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?

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When even suburban mass-market home prices fell

 
8 RajaSingapore’s housing market could be bracing itself for a year of tougher times. It has after all enjoyed a rather long period of highs.  Though the initial signs are slight, a 0.7 per cent drop in December, it could be a warning for the year or next couple of years ahead.

As new properties now come with lower price tags, apartments in the resale market may find themselves having to lower their prices as well in order to attract buyers. The biggest decline came in the suburban segment, which may be a bit of a downer for the market since this is the sector which has been faring the best for many consecutive quarters. But the huge number of launches all over the island could have diluted the buying crowd. Investors who would previously have snapped up these properties in a jiffy may also have been hindered by the loan restrictions implemented last June.

Homes in the central districts could however take the hardest beating this year as many are left unsold. As most of the properties head towards completion in the next few years, the housing supply glut may become more apparent. Put into the mix resale properties and the bowl seems rather big, unless of course the population grows, which might cause other issues for the small nation and its limited resources and space.

Less investing in private homes

Overall home prices have been losing steam, with significant signs showing in the last quarter of 2013. Mass market private home prices have begun to soften and investors are generally shying away from private properties. Upmarket luxury properties however might be the hardest hit as big funders who had previously purchased units in bulk choose to wash their hands of their investments early. Newton Imperial condominium is one example, with 21 units being put up for bulk sale earlier this month.

Hillford Retirement HomeSome investors may however choose to hold on to their properties and tide over the property cooling period. On the ground, city centre home prices have already fallen, and city fringe homes may follow suit. Individual buyers may be waiting for further price cuts or discounts from developers, thus widening the void in the market. But the market can hardly stagnate as activity will no doubt continue, though at a slightly more subdued level.

Some analysts are predicting the ebb and flow of the private property market this year to be highly dependent on the type and number of new property launches. As that too may be lower in number, one may wonder if 2014 might be a dull year for the real estate industry. But the first quarter of the year may bring about some positive change. The launch of The Hillford at Jalan Jurong Kechil earlier this month for example, sold out within its launch day with prices averaging $1, 100 psf.

The Resale HDB flat rollercoaster ride

A year or two ago, the property market was at its peak and now, it seems to be have taken the quick dash down. With the fervent entry of new HDB flats and private properties over the last 3 years, the market is now facing a possible glut. The continuous implementation of property cooling measures also accounted for much of the decrease in activity over the last 2 quarters.

The resale market for HDB flats seem to have taken a dive due to the bumper crop of BTO flats. Photo courtesy of Singapore Tourism Board.

The resale market for HDB flats seem to have taken a dive due to the bumper crop of BTO flats. Photo courtesy of Singapore Tourism Board.

Data from the Urban Redevelopment Authority seems to signify a peak in home supply in 2016. That is when most of the properties purchased in the past 2 years will be completed and ready for occupation. That might mean many will be compelled to sell their existing homes and the resale HDB flat market may then face yet another challenge then. By 2016, 33,290 homes are expected to be completed.

In the resale HDB market, transactions have been at an all-time low since 2005. Prices fell by 0.6 per cent, and sellers may find themselves at the mercy of market demand. Median COV prices are now $10,000 and below. No longer are the days when sellers could command exorbitant cash premiums, which have to be paid upfront.

Most buyers in the resale HDB flat market now are upgraders or PRs. But the pool of buyers may have diminished as buyers may be restricted by loan limits and reduced number of foreigners granted permanent residency. PRs are now only allowed to purchase HDB flats after a 3-year period. Property analysts are expecting interest to rise again after the first half of the year, as low prices bring the buyers back.

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?

Fringe growth for City fringe homes

In terms of speed, the property cooling measures have certainly put the brakes on the growth of city fringe private apartments. Investors are not coming to the buffet table of apartments in areas such as Balestier, Thomson, Outram and Rochor, despite the substantial number of choice units for the picking.

Echelon condominium.

Echelon condominium.

The Urban Redevelopment Authority data indicated zero growth in the non-landed home prices for city fringe areas. City centre apartments on the other hand has increased by a slight 0.4 per cent. The higher stamp duty and tighter home loan limits have detracted many a property investor. In fact, growth in this sector in particular has be flattening since April 2012.

Spottiswoode SuitesSLP International’s head of research, Mr Nicholas Mak, thinks that part of the reason for the flat-lining sales could be that recent launches have been targeted at investors. These include Echelon near Redhill MRT station, Seasuites in Pasir Panjang and Spottiswoode Suites near Outram Park MRT station. Projects such as these has a significant number of one and two-bedders, which have been the hot favourites of real estate investors for sometime.

Have residential home prices in this area reached a saturation point and what will it take to get the buyers back into the market? Will there be spillover interest from the suburban private home market which is doing exceedingly well for the moment?