play the waiting game, resale flat owners are now simply willing to wait, if they can, or rent out their HDB flats. This in turn keeps rental supply high, but that also means they will be likely to compete with private property rentals. As the supply of tenants are kept stable, this could also mean there will be a price-war in the rental market.

How long will the resale market remain weak? Will it be a tough uphill climb?