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18-11-13, 13:23
http://www.todayonline.com/business/property/price-war-has-begun
Property
The price war has begun
By Ku Swee Yong
08 November
The Urban Redevelopment Authority’s (URA) data for the third quarter showed an increase of 0.4 per cent in private housing prices from the previous quarter despite the harsh property market curbs meted out at the end of June.
But the gains are expected to fizzle out as developers have started a price war following the measures embodied in four-letter acronyms such as ABSD and TDSR, standing for the Additional Buyers’ Stamp Duties that were raised in January and the Total Debt Servicing Framework unveiled in June.
The key reason for the growth in the URA’s Private Property Index was the 2.2 per cent increase in the price of non-landed properties in the mass market — the Outside Central Region (OCR). Prices of non-landed properties in the Core Central Region (CCR) fell 0.3 per cent while those in the Rest of Central Region (RCR) fell 0.9 per cent.
Delving deeper into the details, we see that the 0.9 per cent price decline in the RCR was due to a 1.9 per cent drop in the prices of “uncompleted” homes. Prices of “completed” homes in the RCR were playing catch-up with new launch prices and they managed to eke out a 0.1 per cent increase.
The drop in RCR’s price index for uncompleted homes should not come as a surprise because at the end of September, two attractively priced new launches in the RCR made the headlines with their strong pace of sales.
According to developers’ filings with the URA in September, 264 units in Thomson Three were sold at a median price of S$1,362 per sq ft while 433 units in Sky Vue were sold at a median price of S$1,401psf. In comparison, the average price of the units sold at Sky Habitat since the beginning of 2013 exceeded S$1,500 psf.
As the price competition erupted between the two large projects, the impact was obvious: the RCR price index dipped.
Meanwhile in the public housing segment, the rules for mortgages of resale HDB flats were further tightened in August, leading to a decline of 0.9 per cent in the HDB resale price index in the third quarter. This is the first decline since the first quarter of 2009, when the Lehman crisis hit the global stock markets hardest.
With the lowered Mortgage Servicing Ratio and shorter loan tenures, young families and upgraders had to moderate their ambitions for bigger or better located flats. The impact on median resale prices and median Cash-Over-Valuation (COV) is illustrated through the examples in the table.
We are halfway through the final quarter of 2013. As private housing projects Thomson Three and Sky Vue continue to sell at attractive prices, a new launch in the OCR, The Inflora, achieved remarkably strong sales despite the restrictive mortgage rules.
To ensure a high volume of sales, prices were kept attractive at the project. The average price of shoebox units transacted at The Inflora during its launch in late October was below S$1,000 psf, 20 per cent cheaper than the average prices of shoebox units transacted at D’Nest this year and 10 per cent cheaper than shoebox units sold at Hedges Park in 2011.
Other projects that sold briskly were priced at a reasonable margin below previous launches in the same neighbourhoods: The Venue Residences, Nine Residences, etc. Projects launched without a clear margin of discount from recent new sales in the vicinity simply did not fare as well.
The competition between developers will be hotter over the next few weeks. DUO Residences, Marina One Residences and Alex Residences are poised for strong sales as developers price their small units with average quoting prices that are at least 10 per cent below previous new launches in their respective neighbourhoods.
The price wars have begun and the first confirmation of price competition is revealed within the third-quarter RCR index. The HDB resale index has also fallen 0.9 per cent on the back of lower resale prices and lower COVs due to the squeeze on borrowings.
The sentiment of genuine upgraders and investors who currently own HDB units are already affected by the cooling measures. They would require strong encouragement to upgrade or to invest. HDB sellers and private developers can provide such encouragement mainly by discounting their prices.
As competition intensifies between developers and property sellers, and with no let-up in the tight policy measures, the price indices will decrease, almost certainly for the fourth quarter — as evidenced by the transactions at The Inflora, Nine Residences — and perhaps over the next two to three quarters too.
A gradual drop in the overall price indices is the result desired by the authorities. Perhaps as the property sector cools down, the authorities can move on to checking frothy small cap stocks.
ABOUT THE AUTHOR: Ku Swee Yong is the Chief Executive of real estate sales firm Century 21 Singapore Holdings. He is the author of two bestsellers: Building Your Real Estate Riches and Real Estate Riches.
