3Q2011 Home Sales Data & FY2011 Outlook (Part 1)

By The Folks @PropTalk - October 13, 2011 No Comments
Below is the first of the two-part report in this week's issue of THEEDGE SINGAPORE.

Suburban condominiums continue to drive private home prices
The pace of price growth for private homes has been declining steadily over the past two years. URA’s 3Q flash estimate showed that the private residential price index for 3Q2011 rose by 1.3% compared with 2% in the previous quarter. This shows that home prices are stabilising, says Li Hiaw Ho, executive director, CB Richard Ellis Research.

For the first nine months of 2011, the residential price index has risen by some 5.6%, which is significantly lower than the 14.4% growth over the same period last year.

However, including the latest 3Q preliminary figures, private home prices are now higher than it was during the last two peaks: 15.9% above the 2Q2008 peak, and 13.4% above the 2Q1996 peak, says Chia Siew Chuin, director of research & consultancy, Colliers International.

Nevertheless the grim global economic outlook also means that home-buyers are also more cautious. “With prices now far exceeding historical peaks, homebuyers are increasingly becoming resistant towards price growth and this has capped prices to some extent,” concedes Colliers’ Chia. “The pace of price growth has in fact moderated for the eighth consecutive quarter since 4Q2009.”

Owing to the more cautious mood and heightened price sensitivity, market activity continued to focus on mass-market segment. Naturally, the highest price growth was seen in the suburban neighbourhoods or, in URA parlance, the Outside Central Region (OCR), with a q-o-q growth of 2.1%, followed by 1.1% for the city fringe areas, or Rest of Central Region (RCR), and 0.8% for the prime districts and CBD, or Core Central Region (CCR).

The increase in the price index for the OCR and RCR could also have been driven by the strong sales at new projects in areas such as EuHabitat (median price $1,015psf) in Jalan Eunos, The Luxurie ($1,053psf) near Sengkang MRT station, Seastrand ($930psf) in Pasir Ris, and Thomson Grand ($1,300psf) off Upper Thomson Road, says CBRE’s Li.

Increased price sensitivity
Price sensitivity has also shown up in the higher take-up rates for one- and two-bedroom units, and projects priced at lower psf prices, notes Donald Chua, CIMB analyst in an Oct 2 report. He notes strong buying interest at A Treasure trove near Punggol MRT station, where close to 90% of the units have been sold since its launch last month. Likewise in EuHabitat, about 80% of the units have been snapped up to date.

Meanwhile, executive condominiums (ECs) are also gaining popularity after the Ministry of National Development raised the household income ceiling for ECs in mid-August from $10,000 to $12,000. The EC Arc at Tampines was the first to benefit as it was launched just after the announcement, and saw strong response, notes CIMB’s Chua. About 220 units were said to be sold via balloting in early September, with prices at an average of $722psf.

“We expect to see strong take-up for selected value-for-money mass market projects, while uncertainty continues to weaken sales in pricier mass-market projects and the mid-market and luxury segments,” says CIMB’s Chua.

This can be seen from marginal price growth of 0.8% for non-landed homes located in the CCR. This is the smallest quarterly growth chalked up since 3Q2009 when the market first rebounded and is also the slowest compared with price growths recorded in the RCR and OCR.

“The recent steep corrections in the stock market and news about global economic slowdown has dampened market sentiment,” says CBRE’s Li. He expects demand for new homes in Q4 to slow down and any price increase to be marginal. “Nevertheless, it will still be a healthy year for the residential market as total demand for new homes is likely to reach 15,000 units, compared with 16,292 in 2010 and 14,688 units in 2009,” says Li.

For the whole of 2011, the private home price index is expected to increase by 5% to 8%, which is less than half of the 17.6% rate of growth in 2010, says Nicholas Mak, executive director of research and consultancy at SLP International.
{To be continued}

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