Published 3 March 2011
The Business Times
By Ng Wei En and Chua Chor Hoon
MASS and mid-tier properties were star performers last year, with developers testing new benchmark prices in the suburbs as buyers turned out in force, attracted by low interest rates and a strong economic recovery.
Mass market condominiums are found in suburban areas, selling in the range of $600-$1,000 per square foot (psf), while the mid-tier properties would be in the range of $1,000-$1,400 psf.
Both in terms of volume of sales and prices, these segments surpassed their previous peaks. Using the Urban Redevelopment Authority’s Outside Central Region (OCR) price index as a proxy for the mass and mid-tier markets, prices rose 15 per cent in 2010 and were 19 per cent higher than the last peak in Q2 2008.
But will they continue to shine in 2011, after the latest round of cooling measures?
The earlier cooling measures in August 2010 did little to dampen demand. Despite the wide-ranging measures affecting most buyers in both the public and private housing sectors, activity slowed for just two months in September and October. The OCR price index rose 2.1 per cent in Q4 2010, just slightly less than the 2.2 per cent in Q3 2010.
This could have prompted the government to announce a tougher set of measures in January this year. The equity payment was raised to 40 per cent for buyers with existing housing loans and those who sell their properties within four years of buying it face a hefty stamp duty of 4-16 per cent.
The majority of launches this year will still be in the mass market and mid-tier segments, mainly from developments on Government Land Sales sites and collective sale sites that were bought in 2010. Hence, the bulk of purchases is likely to be in these segments.
However, sales volume in the primary market is expected to be lower in 2011 as the January measures will deter short-term investors and cash-tight buyers. Although overall demand will fall, not all investors will withdraw from the market as evident from the January sales.
Some investors intend to hold their properties for the long term. Others may find the 4 per cent seller’s stamp duty by the fourth year of sale acceptable and shift their focus to off-the-plan units that will be completed three to four years later. Those buying for rental yield would, however, favour completed or near completed projects.
The take-up of new units is forecast to be in the region of 9,000-12,000 compared to the record 16,292 units sold last year. This takes into consideration the possibility of more measures to curb demand if take-up rebounds over the next few months.
Nevertheless, prices should remain largely stable in 2011, with any decline likely to be capped at 5 per cent for the whole year, on account of the low interest rates, a growing economy, and financially strong developers with limited landbanks.
Projects with an edge
The residential market will be more challenging this year as buyers will be more selective following the recent measures. Projects with the following attributes will have an edge:
According to the latest Census report, the proportion of single citizens aged 30-34 rose by 9 per cent and above for both genders between 2000 and 2010. So there is a growing group of singles wanting to buy small units for their own occupation which need not be in the CBD.
Waterbank at Dakota and The Scala – both close to MRT stations along the Circle Line which started running in April 2010 – sold out within a couple of months of their launches. When plans for Downtown Line 3 were announced last August, it boosted the sales of new projects along it, such as Waterfront Gold at Bedok Reservoir.
High tender bids were received for a white site next to the Jurong East MRT station and for the Lakefront Residences plot near the Lakeside MRT station. The Lakefront Residences, launched in November 2010, saw good response even though units were priced above $1,000 per sq ft. That was much higher than the $600-650 psf that the adjacent Caspian was launched at in early 2009.
However, a cluster of new projects there in the past two years like The Arte, Vista Residences, Cube 8, 368 Thomson, D’Mira, Prestige Heights and The Mezzo from the numerous enbloc sales that took place in 2007 have given the area a fresher look and lifted prices above $1,000 psf.
While Singapore’s economic prospects are bright and there is ample liquidity to support residential prices, there are some challenges on the horizon. Apart from the sluggish growth in developed countries, the residential sector faces substantial completions in the pipeline and the possibility of more policy measures to cool the market. Property buyers are thus likely to take extra care when looking for opportunities in the residential sector.
Ng Wei En is research analyst and Chua Chor Hoon is head of South East Asia research at DTZ