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Published July 23, 2011

Consultants clip private home sales forecasts

URA's Q2 private home price index up 2% on quarter, slower than Q1's 2.2%

By KALPANA RASHIWALA

(Singapore)


AS an air of caution settles into Singapore's real estate market, some property consultants have trimmed their forecasts on the number of private homes that developers will sell this year as well as how much home prices can rise. So far, they're not predicting price declines.

Urban Redevelopment Authority's (URA) latest numbers show that the overall private home price index rose 2 per cent quarter on quarter in Q2, a slower increase than the 2.2 per cent gain in Q1, taking the increase in the first half to 4.2 per cent since end-2010. For the whole of 2010, the index rose 17.6 per cent.

Three months ago, Credo Real Estate executive director Ong Teck Hui was looking at a 6-8 per cent increase in URA's index for the whole of this year. Now he reckons the upturn could be slower, at 5-7 per cent. Over the same period, Knight Frank's research head Png Poh Soon has trimmed his forecast from 10-12 per cent to 8-10 per cent. He has also clipped his earlier projection on developers' private home sales this year - of about 15,000-17,000 units - by about 10 per cent. Mr Ong, too, has pruned his estimate from about 14,000-15,000 units to 13,000-14,000 units.

Analysts say that initially the caution was sparked by the new National Development Minister, who has made cautionary pronouncements on the property market and ramped up the launch of new public housing flats this year. This increase in supply, together with an expected increase in income ceiling for new HDB flat buyers, has led many market watchers to expect a siphoning-off in some demand for entry-level or mass-market private condos.

'More recently, the deterioration of the external economic climate, Singapore's lower-than-expected Q2 GDP growth and the uncertainty for the rest of the year have taken centre stage,' says Mr Ong.

However, DTZ's SE Asia research head Chua Chor Hoon said the motivation to purchase property will be strong as long as the economy continues to grow and interest rates remain low. 'Hence the market could become more active again if the cautious mood subsides with some resolution to the European and US problems.'

URA's sub-indices for both landed and non-landed private home prices posted slower quarter-on-quarter gains in Q2 than they did in Q1. However, Q2's rise in the landed index, at 3.6 per cent, continued to outpace that for the non-landed segment, which rose 1.4 per cent, in a reflection of the relative scarcity for landed housing.

Semi-detached houses were the star performer in Q2, posting a 3.9 per cent price gain in Q2, faster than the 2.8 per cent hike in Q1.

'Pockets of resilience in the landed market can be seen in price increases for detached houses in the north-east (up 5.3 per cent), terrace houses in central (up 8.6 per cent) and terrace houses in north-east (up 5 per cent),' said Mr Ong.

URA said 2,401 private homes received Temporary Occupation Permit in Q2, taking the first-half figure to 4,631. The number for full-year 2010 was 10,399. Major projects completed in Q2 include Kovan Residences, Park Natura, Hilltops, Cliveden at Grange, Shelford Suites and The Residences at W Singapore Sentosa Cove.

URA's All Residential rental index posted a quarter-on-quarter gain of 1.3 per cent in the second quarter, compared with a 1.2 per cent increase in Q1.

The supply of private homes in the pipeline has grown from 61,831 units at end-Q2 2010 to 71,111 at end-Q2 2011, reflecting the step-up in state land sales.

The office sector saw a 667,362 sq ft net increase in demand in Q2, an improvement on the 538,195 sq ft for Q1 and taking the H1 2011 tally to 1.2 million sq ft. The figure for full-year 2010 was 1.65 million sq ft. Nearly 1.6 million sq ft (nett) of offices were completed in Q2. Major completions include Ocean Financial Centre and Asia Square Tower 1. As tenants take time to fit out space and move into new buildings, the islandwide office vacancy rate increased from 12.1 per cent at end-Q1 to 12.5 per cent at end-Q2.

Savills Singapore's research head Alan Cheong said: 'The office sector's performance for the rest of this year will depend on the economy and how landlords treat the space vacated by tenants migrating to new buildings.'

URA's monthly median rental rate for the choicer Category 1 office space based on rental contracts signed in Q2 was $9.46 per square foot, or a quarter-on-quarter increase of 2.8 per cent. This was slower than the 5.1 per cent hike in Q1.

As at end-Q2 2011, the total supply of office space in the pipeline stood at 9.43 million sq ft of gross floor area. More supply will come from sites recently awarded or released for sale by the state as well as the expected development of six plots of land near Marina Bay and in the Ophir-Rochor area by the Khazanah-Temasek tie-up.

'The overall quantum of supply has increased markedly through the past year and this is likely to moderate the pace of rental growth going forward,' said CBRE Research executive director Li Hiaw Ho.

URA's shop rental index rose 0.8 per cent while its All Industrial rental index increased 5.7 per cent in Q2.