PRIVATE home prices in 2011 could fall by up to 5 per cent but will be largely stable, says a new report by DTZ Research.

The firm expects recent government cooling measures to reduce sales volume, but not cause a significant fall in prices.

Sales volume is expected to fall as short-term speculators will be weeded out by the hefty seller's stamp duty (SSD) of up to 16 per cent within the first year of purchase. However, not all investors will withdraw from the market as some may find the 4 per cent SSD by the fourth year of sale to be surmountable. They could shift their focus to buying uncompleted units with completion dates three to four years later, said DTZ.

The property consultancy expects prices this year to be underpinned by economic growth, low interest rates, strong holding power of developers, the appreciation of the Singapore dollar and inflow of foreign purchasers due to the property market clampdown in mainland China and Hong Kong.

In particular, landed homes, small apartments and high-end apartments will be be less affected by the measures, said DTZ's executive director for residential, Margaret Thean.

'Small units with their low price quantum will continue to attract investors with spare cash or singles wanting their own units. The four-year seller's stamp duty will have little impact on landed homes as most purchase them for long-term owner-occupation. And high-end apartments will continue to see foreign interest,' Ms Thean said.

But DTZ does not rule out the possibility of more government measures should demand remain at a high level after a period of cooling off.

The report also noted other challenges in the form of a spike in the number of completed units in a few years' time as the government is releasing a record high number of homes through the public housing and government land sales programmes. There is also uncertainty over the strength of recovery of the major western economies. If they recover well, interest rates will increase and reduce the affordability of mortgage payments. On the other hand, if they continue to languish, sentiment in Singapore's property market could eventually be hit.

Published January 28, 2011

By UMA SHANKARI

Source: www.businesstimes.com.sg

Last year was a bright year for Singapore's private residential market. Indeed, it was a year of records, particularly for developer sales activity and prices of suburban private homes. However, with the announcement of the latest Government cooling measures effective on Jan 14, such exceptional performance will cease to be relevant for extrapolating future private residential market performance.

In the latest Government cooling measures, sellers' stamp duty was hiked and the loan-to-value ratio for second and subsequent homes was reduced, reflecting its persistence to minimise speculation and investment in private homes.



CONVENTIONAL PERCEPTIONS

The common belief is that the first hit by these measures will be speculators - the main culprits behind the price escalations, particularly those of suburban condominiums.

Indeed, with the revision in sellers' stamp duty, buyers are less likely to have the intention to re-sell and profit in the short run, unless property prices can grow well in excess of 16 per cent over a year or 12 per cent in two years, considering other costs and financing.

Speculators aside, investments are discouraged, particularly with the lowering of the loan-to-value ratio for subsequent homes.

Genuine buyers and high-end residential property buyers may be less impacted but with the demand pool shrinking, it is widely anticipated that property prices will fall.

Notwithstanding the pessimism, there is hope for the private residential market, underpinned by a sustained economic recovery and lit by ample liquidity.

While the tough measures can dampen sentiment, this may be viewed as moderating home buying interest until the sentiment eventually reaches a steady state - as buyers remain cautious while adjusting to the new environment.

Also, a reduction in home sales this year may not necessarily mean a significant price correction - for it leads to a more sustainable base in home buying that is not fuelled by speculation and excessive financing.

Some speculation is necessary to drive market momentum but excessive flipping that leads to asset bubbles can cripple home prices.

The new round of measures is harsh to many, for it eliminates speculators and, most importantly, it deters investors.

It must be recognised that investments in private residential properties are not detrimental for the market. But in times of overwhelming housing demand, the priority of genuine owner occupiers should prevail, to assist every aspiring eligible buyer to have an opportunity in private home ownership.

Additionally, many investors and speculators would have already profited from previous housing booms and may be seen to have a weaker case to compete with the rest, such as younger entrants, who have yet to enjoy the benefits of a private residential property.




SELF-FULFILLING PROPHECY

The common question asked about the impact of the cooling measures is: How much are prices expected to fall in the year?

While there are various well-supported forecasts, it should be appreciated that price falls are often sticky in economic viable times.

Price falls can be a result of a self-fulfilling prophecy as well - where prices can indeed correct as home buyers persistently believe in an imminent decline and refuse to enter the market. In such a context, buyers have also been consistently advised prices may suffer drastic falls.

If a short-term price correction is almost a certainty given the severity of the cooling measures, the more crucial question would be how long this may last - and thereafter, what are the chances of a revival? If the economic recovery can be sustained this year, with ample liquidity, a 5- to 7 per-cent-price-correction for suburban condominiums in H1 '11 can be potentially stabilised or gradually revived in H1 '11, bringing prices at the end of this year to be comparable or slightly lower than the beginning of the year.

Moreover, experience has shown that when assets are attractively repriced, it can potentially encourage sidelined buyers to enter the market if overall economic fundamentals are in place.

