Numbers confirm bounce in property's step

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Published October 2, 2009

Numbers confirm bounce in property's step

15.9% q-o-q jump in Q3 could mark the end of one of the shortest downcycles ever

By KALPANA RASHIWALA


(SINGAPORE) Property cycles seem to be getting shorter and with sharper price swings, mirroring the trend in general economic cycles. In one of the quickest upturns in recent years, the official private home price index jumped 15.9 per cent quarter-on-quarter (q-o-q) in Q3 this year. The four quarters of price drops that preceded this mark the shortest downcycle in the past 18 years - assuming, of course, that prices do not decline in coming quarters.

The increase in Urban Redevelopment Authority's (URA) flash estimate of its Q3 2009 private home price index was the biggest change since a 27.2 per cent increase in the index in Q1 1981.

Jones Lang LaSalle also pointed out that the turn in the index - from a 4.7 per cent q-o-q contraction registered in second quarter this year to the 15.9 per cent jump in Q3 - was the sharpest since the series began in 1975.

The unprecedented loss of confidence last year from the global financial crash and the collapse of Lehman Brothers led to the unwinding of risky investments. By Q1, investors were awash with liquidity and looking for a trusty place to park their funds. 'Singapore real estate certainly fits the bill as a safe depository of wealth,' observes Real Estate Developers Association of Singapore CEO Steven Choo.

Also, the wealth accumulated by Singapore households - from en bloc sales, savings stashed away from wage rises and bonuses from earlier years and from the surge in the stock market after its March bottom - soon made its way into the property market as investors developed a strong dislike for structured products after the Lehman minibonds fiasco. The low interest rate environment and price cuts by developers in the first quarter also helped to draw property buyers from the sidelines.

URA's flash estimates yesterday also showed that price indices of non-landed private homes in the three geographical regions also posted the biggest gains since Singapore's planning authority started releasing these sub-indices in 2004.

In the Core Central Region - which covers the prime districts, CBD and Sentosa Cove - the index jumped 16.2 per cent q-o-q in Q3. The surge was even higher, at 19.1 per cent in the Rest of Central Region (RCR). The index for Outside Central Region, which covers typical mass-marketing housing locations, also rose 15.4 per cent in Q3. In contrast, respective indices for the regions had posted q-o-q declines of 5.2 per cent, 4.4 per cent and 2.3 per cent in Q2.

CB Richard Ellis executive director Li Hiaw Ho said new projects in RCR that sold well in Q3 and contributed to the steep rise in the price index for the region were Vista Residences in the Balestier area, Parc Imperial in Pasir Panjang, Ascentia Sky on Alexandra Road and Trevista in Toa Payoh.

Putting the latest numbers in perspective, property consultancy Knight Frank chairman Tan Tiong Cheng notes that the sharp jump in URA's Q3 headline private home price index probably reflects some 'catching-up effect' after the index posted a surprising decline in Q2 of 4.7 per cent. 'The Q2 drop had confounded property analysts, developers and the buying public as they had seen substantial price increases in Q2 over the preceding quarter. Major property consultants' data showed price gains in Q2 ranging from 10 to 20 per cent for new launches and an average price increase of about 5 per cent for secondary-market transactions,' Mr Tan recalled.

However, the latest index levels captured in URA's Q3 flash estimates are more in sync with consultants' indices and average price computations than they were for Q2, analysts say.

The strong price gains shown in URA's flash estimates reflect the kind of market exuberance that led the government to announce measures last month to cool the market - including banning the interest absorption scheme and promising to restart state land sales in the confirmed list in first-half 2010.

DTZ's SE Asia research head Chua Chor Hoon noted that the pick-up in private home sales and prices that began in the mass-market segment in Q2 soon spread to the mid-market, then to prime districts and even landed market.

Initially, the buying was led by owner-occupiers and investors but speculators soon made their presence felt.

Just how strongly sentiment-driven the property market had become is also reflected in DTZ's analysis which showed that in Q2 this year, there was no time lag between the benchmark Straits Times Index and DTZ's average price for prime-district freehold condos. Typically the STI leads the physical property market by three to six months.

Property consultants reckon the house-buying frenzy seen in Q3 has probably peaked and that sales will moderate over the next three to six months. However, prices are not likely to slide unless a 'double dip' manifests in the economy, they suggest.

