Tuesday, October 4, 2011

Mass-market condo prices rise further in Q3

(SINGAPORE) Prices of HDB resale flats and mass-market private condos climbed smartly in the third quarter, the latest official flash estimates show.
This reflects substantial latent demand, say property analysts. 'The increase in Singapore's housing stock - both public and private- in the past few years has not kept pace with the increase in population growth, both through immigration because of high growth in jobs, as well as new household formation,' says Jones Lang LaSalle's South-east Asia research head Chua Yang Liang.

Most property consultants and a major residential developer BT spoke to said HDB resale and mass-market private condo prices are likely to continue to outperform the market in the near term - barring major shocks.

'However, the rate of price increases is likely to moderate in the fourth quarter as people start to think more cautiously and rationally given the uncertainties (about the global economy),' said Ong Choon Fah, chief operating officer, SE Asia, at DTZ.

Urban Redevelopment Authority's flash estimates show that the overall private home price index rose 1.3 per cent quarter on quarter in Q3 this year. This was a slower rise than the 2 per cent q-o-q increase in Q2 and marked the eighth consecutive quarter of moderation in the rate of increase since Q4 2009.

URA's geographical breakdown of price indices for non-landed private homes reflects a halving in q-o-q price growth for Core Central Region (CCR) - which includes the traditional prime districts 9, 10 and 11 as well as the financial district and Sentosa - to 0.8 per cent in Q3 from 1.6 per cent in Q2. In Rest of Central Region (RCR), the increase was 1.1 per cent in Q3, same as Q2. However, the index for Outside Central Region (OCR), where mass market condos are located, escalated 2.1 per cent in Q3, a faster clip than the 1.7 per cent increase in Q2.

HDB's resale flat price index posted a 3.8 per cent q-o-q gain in Q3 - faster than the 3.1 per q-o-q hike in Q2 and the biggest quarterly rise since Q3 last year, when the index climbed 4 per cent.

HDB said yesterday that it would launch 4,200 Build-To-Order flats in places such as Bedok, Bukit Panjang, Hougang, Punggol and Yishun next month.

ERA Realty Network key executive officer Eugene Lim noted that although HDB has stepped up launches of new flats, these will take time to build. In the meantime, the supply-demand imbalance continues to push up prices of completed HDB flats in the resale market. 'With HDB resale flat prices at an all-time high, this has strengthened HDB flat owners' ability to upgrade to mass-market private condos,' he added.

The launch of new mass-market condos also supported the rise of condo prices in OCR, said property consultants.

Credo Real Estate executive director Ong Teck Hui said: 'The mass market has been relatively buoyant, supported by demand from mainly owner-occupier buyers. The proportion of private homes (excluding exec condos) sold by developers which were in the OCR has been increasing steadily from 45 per cent in 2010 to 53 per cent in the first quarter of this year, 61 per cent in Q2 2011 and around 68 per cent for July and August combined,' he added.

CB Richard Ellis executive director Li Hiaw Ho said: 'Strong sales of new projects such as EuHabitat (median price of $1,015 psf), The Luxurie ($1,053 psf), Seastrand ($930 psf) and Thomson Grand ($1,300 psf) could have contributed to increases in the price indices in Q3 for both OCR and RCR.'

URA's overall private home price index has risen 5.6 per cent so far this year from Q4 2010. Colliers International director Chia Siew Chuin reckons the index could probably increase one per cent in Q4 over the Q3 level, followed by increases of around one per cent or less per quarter for next year. 'Potential home buyers will likely remain cautious, limiting their propensity to commit to prices above the last done, while developers are not expected to be in a hurry to cut prices on the back of still-healthy demand in the primary market,' she added.

Knight Frank research head Png Poh Soon says that if the Singapore economy tanks, private home prices could correct by about 5 per cent year on year.

Credo's Mr Ong said that 'it will be a bit difficult to say when the Singapore economy slows down and the extent to which it affects housing demand'.

ERA Mr Lim said the prices of HDB resale flats may continue to rise unless there are policy changes that can increase the supply of resale flats put up for sale.

He suggested that the government should spare existing HDB flat owners who are moving into another public housing flat from the lower loan-to-value limit of 60 per cent on their new purchase, since such buyers will sell the first flat once they've bought the second one. 'This measure has slowed supply flowing into the HDB resale market.'

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