Consultants see no glut in private homes
Business Times: Sat, Apr 28
SOME property consultants are starting to switch their views on the private housing market from an oversupply story to one of potential shortage, especially in the hot-selling Outside Central Region (OCR), based on the latest Urban Redevelopment Authority supply and demand numbers.
Even as official figures show that developers launched and sold a record number of private homes in the first quarter, URA noted that this was fuelled by small apartments that developers have been pushing to keep lump-sum prices affordable.
The URA's benchmark private home price index fell 0.1 per cent quarter-on-quarter (qoq) in Q1, matching its earlier flash estimate.
However, it was the industrial property market that outperformed every other segment of private real estate space, both in terms of price and rental.
The price index for industrial property rebounded 7.3 per cent from the previous quarter. This, after slowing down to a 4 per cent rise in Q4 2011 from a 7 per cent increase in Q3 2011. The office price index was unchanged while the shop price index was up 0.2 per cent.
Likewise, URA's All Industrial rental index rose 1.8 per cent in Q1, surpassing gains of 0.3 per cent for the private residential rental index and 0.1 per cent for the shop rental index and a 0.5 per cent dip in the office rent index.
Developers launched 6,903 private homes in Q1, up 68.2 per cent. Their sales rose 81.1 per cent to 6,526 units. About four-fifths, or 5,275 units, of the sales came from OCR, where mass-market homes are located.
Credo Real Estate executive director Ong Teck Hui pointed out that the number of units developers sold in OCR in Q1 was about half the 10,374 they sold in the same region last year.
Meanwhile, the stock of homes that have yet to be sold in uncompleted projects with planning approvals (either provisional or written permission) fell from 39,184 at end-Q4 to 36,552 at end-Q1, pulled down by a 15.8 per cent drop in OCR to 16,928.
"What we need to watch out for is whether the build-up in potential supply is too slow relative to market conditions especially in OCR," said Mr Ong.
Savills Singapore research head Alan Cheong noted that the sales of 6,526 units works out to 26,104 on an annualised basis. "At this rate, initial fears of having 47,819 yet-to-be-sold units (including those in projects without planning approvals) in the pipeline causing an oversupply become passe, reversing market watchers' perception of a gross oversupply to gross undersupply situation."
URA's sub-index for non-landed private home prices in OCR rose 1.1 per cent in Q1, suggesting that the uptrend could continue. In contrast, indices for Core Central Region (CCR), which includes the choicest residential locations, and Rest of Central Region (RCR) each slipped 0.6 per cent.
DTZ Asia-Pacific research head Chua Chor Hoon expects OCR to remain the price outperformer, either staying flat or easing up to 5 per cent for the full year, while CCR will be worst hit, with a 5-10 per cent slide.
An interesting trend is that in all three regions, prices of uncompleted non-landed homes were stronger than completed properties, reflecting weaker prices in the resale market. Although the total number of resales of completed private homes slipped 29.4 per cent to 1,906 in Q1, this was due to weak numbers in January and February that were partly offset by a significant recovery in March.
"As prices of completed properties in CCR and RCR have fallen in Q1, buyers are moving back to the secondary market where they see more value for money," says DTZ's Ms Chua.
Subsales - secondary market deals of uncompleted properties and often a proxy for speculative activity - halved from 632 in Q4 to 317 in Q1. Their share of total private home transactions slipped to just 3.6 per cent for Q1, following the steep seller's stamp duty (SSD) rates introduced in January 2011 to deter short-term trading of private homes. This has shrunk the pool of buyers who can offload their units in the subsale market without incurring the SSD.
At the same time, those thinking of buying a property these days are more likely to head for a new developer launch. This allows them to stretch the purchase payment over the three years or more that it takes for the project to be completed and by which time they could sell their property without having to incur any SSD or they could chalk up just a small SSD.
The most recent property cooling measure - the additional buyer's stamp duty, which is as high as 10 per cent for foreigners who buy any residential property here - introduced on Dec 8, seems to have had its desired effect. URA figures show that foreigners' share of uncompleted homes sold by developers dived to 6.2 per cent in Q1 from 17 per cent in Q4. With speculative demand and foreign buying curbed, the main bugbear for the authorities now is exuberant developer sales, analysts say.
URA figures show that 27 per cent of the 6,526 units (including 68 completed units) comprised small units (of 50 square metres or below), up from 15 per cent in Q4. The 27 per cent is probably an all-time record.
Units costing up to $750,000 made up 42 per cent of developers' Q1 sales, up from 25 per cent in Q4 and the highest since 52 per cent in Q1 2009, when property buying fervour recovered after the global financial crisis.
Reports have shown that the bulk of small apartment buyers have HDB addresses and are hence unlikely to be considering upgrading to a shoebox unit, suggesting some exuberance in investment demand for small units - although some may be buying for their children.Source: Business Times