Although the current cooling measures may be very restrictive, a potential buyer may still purchase after much deliberation if prices ultimately become affordable. Suitable property repricing can release latent demand from prospective owner occupiers, providing support to overall demand base.

And if prices see continual correction throughout the year, there would be significant opportunities for a turnaround after the year as the new demand base may emerge stronger, if economic fundamentals stay firm.


STRUCTURAL CHANGE IN BUYING PREFERENCES?

It is a challenge to cater to competing concerns of all stakeholders and further so to achieve market equilibrium.

To achieve the steady state, fine-tuning policies may even be necessary, such as the withdrawing or mitigating of some of the cooling measures along the way.

But before the equilibrium is reached, the pain from the calibration process can be relieved with nimble adjustments from market participants.

For one, developers are likely to hold phased launches of selected projects in H1 '11 to test overall home buying interest, pricing and observe structural changes in buying preferences.

A structural change can develop as forthcoming home buyers would likely be mainly owner-occupiers instead of investors and speculators.

A different product mix may have implications for a project's breakeven cost and land tender prices.

The recent home buying euphoria had created unnecessary anxiety among many potential buyers.

Prior to the cooling measures, there were many who bought with a view that not buying a property will mean losing the opportunity ahead. While they are not speculators, they may have created undue stress for themselves and everyone - aggravated by some who stretched affordability even if they are genuine buyers.

The material justification for a genuine home buyer should be his confidence in financing his home and not simply his intention to own a piece of property for occupation.

The slowdown in home buying can provide many stakeholders time to compare aspirations with the reality, where home buying is after all a major decision involving huge capital.

If the calibration is successful, it may ultimately sculpt an environment where genuine homebuyers are completely confident in the buying decision, including considering financial contingencies.


by Ong Kah Seng

05:55 AM Jan 28, 2011

Ong Kah Seng is senior manager, Research - Asia Pacific at Cushman & Wakefield.





Source: www.todayonline.com

Published January 10, 2011


CapitaLand to launch 1,700 mostly upmarket homes
It expects prices of high-end units to rise 10-15% this yr

By UMA SHANKARI

(SINGAPORE) Property group CapitaLand will launch around 1,700 new homes in Singapore this year as it plans to ride on an expected 10-15 per cent growth in high-end home prices.

'We remain bullish about (the prospects of) the residential market in Singapore, particularly for the segment our products are in,' said Wong Heang Fine, chief executive of CapitaLand's Singapore residential arm. He was speaking to reporters on Friday at a briefing on the unit's prospects.

CapitaLand expects private home prices to rise by a further 5-10 per cent in 2011 after they climbed 17.6 per cent in 2010. But for the high-end segment, the outlook is even brighter; the group's view is that prices in that segment could climb by 10-15 per cent this year.

This should benefit the developer, which plans to roll out another 1,700 mostly upmarket units in five different projects - The Nassim, Urban Resort Condominium, The Interlace, d'Leedon and the residential component of a new development at Bedok Town Centre - in 2011.

With the exception of the Bedok Town Centre development, the remaining four projects will all be high-end or luxury offerings.

CapitaLand has already started marketing The Nassim and Urban Resort Condominium, but will officially launch both projects in Q1 2011.

At the freehold Urban Resort Condominium, 14 out of the 64 units available have been sold as at end-November 2010, data from the Urban Redevelopment Authority (URA) shows. CapitaLand expects to sell the remaining units for upwards of $3,000 per square foot (psf) each.

Sales at The Nassim, a 55-unit project at Nassim Hill on the former ANA Hotel site, have yet to start. CapitaLand declined to provide the expected pricing for the project, but said that units in other developments in the area are selling for $3,500 psf and more.

The group will also roll out more units in two developments it launched in 2009 and 2010 - The Interlace and d'Leedon - in Q1 2011. This will be followed by units in a mixed-use project at Bedok Town Centre on the site CapitaLand bought in a government tender in 2010. That project could be launched in the second or third quarter of 2011.

CapitaLand is also looking to replenish its land bank, said the group's chief executive Liew Mun Leong. He said that the group was interested in sites made available by the H1 2011 government land sales programme as well as collective sale sites.

The property group is coming off a strong 2010. Last year, CapitaLand sold 800 homes in Singapore, 33 per cent more than the 600 homes sold in 2009. The total value of sales also rose 54 per cent year-on-year to $1.85 billion.

CapitaLand shares lost 2 cents to close at $3.88 on Friday

Source: www.businesstimes.com.sg

Experts say mass-market condos will lead housing demand this year

by Joanne Chan
05:55 AM Jan 07, 2011

SINGAPORE - With private home prices at record highs, industry players expect developments catering to the mass market to lead demand this year.