Property
The price war has begun
By Ku Swee Yong
08 November
The Urban Redevelopment Authority’s (URA) data for the third quarter showed an increase of 0.4 per cent in private housing prices from the previous quarter despite the harsh property market curbs meted out at the end of June.
But the gains are expected to fizzle out as developers have started a price war following the measures embodied in four-letter acronyms such as ABSD and TDSR, standing for the Additional Buyers’ Stamp Duties that were raised in January and the Total Debt Servicing Framework unveiled in June.
The key reason for the growth in the URA’s Private Property Index was the 2.2 per cent increase in the price of non-landed properties in the mass market — the Outside Central Region (OCR). Prices of non-landed properties in the Core Central Region (CCR) fell 0.3 per cent while those in the Rest of Central Region (RCR) fell 0.9 per cent.
Delving deeper into the details, we see that the 0.9 per cent price decline in the RCR was due to a 1.9 per cent drop in the prices of “uncompleted” homes. Prices of “completed” homes in the RCR were playing catch-up with new launch prices and they managed to eke out a 0.1 per cent increase.
The drop in RCR’s price index for uncompleted homes should not come as a surprise because at the end of September, two attractively priced new launches in the RCR made the headlines with their strong pace of sales.
According to developers’ filings with the URA in September, 264 units in Thomson Three were sold at a median price of S$1,362 per sq ft while 433 units in Sky Vue were sold at a median price of S$1,401psf. In comparison, the average price of the units sold at Sky Habitat since the beginning of 2013 exceeded S$1,500 psf.
As the price competition erupted between the two large projects, the impact was obvious: the RCR price index dipped.
Meanwhile in the public housing segment, the rules for mortgages of resale HDB flats were further tightened in August, leading to a decline of 0.9 per cent in the HDB resale price index in the third quarter. This is the first decline since the first quarter of 2009, when the Lehman crisis hit the global stock markets hardest.
With the lowered Mortgage Servicing Ratio and shorter loan tenures, young families and upgraders had to moderate their ambitions for bigger or better located flats. The impact on median resale prices and median Cash-Over-Valuation (COV) is illustrated through the examples in the table.
We are halfway through the final quarter of 2013. As private housing projects Thomson Three and Sky Vue continue to sell at attractive prices, a new launch in the OCR, The Inflora, achieved remarkably strong sales despite the restrictive mortgage rules.
To ensure a high volume of sales, prices were kept attractive at the project. The average price of shoebox units transacted at The Inflora during its launch in late October was below S$1,000 psf, 20 per cent cheaper than the average prices of shoebox units transacted at D’Nest this year and 10 per cent cheaper than shoebox units sold at Hedges Park in 2011.
Other projects that sold briskly were priced at a reasonable margin below previous launches in the same neighbourhoods: The Venue Residences, Nine Residences, etc. Projects launched without a clear margin of discount from recent new sales in the vicinity simply did not fare as well.
The competition between developers will be hotter over the next few weeks. DUO Residences, Marina One Residences and Alex Residences are poised for strong sales as developers price their small units with average quoting prices that are at least 10 per cent below previous new launches in their respective neighbourhoods.
The price wars have begun and the first confirmation of price competition is revealed within the third-quarter RCR index. The HDB resale index has also fallen 0.9 per cent on the back of lower resale prices and lower COVs due to the squeeze on borrowings.
The sentiment of genuine upgraders and investors who currently own HDB units are already affected by the cooling measures. They would require strong encouragement to upgrade or to invest. HDB sellers and private developers can provide such encouragement mainly by discounting their prices.
As competition intensifies between developers and property sellers, and with no let-up in the tight policy measures, the price indices will decrease, almost certainly for the fourth quarter — as evidenced by the transactions at The Inflora, Nine Residences — and perhaps over the next two to three quarters too.
A gradual drop in the overall price indices is the result desired by the authorities. Perhaps as the property sector cools down, the authorities can move on to checking frothy small cap stocks.
ABOUT THE AUTHOR: Ku Swee Yong is the Chief Executive of real estate sales firm Century 21 Singapore Holdings. He is the author of two bestsellers: Building Your Real Estate Riches and Real Estate Riches.