Private property prices expected to rise 5%-12%

December 13, 2010 

Private residential property prices are expected to rise between five and 12 per cent next year.

Analysts expect high-end properties to lead the price increase. They say prices in that segment still have room to grow because of the positive economic outlook for 2011.

Robust economic growth forecast of between four and six per cent next year and abundant liquidity are making analysts upbeat.

Karamjit Singh, managing director, Credo Real Estate, said: “The residential market is generally looking very strong, very bright. Having said that, within the various categories, we believe that the mid-prime and prime would do slightly better than the suburban market.

“We see more capital upside in mid-prime, prime. It’s also that segment of the market that has not fully recovered from the all-time peak in 2007, where the suburban market has surpassed and we’re now at historical highs.

“2010 can be considered as a recovery year, where we’re recovering from an economic slump, from a very low base. So the pace of rise of values tends to be faster, quicker. I don’t think it’ll be repeated in 2011, unless there’s an entirely new phenomena that re-prices the property values in general.

“So here we’re talking about a more moderated pace of growth, backed by an overall sense of confidence.”

Industry watchers expect prices in the luxury market to easily push past the S$2,500 per square foot mark.

Donald Han, vice chairman, Cushman & Wakefield, said: “I think the main reason is that Singapore continues to be a very attractive hub for a lot of wealth management centres.

“A lot of the investment banks are beginning to focus in bringing a lot of high net worth investors to park their money here. And as a result, I think some of these amounts will continue to trickle into real estate, and predominantly residential is usually the first stop for some of these investors.

“In addition to that, I think the market has started to see rental increases over in 2010 – rents have gone up by as much as 13 per cent on a per annum basis – and by virtue of the lack of new supply completed in 2011.

“In fact, the number is close to about 6,700 units in 2011, versus an average last 10-year trend-line of 9,700, that is, 30 per cent short of completion. We’ll see a continued increase for rental apartments, and this should be able to push up rentals by at least another 10-15 per cent in 2011.”

Observers expect between 10,000 and 13,000 new private home units to be sold in 2011. In the first 10 months of 2010, over 13,100 private units were sold.

Another segment to watch in 2011 is the enbloc sales market. In 2010, small and mid-sized collective sales, priced below S$50 million, proved to be most successful.

Mr Han said: “I think the momentum will carry on… The borders … will start to be tested. We’re beginning to test now and launching projects which are more than $200 million to as much as half a billion.

“And a lot depends on the state of the market for the residential project marketing. I think moving forward, the market for project marketing will continue to do well. As a result, developers will start to … want to land-bank into the private land supply.

“One of the supplies would be through collective enbloc sales, so continued good performance for collective enbloc. In 2010, we’d probably hit close to $1.5 billion in terms of total sales. We expect this number to double nearer to about $3 billion for 2011.”

For now, observers generally do not expect the government to introduce any additional property cooling measures, at least within the first half of 2011.

But if there is any indication of prices becoming unsustainable, it will be seen either in February or March. Industry watchers say some of the risk factors that could affect the positive private property sector performance here include increased interest rates and higher inflation.

Source : Channel NewsAsia – 13 Dec 2010

A sizzling year for Asian property markets

 December 23, 2010 

Runaway private housing prices compelled governments to impose cooling measures, with varying results

Asia’s residential property market stole much of the limelight this year as concerns of record property prices spurred government intervention in the form of repeated cooling measures. Singapore, China and Hong Kong were among the jurisdictions that have introduced anti-speculative measures to cool down their red-hot property market.

China was at the forefront of introducing price controls after property prices in the country surged 7.7 per cent over an 18-month period. This prompted the government to introduce measures such as a ban on mortgage loans for third properties.

In Hong Kong, prices grew by 50 per cent this year alone and to curb the rapid increase, policymakers had imposed a 15-per-cent stamp duty last month on properties sold within six months of its initial purchase.

These measures are considered drastic, said analysts, but have worked to cool the property market, albeit with varying results.

In Hong Kong, weekend sales of homes in the resale market dived 83 per cent immediately after the stamp duty tax was increased. But Hong Kong property market watchers still believe residential property prices could increase by 10 per cent next year.

“After the introduction of the stamp duty in Hong Kong, a lot of developers criticised the move for overdoing it,” said Mr Colin Tan, head of research and consultancy at Chesterton Suntec International.

Singapore also implemented its own set of cooling measures, the latest of which were introduced in August. They include lowering the mortgage loan-to-value ratio to 70 per cent for owners intending to buy a second and subsequent properties.

The measures had some slowing effect on the property market, but robust housing demand, low interest rates and ample liquidity meant that the measures did not deter home buyers.

Latest home sales figures from the Urban Redevelopment Authority (URA) highlighted that, despite the cooling measures, last month saw sales hitting 1,909 units – a spike from 1,058 units in October.

However, quarterly prices fell signficantly since the introduction of the measures – private residential property prices grew at 5.6 per cent and 5.3 per cent in the first two quarters of this year, dropping significantly by the third quarter to 2.9 per cent following the latest batch of cooling measures.

Singapore’s cooling measures were aimed at reducing speculative activity in the market, and analysts said that it has indeed achieved its objective to varying degrees. Yet, the market has remained robust and analysts said that it is because of the strong underlying demand for private homes, and not speculation, which has driven the market higher in recent months.

“The last round of Government cooling measures, which imposed several restrictions on re-selling, was ultimately incrementally adjusted by homebuyers,” said Mr Ong Kah Seng, Cushman & Wakefield’s Asia-Pacific senior manager of research.

“Many homebuyers are currently buying with the self prophecy that not buying a property now will mean one will miss the opportunity ahead – hence many are buying to fulfil the aspiration to own a piece of private property instead of hoping to make quick profits from it,” he added.

To meet the demand in housing, the government will release about 30 land sites next year – roughly the same number of sites released this year.

Those balloting for their Housing Development Board (HDB) flat also have more reason to cheer. In the first quarter of next year, HDB will launch about 5,000 Build-to-Order HDB flats.

Still, some analysts expect more cooling measures to emerge next year. “It is inevitable,” said Chesterton’s Mr Tan.

URA’s property sales and price data recorded this month will ultimately decide on the need for more cooling measures, said analysts. But they may not be as drastic compared to those imposed by Hong Kong and Chinese policymakers, analysts said.

Curbing demand too drastically may spell bad news for developers, too. “If prices fall too hard, this may mean thinner profit margins for developers,” said Mr Tan.

Further steps may include tightening CPF policies to reduce withdrawal limits and lowering the loan-to-value ratio, particularly for second home mortgages, said Mr Ong.

Analysts said with a bright economic outlook going forward, coupled with low-interest rates and ample liquidity, home prices may still increase about 5 to 12 per cent next year.

MediaCorp also understands that the URA is seeking reactions and feedback from property consultants to study the need for more regulation in the sector.

Source : Today – 23 Dec 2010