Private home prices surpass 1996 peak

Earlier this year, to discourage short-term speculative investment, thegovt imposed a 1-3% tax on residential properties sold within one yearof purchase and lowered the loan-to-value limit on private housingloans to 80%.

Fri, Jul 02, 2010
my paper

By Rachel Chan

PRICES of private residential properties have crossed the peakreached in 1996 in the second quarter, according to flash estimates bythe Urban Redevelopment Authority (URA).

The private-residential-property price index, based on URA estimates, rose from 175.0 points in Q1 to 184.1 points in Q2.

While this increase of 5.2 per cent is lower compared with the 5.6per cent rise in the previous quarter, the preliminary estimate of theQ2 residential price index, at 184.1 points, is higher than the marketpeak of 181.4 points back in Q2 1996, said Mr Joseph Tan, executivedirector (residential) at CB Richard Ellis.

Prices rose the most, by 5.7 per cent in the quarter, amongnon-landed private residential properties in the Outside Central Region.

"This could be attributed to the price points set by new launchessuch as Tree House and The Minton, as well as rising prices of resaletransactions in locations where several sites from the government landsales (GLS) programme had been sold in the past six to nine months,"said Mr Tan.

It was reported last month in The Business Times that May's topseller was The Minton in Hougang, with 204 units sold at a median priceof $849 psf. Tree House in Chestnut Avenue was one of April's topsellers, at a median price of $835 psf.

Successful tenders for three residential GLS sites awarded in Maywere bullish. For example, Keppel Land (Mayfair), the developer whichwon the site located in Boon Lay Way/Lakeside Drive, bid $499 psf perplot ratio, which could translate into a break-even price of $800-$850psf, said Ngee Ann Polytechnic real-estate lecturer Nicholas Mak. Thatwould outprice other condominiums in the same vicinity by as much as 40per cent.

In the Core Central Region (CCR), properties in the same categoryrose by 5.1 per cent and, in the Rest of Central Region (RCR), by 4.5per cent.

Back in Q1 2010, it was the price index for the RCR which showed thehighest increase of 7.2 per cent, followed by 4.5 per cent in the CCRand 3.9 per cent in the OCR, noted Mr Tan.

Mr Mak expects that home prices will rise at a slower pace this year, at a year-on-year rate of 12 to 18 per cent.

"By the fourth quarter of 2010, the overall price level in thehigh-end CCR may finally surpass the peak price level that was lastseen in Q1 2008," he said.

In the long term, ample supply of residential land by the Governmentthrough its land sales programme will ensure a more stable supply, saidMr Tan.

"As sales momentum becomes less frenzied, home prices willstabilise," he said. Earlier this year, to discourage short-termspeculative investment in property, the Government imposed a 1 per centto 3 per cent tax on residential properties sold within one year ofpurchase and lowered the loan-to-value limit on private housing loansto 80 per cent, from 90 per cent.

It also said it would release more residential-development sites, aswell as build more Housing Board flats, to meet demand and curb risingprices.

The property peak of 1996 had been fomenting in 1994 and 1995, whenhome prices raced ahead of gross domestic product growth. However, theGovernment's anti-speculative measures and the Asian financial crisisreversed the rise in prices.