Tuesday, April 2, 2013

First-time buyers prop up non-central prices

The Business Times  |  APRIL 02, 2013
Private home prices inched up only slightly in Q1 in the face of cooling measures

[SINGAPORE] Amid the latest official flash estimate showing a slower quarter-on-quarter increase in private home prices in Q1 2013 than in Q4 last year, some property consultants believe that the latest cooling package in January will have a more lingering impact than the six preceding rounds.

However, prices in the widely watched Outside Central Region (OCR), home to suburban condos, are unlikely to fall this year given the strength of the first-time home-buyer pool, say some analysts.

The Urban Redevelopment Authority's (URA) flash estimates showed its price index for non-landed private homes in OCR still managed to rise 1.7 per cent quarter on quarter in the first quarter, though this was a much slower pace of increase compared with the 3.8 per cent jump seen in Q4. The increase for Core Central Region (which includes Singapore's choicest residential locations) too slowed to 0.4 per cent in Q1, from a 0.7 per cent rise in Q4. In Rest of Central Region (which refers to city-fringe locations), the index was flat in the first quarter after climbing 0.9 per cent in Q4.

URA's overall private home price index inched up 0.5 per cent quarter on quarter in Q1, a slower rise than Q4's 1.8 per cent increase.

"The fact that OCR prices have yet to fall despite seven rounds of cooling measures doesn't mean the measures are not working. They're definitely working, but the size of the first-time home buyer market is very large and that is the one segment that has not been affected by the cooling measures," says Jones Lang LaSalle's (JLL) head of investments and residential Karamjit Singh.

CBRE's executive director, residential, Joseph Tan attributes the relatively strong increase in OCR prices in the first quarter chiefly to the launch of a significant number of projects with good locations near MRT stations.

Said JLL's Mr Singh: "Going by the current measures, I do not think we will see prices decline this year for OCR. For CCR and RCR, prices could start heading towards negative territory with marginal price declines."

Most property consultants expect the URA's OCR price index to outperform the market in 2013 as in the past two years. The increase for the whole of this year is predicted at 3-6 per cent by SLP International, 5-10 per cent by Savills and up to 5 per cent by PropNex.

Savills predicts flat prices for CCR and RCR and reckons the URA's overall private home price index could end the year 3-5 per cent higher. SLP projects an up to 4 per cent full-year rise in the benchmark index and PropNex, an increase of 1-3 per cent.

Many industry players believe that unlike earlier rounds of measures, the bite from the January package will last longer.

Knight Frank chairman Tan Tiong Cheng said: "Investors are severely affected by the lower loan-to-value limits and higher cash down payment, especially for older investors with multiple properties.

"These are the people who chose to buy in the past, but now that they have to foot a bigger cash component, they're more careful. On top of that, given the high number of home completions over the next two years, the rental market is poised to weaken."

SLP International executive director Nicholas Mak, too, agreed that the effects of the January cooling package, combined with shorter loan tenure introduced last October, will have a longer-lasting impact on curtailing investment demand than the earlier rounds of measures.

DTZ's SE Asia chief operating officer Ong Choon Fah highlights that mortgage rates have also started to creep up, which could also "temper some of the exuberant investment demand".

Developers are expected to have sold more than 2,000 private homes in March, after the pullback in February in the aftermath of January's cooling package and due to the Chinese New Year festive period. Some analysts reckon the final figure for Q1 is likely to have crossed 5,000 units - close to last year's average quarterly figure of 5,549. However, resales of completed private homes have slowed sharply amid a buyer-seller price gap, say agents.

On developers' sales this year, Savills Singapore research head Alan Cheong suggests that in addition to first-time home buying, what could fuel transactions could be the Population White Paper, which "inadvertently sent a message to those who can afford to buy a private home, to bring forward their buying - or risk being crowded out".

"But when demand from this group - comprising mostly those purchasing for their children - peters out, where's the next demand driver going to come from?" he asked.

Meanwhile, talk in the market is that Kingsford Development, controlled by Chinese citizens, has moved fewer than 100 units in Kingsford.Hillview Peak, a 512-unit condo. It is said to have begun sales on Good Friday at an average price of about $1,400 per square foot (psf) but in the face of slow sales, gave additional discounts amounting to about $50 psf.

Knight Frank observed that year on year, the URA's overall private home price index in Q1 was up 3.4 per cent. This is similar to the 3.5 per cent year-on-year gain in Q1 last year. And the 7.2 per cent year-on-year hike reflected in the Q1 2013 OCR non-landed private home price index is the largest since the 7.7 per cent rise in Q4 2011.

Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C

Senior Sales Director
DTZ Property Network Pte Ltd (L3007960A)
Email: marshe_inc@yahoo.com.sg

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