$1000 psf the “new normal” for condos

It was good while it lasted, but the second wind to Singapore’s residential property market seems to be blowing a lot softer coming into May than it did in the first part of the year. Worst affected – mass residential markets like those in the east coast. And the main reason is that prices have already rebounded to peak levels, and in some cases have already surpassed peak levels.

Added to that are the government cooling measures announced in February which have deterred property flippers. Those measures, which forced banks to give loans at 80% of valuation, down from 90 %, and a one year holding period for stamp duty concessions, may not have turned off real investors, but they haven’t helped sentiment either. April may be looked back on as the high point for mass residential in 2010, with Mid-end projects selling like hot cakes as properties in the Outside Central Region attaining prices of over $1000 psf.

The Vision at West Coast Crescent, in particular changed hands at a median price of $1,050 psf for its 236 units. “This is a breakthrough in the private property mass market. However, this may not be sustainable in the long-term,” said Propnex CEO Mr Ismail. And government figures also showed $1000 psf was the magic spot, with properties priced from $1,000 psf to $1,999 psf accounting for 51.8% of all the transactions in March. Analysts such as Colin Tan, head of research and consultancy at Chesterton Suntec International commented that most buyers are largely investors, who tend to go for smaller one and two-bedroom units as they are easier to offload.

Foreign investors, who tend to invest in prime district units, are also streaming in as the economy picks up growth. Despite the possibility of local interest rates possibly rising in tandem later this year should US hike its rates, analysts remain upbeat that private residential properties will maintain their buoyancy.

Colin Tan from Chesterton Suntec International succinctly concluded, “If the rise is small, the buying will continue. If it is significant and rapid, property prices may start to correct.”

Others are not so sure. Property analysts from Deutsche Bank predict that low end properties may only rise by 3 % overall this year.

Record central launches
March was a good month for home sales as developers sold 1,761 new private units in March 2010, up 47% mom from the 1,202 units sold in Feb led by record launches and sales in the core central region (CCR). Significantly, Mar sales volumes are now back to Aug-09 levels, according to analysts from Goildman Sachs.

With this, 1Q10 sales rose to 4,446 units vs. 1,860 units in 4Q09, and alone accounted for 30% of 2009’s near-record sales volumes (14,688 units). Overall, prices for rose 5.1% qoq in 1Q10, moderating from the 7.4% increase in 4Q09; led by mid and prime segments. By segment, Prime (CCR) sold 717 units(+37% mom), the mass market segment (Outside Central, OCR) sold 776 units (+38% mom), while the mid-end segment (Rest of Central, RCR) saw a pick up from a low base, 268 units (+133% mom). Projects selling well include: The Vision (OCR, 236 units, S$1,050psf), The Estuary (OCR, 212 units, S$770psf), and 76 Shenton (CCR, 202 units, S$1,900psf), noted the report.

Circle Line effect
One property play that is working for many is buying properties near the newly opened Circle Line. According to a Credit Suisse report, property located near the Circle Line stations fared better than the overall real estate market.

Prices of private homes like Springbloom and Chiltern Park around Lorong Chuan station have risen 27 percent to 40 percent since June 2008.
Most of the 11 Circle Line stations are in established areas, such as MacPherson, Dakota, Mountbatten, Stadium and Bras Basah.

With commuter journeys shortened by as much as 15 minutes for a journey from Woodlands to Paya Lebar, residential projects coming up near the Circle Line stations have seen brisk business as residents look towards projects near to MRT stations.

The preview of UOL’s Waterbank- a 616-unit condominium located next to Dakota MRT in April drew an overwhelming response, with 40% of units sold. Prices of typical units range from above $1000 psf to above $1,300 psf, and buyers were mainly Singaporeans. Units range from 484 sq ft for a one-bedder to 2,820 sp ft for a penthouse.

Next to Waterbank, developers Ho Bee Group and NTUC Choice Homes are left with mainly 50-odd four bedders at the 348-unit project Dakota Residences. The project is expected to TOP in August this year.

According to Propnex’s Ismail, “Properties near amenities, particularly along the MRT are always valued greater than those that are far from it.” And the first four months of 2010 were also good for HDB owners, though not necessarily buyers, with some all time high prices for HDB transactions, including a HDB penthouse maisonette in Queenstown, which was almost sold for S$900,000 seeming to be bridge the price gap between private properties and public dwellings.

According to Adam Tan, spokesperson from P & N Holdings Pte Ltd, “Buyers from these two segments are generally more price sensitive, targeting property with prices ranging from S$700-S$850psf in the mass market segment, and S$1,100-$1,300psf in the mid-tier segment.”

Most purchasers are home-stayers and a significant group of them fall into the HDB-upgrader category. However, recent price indices from HDB and URA are witnessing a widening gap, which could lead to a more investor-oriented market in the second half of the year.

Luxury still room to grow
Tay Huey Ying, Director for Research and Advisory, Colliers International advised that based on URA’s latest flash estimate for 1Q 2010, “High-end properties which have lagged behind mass-market properties in the recovery path, with average prices still below the recent peak in 2008 by 6.7%, are likely to lead in price growth in 2010.”

“In contrast, while the price index for mass-market homes have already surpassed their 2008 peak by some 7.7%, this would likely limit the strength of price growth for mass-market homes in 2010, given that mass-market home-buyers are typically upgraders who are price-sensitive.”

High-end segment shines; Luxury sales more modest
Goldman Sachs noted, however, that luxury sales continued to be strong, with nearly 43% of the total units sold transacting at over S$1,500psf vs.41% in February and 38% in January.

“Notably 20% of units sold above S$2,000psf in March vs. 10% in February but luxury take-up was more modest with 2 units selling at over S$3,000psf vs. 8 in February , including a unit at Nassim Park Residences which sold at S$3,465psf.”

This is a sentiment shard by the analysts at Deutsche Bank, who note that luxury property prices are still5 % to 150 % below the peak and demand should be supported by the improving economic outlook, low interest rates, and more foreigners buying. Developers had been placing some quite aggressive bids in government land sale tenders, which could indicate higher prices to come.