3Q2011 Home Sales Data & FY2011 Outlook (Part 2)

By The Folks @PropTalk - October 14, 2011 No Comments
Impact of global economic situation
Historically, the price index for private property (PPI) declined during the period of 1996-98, 2000-04, and 2008-09, with each period marked by external shocks such as the Asian financial crisis in 1998, tech stock bubble and SARS epidemic in 2000/03 and, most recently, the global financial crisis in 2008.

“Correspondingly, the residential property market was also marked by high volume of new sales during those periods,” says Chua Yang Liang, head of research for Southeast Asia at Jones Lang LaSalle. “Given the currently moderate level of new sales as compared to resale activity – which again lends further support to the argument that there remains a substantial latent demand – resale market activity will likely to continue to support property prices going forward.”

Chua doesn’t expect to see a sudden drop in PPI like in the earlier periods, “unless the eurozone financial crisis takes another negative turn and sends further shock waves across Asia. Otherwise we can expect property price growth to maintain at a moderate average pace of 1% to 1.8% per quarter,” he adds.

JLL’s Chua also notes that despite the continued growth in property prices, rental values for properties in prime districts have started to fall for the first time since 1Q2008. Average prime rents fell by 1.4% q-o-q to $4.70psf per month but it is the luxury segment where the falls have been steepest, with an overall drop of 1.9% q-o-q to $5.13psf per month, he adds. While not as steep, typical prime properties have also seen rents fall in 3Q2011 by 0.8% q-o-q to an average of $4.27psf per month.

“The impact of the current global economic situation is starting to be seen in Singapore, with companies initiating hiring freezes, which in turn has an impact on demand for residential properties, especially in the prime markets where new expatriate staff typically choose to locate,” says Chua.

“This fall in demand, combined with an influx of new supply such as Nassim Park and Cliveden at Grange in the luxury market and City Vista Residences and Soleil@Sinaran in the typical prime market, has put downward pressure on rentals. Increasingly, occupiers are not maximizing their housing budgets and are going for less expensive options and/or downsizing their existing properties to reduce accommodation costs.”

As a result, new properties in the Central and East Coast areas are proving increasingly attractive to occupiers – rental values in those areas have remained flat at $4.50 and $3.45psf per month, respectively, in 3Q2011. Activity also remains high for properties commanding rents of less than $6,000 per month as people look to reduce housing costs.

Landed home prices continue to outpace non-landed in 3Q
Average resale prices in the landed sector continued to outpace the non-landed segment in 3Q owing to the limited stock of landed homes, says DTZ in a report on Oct 6. The average resale price of leasehold landed homes in non-prime districts increased the most by 3.8% q-o-q in 3Q2011 while the average resale price of freehold landed homes in the prime districts of 9, 10 and 11 saw a q-o-q price increase of 2.8%.

Based on a basket of completed condos tracked by DTZ Research, it was found that the average resale price of leasehold condos in the suburban areas grew at a slower pace of 2.5% q-o-q in 3Q2011.

As for the luxury condos in the prime districts of 9, 10 and 11, the average resale price was unchanged in 3Q2011. “The deteriorating global outlook and higher price quantum led to more cautious and selective buying,” notes DTZ. “Some projects are still experiencing price increases. In a slower market, prices of the better-designed and well-located projects will hold better.”

Condo sales in the CCR made up only 6.8% of total primary home sales and 21.6% of total secondary sales in July and August, notes DTZ. Mass-market home purchases, on the other hand, are backed by the rising HDB upgraders, aided by the rising HDB resale prices and low interest rates, notes Chua Chor Hoon, head of DTZ SEA Research. First-timers and investors are also motivated by the low interest rates to buy for owner-occupation and investment, she adds.

“As many of these buyers are buying for owner-occupation and investment beyond four years due to seller’s stamp duty measure, they probably take a longer-term view and thus less worried about the current global economic uncertainties,” notes DTZ’s Chua. “However, if the global outlook worsens and the economy continues to slow, this will eventually affect buying sentiment and lead to less exuberant purchase activity.”


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