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RESIDENTIAL PROPERTY | Krisana Gallezo-Estaura, Singapore
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What does it mean that home prices remain stubbornly high despite cooling measures?

Prices remain at all time high after recovering in 2009.

URA’s flash estimate for the overall private residential property price index in 1Q 2013 released yesterday remain high implying that demand drivers remain fundamentally strong.

On a quarterly basis, prices grew at a slower pace by 0.5% from 4Q12's 0.7% but prices remain at an all-time high after recovering 59.9% from the global financial crisis in 2Q 2009.

Here's what analysts had to say:

Ms Chia Siew Chuin (谢岫君), Director for Research & Advisory, Colliers International

Price growth generally slowed down islandwide. In particular, according to the flash estimate, price growth of non-landed homes in the Rest of Central Region (RCR) came to a standstill after increasing 0.9% in 4Q 2012. Prices of homes in the Core Central Region (CCR) climbed a slower 0.4% QoQ, from the 0.7% increase last quarter. Prices of non-landed private homes in the Outside Central Region (OCR) increased the most, rising 1.7% QoQ, albeit moderating from the 3.8% quarterly growth recorded in 4Q 2012.

With affordability a key consideration, especially after the latest cooling measures in January 2013, mass-market homes in the OCR continued to be popular with most homebuyers. Market response to home sales in the region was positive – on the back of attractive pricing strategies and various forms of incentives offered by developers to entice buyers. These had helped to sustain moderate price increases in the segment.

Looking ahead, the outlook for the private residential market remains cautiously optimistic.

With the market more attuned to the latest cooling measures, the coming months will be the real litmus test for market demand, as more new residential projects – particularly from the ramped up Government Land Sales programme – are progressively launched.

Home demand will continue to be supported by first-time home buyers and public flat upgraders, and incentivized by developers’ creative marketing strategies. Developers are likely to continue dangling sweeteners – to cushion the impact of ABSD – to attract homebuyers, which have proven to be relatively successful in luring homebuyers. These may come in various forms, such as part absorption of the stamp duty, price discounts, early bird or VIP preview prices, among others.

Nonetheless, the seventh round of cooling measures that has come hot on the heels of the mortgage curbs announced in October 2012 serves as a reminder of the government’s unrelenting commitment to tame the market.

Additionally, the growing inertia towards further price appreciation, coupled the sizeable residential home supply that will come on-stream in the next few years, will keep prices in check. The threat of rising interest rates should also contain the risk appetite of home buyers; hence, limiting their propensity to commit to prices extensively above the last done.

These factors should provide for stability and sustainability in the Singapore residential market for the rest of the year. Barring any unforeseen shocks, private residential property prices are expected to continue its flat lining, with projects that feature attractive locational and product attributes enjoying better upside potential.

Knight Frank

The private residential property prices had been trending upwards over the last three quarters of 2012 (-0.1 per cent q-o-q decrease in 1Q 2012, 0.4 per c ent increase in 2Q 2012, 0.6 per cent increase in 3Q 2012 and 1. 8 per cent increase in 4Q 2012).

The slower pace of price increas es in 1Q 2013 suggested that the sevent h round of cooling measures and new property tax policies have had the int ended impact of cooling price escalation of private homes. However, privat e home prices continued to show an upward trajectory despite the meas ures. The q-o-q price increase in 1Q 2013 was significantly higher than that of 1Q 2012, where overall private home prices fell by 0.1 percent q-o-q.

On a yearly basis, overall private home prices increased by 3.4 per cent in 1Q 2013, the highest y-o-y increase since 2Q 2012. Similarly, high-end properties posted a 1. 8 per cent y-o-y price increase in 1Q 2013, the highest y-o-y rise since 2Q 2012, whilst mid-market property prices registered 2.2 per cent y-o-y increase and mass market property prices at 7.2 per cent y-o-y increase, the highest rises since 1Q 2012.

While the recent government policies have partly controlled runaway property price appreciation, market sentiment stayed buoyant throughout 1Q 2013, as evidenced by the high developers’ sales volume in January 2013 (2,013 units), as well as strong sales performances at recent project launches in March 2013 such as Urban Vista, Sennett Residences and D’Nest. The continued buoyant sentiment is fuelled by attractive new launches, low interest rate environment, and healthy employment prospects.

Following the initial knee-jerk reaction from the seventh round of cooling measures as shown by the low developers’ sales volume of 708 units in February 2013, signs of market speculation of another round of property cooling measures may have prompted some homebuyers to enter the private residential market particularly after the Chines e New Year period.

From Knight Frank’s analysis of new sale and resale private home prices, the general price increase experienced in 1Q 2013 is partly attribut ed to the higher price increase in the resale market. Based on the caveats lodged in 1Q 2013, price increase in CCR was contributed from the secondary market, where the average price of high-end resale properties inc reas ed 3 per cent q-o-q from $1, 778 ps f in 4Q 2012 to $1,839 psf in 1Q 2013. Meanwhile, average price of new sale properties in CCR declined 22 per cent q-o-q from $1,982 ps f in 4Q 2012 to $1,552 psf in 1Q 2012.

Similarly, the price increase of mass market private homes in the OCR was also attributed to the secondary market, where average resale price increased 5 per cent q-o-q to $1,027 psf in 1Q 2013; and average new sale price declined 2 per cent q-o-q to $1,042 psf for the same period.

We envis age t hat the buying s entiment in the private residential market would continue to be affected by the cooling measures and tax policies, as prospective homebuyers remain sensitive to price levels with the higher ABS D and cash downpayment. New launches with good location
attributes and attractive price offers would be enticing draws for prospective buyers. Singaporean first-time homebuyers are likely enter the private residential market, as they continue to hunt for their first private home to take advantage of discounted prices offered by developers .

As the residential market absorbs the full effect of the cooling meas ures over the subsequent months, we foresee that the authorities would closely monitor price movements of private homes for a further one to two quarters prior to any implementation of new policies.

Mohd Ismail, CEO, Propnex

With the introduction of the cooling measures in January, price growth for private properties is expected to remain slow moving for the entire 2013—particularly in CCR and RCR. However, mass market properties in the OCR will continue climbing due to their more budget friendly prices and sustained demand from genuine first time homebuyers and investors.

For the entire 2013, I expect overall prices to increase by between 1 to 3%. On the other hand, OCR properties are expected to increase by up to 5%. 

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