DTZ's Ms Chua is forecasting a 0 to 5 per cent price increase generally. Colliers International's director Tay Huey Ying predicts a 5 to 10 per cent q-o-q rise in URA's overall private home price index in Q4.

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October 2, 2009 Friday

Private home prices soar 15.9% in third quarter

Half the losses since mid-2008 recovered; experts sound warning

By Joyce Teo, Property Correspondent


PRIVATE home prices surged an estimated 15.9 per cent last quarter - the sharpest quarterly rise in 28 years - and reversing four quarters of decline.

The initial property price estimates for the period ended Sept 30, released by the Government yesterday, offer new evidence of a private residential rebound despite an uncertain economy.

However, some market experts warn that this kind of price rises is not sustainable over the longer term, and note that buying interest has already slowed somewhat.

The latest price jump is the sharpest quarterly rise since a 27.2 per cent surge in the first quarter of 1981 and is the sharpest about-turn in the market since 1975, property analysts said.

By contrast, private home prices fell 4.7 per cent in the second quarter of this year, following a record 14.1 per cent slide in the first.

The flash estimates, from the Urban Redevelopment Authority (URA), marked an end to the shortest-ever severe market downturn here.

The private home market has now recovered about half the losses it has suffered since falling from a mid-2008 peak. The URA price index is near levels of the second quarter of 2007.

Property experts believe higher launch prices in the third quarter largely helped to push up prices. Developers sold more than 11,800 units in the first eight months of this year, far exceeding the 4,300 sold all last year.

A URA spokesman said the strong demand 'probably led to higher prices' in the third quarter. 'We will continue to monitor the property market closely to ensure that property prices and rentals move stably in line with economic fundamentals.'

The fast and furious rise in prices would explain why the Government intervened recently with measures to calm the market, analysts said.

There was clear anecdotal evidence of the boom, as buyers queued for new homes and submitted blank cheques in order to snag a unit. 'The rest of the world knows the market has risen since the second quarter,' said Knight Frank chairman Tan Tiong Cheng.

He said the fact that a feared depression did not happen may have spurred property buyers. They then took advantage of low interest rates, believing property to be the safest hedge against inflation, Mr Tan said, offering an explanation for the unusual recovery.

PropNex chief executive Mohamed Ismail said that once the rebound was under way, the 'feverish activity in a runaway market was fuelled by many investors and HDB upgraders who were afraid of losing out on a good investment opportunity'.

Another reason may have been strong demand from permanent residents, who boosted rising HDB resale prices, helping fuel the private homes boom, an industry source suggested.

The flash data showed that prices of non-landed private homes on the city fringes rose the most - 19.1 per cent. This was on the back of a strong showing in new projects such as Vista Residences in Jalan Datoh, Ascentia Sky in Alexandra Road and Trevista in Toa Payoh, experts said.

Suburban home prices jumped by 15.4 per cent while prices of city-centre homes surged 16.2 per cent.

These flash estimates are based on transaction prices of caveats lodged during the first 10 weeks of the quarter. Despite the startling numbers, the market for posh homes has yet to return to boomtime levels. The mass market has recovered to a greater degree while the mid-tier market is fairly close to full recovery, experts said.

The Government announced anti-speculative measures, such as offering more sites for sale, on Sept 14.

However, the effects of these measures have not been fully captured in the latest data and are set to continue seeping into the market, experts said.

At the same time, the performance for the rest of the year is likely to be hit by a seasonal slowdown, they said.

'At the new launches, a lot of the sales are due to pressure tactics. If you take away the speculators, you take away the froth so people will be more circumspect,' said an expert.

As it is, the frenzied buying has already slowed. 'There has been some slowdown in inquiries, especially in projects where prices have moved up significantly,' said DTZ head of Southeast Asia research Chua Chor Hoon.

New home sales may hit a record high of 5,200 units in the third quarter but prices are likely to remain stable for the rest of the year, said CBRE Research executive director Li Hiaw Ho.

Barring further cooling measures, the rise in the private home price index could slow to 5 per cent to 10 per cent for the fourth quarter, said Colliers International director for research and advisory Tay Huey Ying.

The recent price rises are not sustainable, said Jones Lang LaSalle's head of research South-east Asia, Dr Chua Yang Liang.

If prices, especially for mass market property, keep rising at such a pace, the Government may act again, though it will be aimed at stamping out speculation without hurting real demand, said Standard Chartered Bank economist Alvin Liew.

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