Property is seen as a safe and appreciating asset, they say, adding that Singapore's growing economy and low borrowing rates have injected ample liquidity into the market. But even as property is viewed as a good investment, affordability will be key as prices continue to trend higher, they add.

With the Housing and Development Board resale market largely closed off to private property owners, those looking for a second property to invest in are now eyeing mass-market condominiums.

Mr Chris Koh, director of Dennis Wee Group, said: "They already have one private property. The funds that they have are very limited to invest in another high-end private property. They had thought of a HDB flat a year ago, but now they've decided to buy another mass-market, lower-end private property."

Cooling property measures introduced on Aug 30 last year disallow dual ownership of private property and an HDB flat. A private home owner has to sell off his property before he's allowed to buy an HDB flat.

Foreigners settling here will also drive demand for mass-market condos - typically those going for $1,000 psf or less.

Mr Koh added: "We have two groups of foreigners. We have foreigners who are very rich, and there are foreigners who come to Singapore who just want a new place for their children to grow up. They are not as rich as the high-end. So a lot of them enter the mass market. They will buy condominiums near public schools. They will buy condominiums near public transportation."

Foreign investors who traditionally might have snapped up more expensive developments are also thinking twice.

Mr Colin Tan, Chesterton Suntec International's head, research and consultancy, said: "People see risk. So even though they may have enough cash to put a downpayment for something high-end or in the mid-tier, I think sometimes, in order to mitigate the risk, they may still go for the mass market."

Despite a third round of property cooling measures last August, Singapore is still widely seen by investors as a good place to park their money, especially when compared to other countries in the region which have introduced tougher anti-speculation measures.

Hong Kong, for example, imposed a 15-per-cent-stamp duty on all properties sold within six months of purchase.

Market watchers expect private home prices to inch up 1 to 2 per cent each quarter this year, in line with Singapore's expected economic growth.

Source: www.todayonline.com

Published December 29, 2010


High-end condos can't keep pace with mass-market hikes
Prices in Non-Central region top pre-crisis high, Central region 3.7% below peak


By KALPANA RASHIWALA

(SINGAPORE) The latest flash estimates for November from the National University of Singapore (NUS) show that prices of non-landed private homes in Singapore's Central region (districts 1-4 and 9-11) have appreciated 7.9 per cent in the first 11 months of this year from end-2009.


Over the same period, the Singapore Residential Price Index (SRPI) sub-index for the Non-Central region rose at a faster clip of 12.9 per cent. As a result, the overall SRPI increased 10.7 per cent year to date.

SRPI, compiled by the NUS Institute of Real Estate Studies, covers only completed properties.

The Central region sub-index for November is still 3.7 per cent shy of its pre-Global Financial Crisis peak in November 2007. On the other hand, the sub-index for the Non-Central region in November has already surpassed its January 2008 pre-crisis peak by 15 per cent. As a result, the overall November 2010 index is about 7.6 per cent above its November 2007 pre-crisis high.

The latest indices from NUS tally with what property agents have been reporting from the ground - that mass-market condo prices have scaled fresh records this year while prices of prime and luxury condos have yet to touch their 2007 records.

DTZ executive director (consulting) Ong Choon Fah said that entry-level suburban condos have enjoyed strong demand this year, riding on upgrader demand amid a buoyant HDB resale market.

'In addition, the trend of developing a higher proportion of smaller units in private residential projects has spread from the prime districts (where rental demand is stronger) to the suburbs - and this has also helped to boost sales of mass-market projects by making the lump sum investment more palatable to buyers.'

Mrs Ong also pointed out that these days, developers of suburban projects are offering some of the innovative features which in the past were available only in prime district projects - such as sky gardens.

Knight Frank chairman Tan Tiong Cheng said that the increase in high-end condo prices had not been so sparkling this year due to more subdued foreign buying compared with the previous bull run in 2007.

'The foreign buying back then was from a wider spectrum. These days, buyers from the West, Middle East and Russia seem to be out of the equation. Also Western bankers were a significant buying contingent in 2007 but post-crisis, banks are less generous with remuneration.'

Month on month, the overall SRPI dipped 0.2 per cent in November. The sub-index for the Non-Central region too eased 0.3 per cent but the Central region sub-index was flat.

Since the last round of property cooling measures on Aug 30, the Central region sub-index has eased 0.4 per cent while the non-Central index has strengthened 0.9 per cent. As a result, the overall index in November was 0.4 per cent ahead of the August level.

Despite being proven wrong with their earlier forecast of stronger price appreciation for high-end condos compared to mass-market ones for 2010, analysts continue to predict the same trend in 2011, pointing to the already substantial price hikes posted in the mass-market segment. And if the government succeeds in taming HDB resale prices, that will also have an impact on upgrader demand for entry-level condos. Also, any interest rate hike, as well as further property cooling measures, is likely to make a bigger dent on demand in the mass-market segment than on upmarket condos

Source: www.businesstimes.com.sg