RESIDENTIAL PROPERTY | Staff Reporter, Singapore

Property prices could rise by up to 10% next year

The market is going through an early recovery phase.

The Singapore property market is moving upward, but it has yet to break en bloc sales spikes in 2007 and 2011, UOB Kay Hian said.

"Traditionally, spikes in en bloc sales are early indicators of a turnaround in the residential property market in Singapore," UOB said.

The bank said mass-market properties could slightly firm up the market and recovery should reach the mid- to high-end segment.

Property prices could bottom out in 2017, then increase by 5-10% next year.

Collective sales in 2016 to 2017 are still just 21% of the transacted sales within 2006 and 2007, which could mean more room for en bloc sales.

Collective sales value for the first eight months of 2017 went over $3b, surpassing the transaction value in the previous four years.

"However, we believe that we are still in the nascent stages of the en bloc fever, which could run until the end of next year, as a surge in en bloc sales could span between six to eight quarters," UOB said.

Moreover, millionaire owners looking for replacements after en bloc sales could fuel demand for mid- to high-end segments.

Previously in 2006-2007, the en bloc sales cycle took out 10,000 units and resulted in a similar number of millionaires looking for replacements.

For 2016-2017 YTD, 2,000 units have been taken out, with 1,000 to follow in advanced stages.

"As the cycle progresses further, collective sales could be fuelled by more replacement demand," UOB said.

However, a risk of oversupply remains once en bloc fever subsides.

Whilst the en bloc cycle in 2006-2007 took out 10,000 units, it put back twice as many back to the market.

The 3,000 units could yield 12,000 units in new developments.

"Besides, owners’ rising price expectations (if unrealistically high) may deter developers from the en bloc route, if they believe that the margins are not worth pursuing," UOB added.

They also said developers prefer GLS to en bloc sales, because they turn around more quickly compared to en bloc situations.

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