PRICE rises for private homes almost ground to a halt last quarter
while rental increases also tapered off. The latest official data has
sparked a discussion in property circles on whether the market has
peaked. Most observers say that either the peak has already been touched, or will be touched very soon.
The Urban Redevelopment Authority's benchmark private home price index
inched up just 0.2 per cent quarter on quarter (q-o-q) in Q4 last year,
its ninth consecutive quarter of moderation. For the full year, the
index's 5.9 per cent rise was a third of the 17.6 per cent gain
registered in 2010. The figures were identical to flash estimates
released on Jan 3.
And for the first time since Q3 2009, the
increase in URA's landed property sub-index was lower than that for the
non-landed property sub-index. The landed sub-index rose just 0.1 per
cent q-o-q in Q4 2011, compared with 0.3 per cent for the non-landed
sub-index. In fact, for semi-detached houses, the price index actually
fell 0.6 per cent q-o-q in Q4.
'In that quarter, prices of
semi-detached houses in the east fell 1.6 per cent while those in the
north-east softened by 1.3 per cent. This shows that some segments of
the landed market are facing stronger price resistance,' says Credo Real
Estate executive director Ong Teck Hui. 'However, landed prices have
risen 80 per cent from the market trough in Q2 2009, outperforming the
48 per cent increase for non-landed for the same period.'
URA's
overall rental index for private homes rose 0.4 per cent q-o-q in Q4, or
half the 0.8 per cent rise it had posted in Q3. Full year 2011, the
index was up 3.8 per cent - a fraction of the 17.9 per cent gain it had
put on in 2010.
The outlook for private home prices looks bleak.
CBRE predicts a price drop of 5-15 per cent this year, with luxury/prime
properties taking the bigger hit and mass-market homes being the least
affected.
Credo's Mr Ong says: 'It's difficult for prices to
regain momentum as the recently imposed ABSD (additional buyer's stamp
duty) and the economic slowdown could ease demand. Sustained supply and
competition among sellers will also keep a lid on prices.'
Giving a different take, Savills Singapore research head Alan Cheong
said: 'We still believe it's difficult to conclude if we've reached an
inflexion point, if any at all.'
Mr Cheong cites the
oligopolistic nature of the Singapore residential property market, with
large developers with deep pockets who're likely to resist any price
cut. 'A cocktail of low interest rates till at least late-2014 (as
pledged by the US Federal Reserve) and higher inflation will in due
course reignite another round of interest in the residential market as
it's deemed a good hedge against inflation,' he said.
Credo's Mr
Ong paints two scenarios. 'In the best-case scenario, if the economic
slowdown is milder than expected, then buying sentiment may remain
positive, translating to sustained buying activity which will help to
keep prices stable amid the build-up in supply. In the worst-case
scenario, if there's a recession, we can expect demand to slacken,
creating downward pressure on prices.'
Lamenting the difficulty
in making accurate predictions, Knight Frank chairman Tan Tiong Cheng
said: 'Each time after the government has announced cooling measures in
the past two years, I thought the measures would be sufficient to cool
the market. But things have turned out to be otherwise.'
He
admits that the ABSD will have some effect in curbing investment and
foreign demand for private homes. 'Prices will come down - but to what
degree before they go up again? What's the alternative for people with
savings? Where should they put their money? If you believe in the longer
term, property is as good a bet as any. After all, interest rates are
expected to stay low for the next couple of years.'
Price
declines could be exacerbated by the secondary market, where volumes
have slowed down more sharply than in the primary market (that is,
developer sales). The number of units (excluding executive condos, or
ECs) sold by developers fell 2.4 per cent from 16,292 units in 2010 to
15,904 units in 2011. However, the number of homes sold in the secondary
market (resales and subsales combined) slipped 27.6 per cent, from
22,608 in 2010 to 16,357 in 2011.
Developers are wooing buyers
with nice showflats and appealing ad pitches. The ease of stretching out
progress payments over a few years - compared with having to pay the
full price upfront when buying a completed home in the secondary market -
is another reason to buy a home directly from a developer.
DTZ's
Asia Pacific research head Chua Chor Hoon said: 'When secondary volumes
come down, eventually it will affect prices. If demand slows down and
sellers find it hard to sell after a few months hanging on to their
prices, some owners will start to reduce prices. There will be more
bargaining power for buyers as well as occupiers as rents start to
ease.'
URA stats also show that developers completed 12,469
private homes (excluding ECs), up 19.9 per cent from the 10,399 in 2010.
This has begun to weigh on residential rents, which are rising at a
slower rate.
Savills Singapore expects a 'mild correction' of 5
per cent in rentals this year as more new apartments come on stream in
the months ahead. It also expects the number of private residential
leasing deals (excluding ECs) to hover around 45,000 in 2012, after
hitting an all-time high of 45,062 leases last year. The figure for 2010
was 41,573.
'The strong 2011 showing may be attributed to
Singapore becoming the preferred location among MNCs for their regional
HQs. This has also attracted more senior and top executives to relocate
here,' said Savills' residential leasing head Patrick Lai.
DTZ's
Ms Chua said rental pressure is greater in Core Central Region but this
is likely to shift to Outside Central Region in three to four years due
to expected completion of projects in suburban areas arising from the
ramp-up in Government Land Sales since the second half of 2010.
Source: Business Times