Analysts look beyond April’s house price gains

Published 31 May 2011
The Business Times
By Kalpana Rashiwala

With policy changes in the air, latest numbers could represent fork in road for market

Mass market condo prices have been racing ahead, but a moderation may be around the corner.

Market snapshot - Singapore Residential Price Index (till Apr 2011)The NUS Singapore Residential Price Index (SRPI) increased 14.1 per cent in April year-on-year for the Non-Central Region, while the index for the Central Region, which covers districts 1-4 and 9-11, rose at a slower pace of 5.6 per cent over the same period.

The indices track prices of completed private apartments and condos. Market watchers say the findings mirror the primary or developer sales market, where suburban condos have led the price surge for private homes over the past two years.

Property industry players generally do not expect mass-market condo prices to keep surging at the same pace.

An early indicator of this may be a slight pullback in buying in this segment reported by some sources this month, ever since the government announced that the monthly household income cap for those buying new Build-to-Order (BTO) flats from the Housing & Development Board (HDB) could go up from $8,000 currently to $10,000, pending a review.

This could siphon off some demand from the HDB resale market, which in turn could put a lid on HDB resale flat prices and impact HDB upgraders’ ability to move to private homes.

A seasoned property consultant said this effect would be more pronounced with the government announcing in recent days a major stepping-up in BTO supply this year as well as its plans to release more BTO flats in mature estates next year.

Analysts also widely expect an increase in the income cap for those buying new Design, Build and Sell Scheme flats (which are public housing flats designed and developed by the private sector) and executive condos (a hybrid of public and private housing) from $10,000 currently to say, $12,000.

This could further siphon off some demand from the 99-year mass-market private condo segment.

BT has learnt that the uncertainty about the impact of any policy changes in income ceilings for new HDB flats on the private housing market is causing a slight pull-back in demand.

A developer said the outlook for mass-market condos demand and prices will depend on how government calibrates its land supply. ‘Perhaps they should increase supply for EC land but reduce the quantum of land for 99-year private condos,’ he suggests.

‘We cannot expect mass-market condo prices to increase in the same order as what we’ve seen in the last two years because for one, interest rates will move up, albeit a little, may be 25 to 50 basis points as we go forward into 2012,’ he added.

CB Richard Ellis executive director (residential) Joseph Tan says the increase in supply of new mass-market or entry-level private condo launches coming from land sold at Government Land Sales tenders point to more muted increases in home prices in this segment for the rest of 2011.

He noted that a key reason for strong sales and price increase for mass-market private condos in the past two years has been developers’ strategy of building smallish units which they have been able to sell at higher per square foot prices, so long as the lumpsum investment size is kept affordable.

‘One-bedroom units can sell well if they’re priced below $600,000-650,000, while three-bedders of about 1,050 sq ft can move if their prices don’t exceed $1 million,’ Mr Tan said.

At Elias Road, 160 units at the Belysa EC project have been sold since the project was released on May 25, inclusive of the maximum 15 units (5 per cent of the project’s 315 units) set aside for second-time home buyers in the first month of launch. The average price is $670 psf.

Next week, Far East Organization and Frasers Centrepoint are expected to preview the 99-year Seastrand condo in Pasir Ris. It will have 473 apartments (one to four-bedroom units) and is tipped to be priced around $850 psf on average. In the Newton area, City Developments is expected to roll out Buckly Classique in late June. The low-rise freehold condo will have 64 units comprising two to four bedders and penthouses.

National University of Singapore’s flash estimates for April show that the overall SRPI rose one per cent month on month and 10.4 per cent year on year.

The sub-indices for the Central and Non-Central regions reflect month-on- month gains of 0.8 per cent and 1.1 per cent respectively in April.

The Non-Central region sub-index is now 23.6 per cent above its pre-Global Financial Crisis peak in January 2008. The Central Region sub-index on the other hand is 0.8 per cent shy of its November 2007 pre-crisis high. This leaves the overall index as at April some 13.6 per cent above its pre-crisis peak, which was also in November 2007.

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