Our "headline story" on the private real estate market

By The Folks @PropTalk - July 29, 2015 No Comments

The three news reports that the wife and I had come across yesterday had allowed us to build a nice little "headline story" on the current state of the private real estate market:

Private resale still sliding in June, led by shoeboxes...

Resale prices of private homes fell again in June, according to Singapore Residential Price Index (SRPI) estimates released on Tuesday (Jul 28).

The SRPI, compiled by the National University of Singapore's Institute of Real Estate Studies, showed overall prices declining 0.3% in June from the previous month. In May, prices fell 0.6% from a month earlier.

Prices of small units, which have a floor area of 506sqf or below, fell 1.1%. Prices of homes in the non-central region, excluding small units, fell 0.9% in June from May, the findings showed.

Prices of homes in the central region, excluding small units, bucked the trend, rising 0.3% from the previous month, according to SRPI.

While market sentiment remains weak...

Market sentiment in the real estate industry remained weak in the second quarter of this year, according to a poll of 64 industry players conducted by the Real Estate Developers' Association of Singapore (REDAS) and the National University of Singapore (NUS).

The sentiment index stood at 3.9, inching up from 3.8 in the previous three months. A score under five indicates deteriorating market conditions, while a score above five indicates improving conditions.

The residential and prime retail sectors were the worst performing, while the business park/hi-tech space sector was the best performing. Looking ahead, the Future Sentiment Index - which measures sentiment for the next six months - also increased, to 4.0 from 3.7 in the previous survey.

The survey showed that developers are not likely to hold back on their residential launches. Close to 75% of the developers surveyed said they expected new launches to increase moderately and/or hold at the same level in the next six months. On price changes, 52.4% of the developers said they anticipated a moderate decrease in residential property prices in the next six months. 

More than 73% of the respondents said the slowdown in the global economy, rising inflation and interest rates would adversely impact market sentiment in the next six months. Only 26.6% cited Government cooling measures as a potential risk to negatively affect sentiment in the market. 

And interest in EC continues to be tepid!

The response to the latest batch of executive condominium (ECs) projects has been tepid, with about 2,200 EC units remaining on the shelves as of June 2015, the highest in almost a decade.

The largest EC development to date, Sol Acres, received 800 e-applications for the first 707 of its 1,327 units, when subscription closed on Sunday (Jul 26). Booking will open for the 707 units on Aug 22.

The Brownstone EC, located along Canberra Drive, sold just under a third of its 638 units in the opening weekend. The Brownstone's developer CDL said the units were sold at an average of about $810 psf, with prices starting from $596,000 for a two-bedroom, $695,200 for a three-bedroom, $835,200 for a four-bedroom and $1.316 million for a penthouse.

In a statement, it added that the three- and four-bedroom apartments enjoyed particularly good take-up rates. All six of the five-bedroom penthouses have been sold out. About 65% of those who purchased units at The Brownstone were first-time buyers, CDL said.

Developers of The Vales EC, which opened for booking more than a week ago, sold about 100 units, less than 20% of the total 517 units. Developer Singhaiyi said most of the units sold are the three- and four- bedroom units.

In November last year, developers of Lake Life EC sold more than 95% of the units in just two days. Since then, response in the market to new projects has been less than warm. Market watchers said it is a sign that recent projects are adding to the pool of unsold units.

Nicholas Mak, executive director of research and consultancy at SLP International Property Consultants said: "During the heyday of the EC launch market that was in 2011 to 2013, the number of e-applications each EC project can sometimes achieve is double of the number of units available.

“One of the reasons why the demand was strong was also because of rising HDB resale and condominium prices. When prices of the mass market condos are rising very rapidly, it begins to go out of reach of some HDB upgraders who will then turn to the EC market as an alternative. But right now, the prices of mass market condominiums are sliding and HDB resale prices are also fairly stagnant."

Market watchers also said the 30% mortgage servicing ratio cap and resale levy imposed on second-time buyers have also curbed demand. Second-timers have to pay up to $50,000 levy when buying an EC unit.

"For an EC project, typically the number of second-timers is about 50% , so definitely the resale levy has hit them quite hard,” senior manager of research and consultancy at OrangeTee Wong Xian Yang said.

With talk of an impending increase in the income cap for EC buyers, analysts said this could provide some respite for the EC market.

CEO of Century 21 Singapore Ku Swee Yong said: "Revising the household income cap on EC market would definitely help to increase the demand. But a family with household salary of $13,000 or $14,000 might also consider the ample supply of private properties."

Analysts also said this is especially so if mass market condominiums are reasonably priced. For instance, buyers were quick to snap up units at High Park Residences condominium in Fernvale, which average below $1,000 psf. Almost 80% of the 1,390 units have been sold.
Sources: CNA

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