Signs of property bubble before new measures were announced

By PropertyGuru – September 15th, 2010

The month of August, the last immediately prior to the property cooling measures announced by the Ministry of National Development (MND) on 30 August 2010, saw the highest percentage of private properties sold in the $1,000 psf or more bracket.

Out of the 1,248 units sold, which was about 19.2 percent less than July’s 1,544 units, 88.2 percent saw a median psf price of over $1,000.

“This is the highest percentage that we’ve seen for years,” said Mr. Adam Tan, a spokesman for PropNex.

“While the dip in the volume of sales can be attributed to the typically quieter ‘ghost month’, the figures reveal that buying power and prices were escalating even further.”

July was the only other month for the last three years that saw over 80 percent of the private property units sold for at least $1,000 psf, with a percentage of 86.8 percent only narrowly edged out by August’s 88.2 percent.

And like July, most of the units came from projects that saw a median sale price of at least $1,000 psf: The Greenwich sold 207 units at $1,095 psf; Viva Vista sold 139 units at $1,509 psf; The Scala sold 74 units at $1,138 psf and Centra Suites sold 62 units at $1,201 psf.

“The only exception was Waterfront Gold,” said Mr. Tan, “which sold 65 units at a median price of $990 psf, which is already very close to hitting the $1,000 psf mark.”

Together, these five projects accounted for 44 percent of the total sales.

“Consumers were obviously still willing to purchase properties that were reasonably priced,” said Mr. Tan, referring to the fact that only one of the top-selling projects breached the $1,500 psf mark, and then only barely.

“With a continually strengthening economy, the threshold for the PSF price that buyers are willing to pay is slightly higher, hence the increased activity within the $1,000–$1,500 psf market.”

Normally, September sees slower sales than August, as the year begins to wind down. And the new property cooling measures, together with the resulting “wait-and-see” attitude for many buyers in the mass market segment, should see a further reduction in the number of units that would normally be sold.

“Despite many developers holding their prices, over 350 units have already been sold in the first half of September,” revealed Mr. Tan, who added that 250 came from NV Residences alone.

“Furthermore, the mid- and upper-end markets will not be affected as much by the new measures as they have the financial power to pay the 30 percent cash-and-CPF down payment and settle for a 70 percent bank loan, two of the main cooling measures affecting private property purchases.

“Thus, it will be the mass market which will be the most affected, with HDB upgraders who are now unable to afford the 30 percent cash-and-CPF down payment being noticeably absent.”

Mr. Tan expects about 700 to 850 private property units to be sold in September, with perhaps 500 to 800 units sold per month for the last quarter of 2010.