Published April 3, 2007
Sharpest rise in private home prices in 7 years
URA flash estimates for Q1 show 4.6% gain
By ARTHUR SIM
(SINGAPORE) Housing prices have made their steepest climb in seven years - and there is no let-up in sight.
According to flash estimates for the first three months of this year from the Urban Redevelopment Authority (URA), private home prices rose from 130.2 points in the fourth quarter of 2006 to 136.2 points in the first quarter of this year, an increase of 4.6 per cent.
This represents the highest quarter-on-quarter increase since the 5.3 per cent seen in the final quarter of 1999.
In line with URA's decision to release more detailed data on the residential market, it also published estimates for price indices for non-landed private residential property in the Core Central Region (CCR), Rest of Central Region (RCR) and Outside Central Region (OCR).
Its estimates show that the price index in the CCR increased by 5.6 per cent compared to 4.9 per cent in Q4 2006. The index rose 2.9 per cent for the RCR and 2.6 per cent for the OCR, compared with 2.2 per cent and 1.5 per cent in the previous quarter.
CBRE Research executive director Li Hiaw Ho attributed the 'unprecedented high levels' of prices largely to sales of more luxury projects in the first quarter of the year.
Based on CBRE Research's data, sales at new launches will likely exceed 3,500 units in the first quarter. Of these, Mr Li says that between 30-40 per cent could be in the CCR.
Mr Li also highlights several hot spots outside the luxury market that are doing well including Farrer/Holland Road, Meyer/Amber Road and Buona Vista, where he believes new projects are being priced at 50 per cent more than what they would have fetched a year ago.
Colliers International director for research and consultancy Tay Huey Ying reckons that the government's announcement of a potential population increase to 6.5 million has 'boosted market confidence in the RCR and OCR segments'. She concludes that: 'Such a sizeable population target would immediately put the brakes on any concerns over the current excess supply in the market.'
The RCR and OCR segments are still likely to be driven largely by owner-occupiers rather than investors. 'The prospects of the leasing market in the CCR will continue to be brighter than those in the OCR for reasons of proximity to the CBD, shopping and entertainment facilities in Orchard Road and the upcoming integrated resorts,' she said.
As such, the continued high level of collective sales will be an important factor in balancing supply and demand, and property prices.
Savills Singapore director for marketing and business development Ku Swee Yong says that, by his calculations, there will be a net negative supply of some 500 homes this year, based on the 3,500 homes he believes will be lost to collective sales. The figure for net negative supply for 2008 is expected to be higher, he said.
Although foreigners and investors are credited for supporting the luxury market, those 'displaced' by en bloc sales in the CCR could be stimulating other property segments. 'There are people who are panic buying because they have sold their existing homes through en bloc deals,' Mr Ku said, adding: 'If they are willing to downgrade, they should be OK.'
The Housing and Development Board (HDB) resale price index has also increased by 1.2 per cent since the previous quarter from 103.6 to 104.8 points.
Noting that it is the highest increase since the last peak in Q1 2005, PropNex CEO Mohamed Ismail said that choice flats are now being transacted at $5,000-$10,000 above valuation, unheard of just a year ago.
PropNex's data show that demand was for bigger flats - five-room and executive flats. Mr Mohamed says the number of these larger units available is dwindling, and he expects the overall increase in the resale price index to hit 5 per cent for 2007.
ERA Singapore assistant vice-president Eugene Lim also agrees that the 'momentum' in the HDB resale market is driven by larger flats, especially those in mature estates.
In 2006, although overall volume of resale flats fell below 30,000 for the first time in a decade, ERA's data shows that executive flat resale volume of 2,229 units was 9.5 per cent higher than 2005. For five-room flats, the 6,421 units sold was 9.3 per cent higher than 2005.
Mr Lim says that the relaxing of restrictions on subletting HDB flats has not yet had much impact on the public housing market, although he believes the current market is already 'tight'. 'Foreigners living here on a lower budget are finding it difficult to find HDB flats to rent,' he said.