Published October 29, 2011

Mass-market home prices rise above froth

Driven by genuine demand, this segment shines brightest in Q3 as cooling measures keep speculators on the sidelines

THE mass-market housing segment or Outside Central Region in Urban Redevelopment Authority (URA) parlance continued to be the clear outperformer in the private housing market this year. While speculators who target other segments have been scared away by cooling measures, the mass-market segment was again held aloft in Q3 by genuine buyers.

'These people typically go for homes in affordable locations, in mass market projects in Outside Central Region (OCR),' said Credo Real Estate executive director Ong Teck Hui. On the supply side, too, the government has been pushing out development sites predominantly in OCR, which is translating to new project launches in these locations, say market watchers.

URA's figures show that the overall private home price index rose 1.3 per cent quarter on quarter (q-on-q) in Q3 this year, a slower rise than the 2 per cent q-on-q gain in Q2 2011. The sub-index measuring prices of non-landed private homes in OCR posted a 2.1 per cent q-on-q rise in Q3, outpacing a 1.2 per cent q-on-q increase in Rest of Central Region and 0.7 per cent q-on-q rise in the Core Central Region (which covers Singapore's choicest residential locations). Year to date, the increases for the three regions are 7.1 per cent, 4.4 per cent and 3.5 per cent respectively.

Numbers from Institute of Real Estate Studies (IRES) at the National University of Singapore released yesterday also showed that the Singapore Residential Price Index (SRPI) for Non-Central Region (excluding small units) has increased 10.2 per cent year to date (between December 2010 and September 2011), outpacing the 3.3 per cent rise in the SRPI Central Region (excluding small units) index.

IRES defines Central Region as Districts 1-4 (which includes the financial district and Sentosa Cove) and traditional prime residential districts of 9-11. SRPI covers completed private apartments and condos.

Reflecting the popularity of smallish units, the SRPI Small index, which tracks prices of completed non-landed private homes up to 506 sq ft islandwide, has climbed 10.1 per cent year to date. The Overall SRPI has appreciated 7.3 per cent year to date.

URA's numbers show that developers sold a total of 4,262 private homes (in uncompleted and completed projects) islandwide in Q3, down 4.1 per cent from 4,444 units in Q3.

In OCR alone, developers found buyers for 3,082 uncompleted units in Q3, up 13.8 per cent from Q2's 2,709 units. The figure for the first nine months of this year was 7,692 units - exceeding the full-year 2010 figure of 7,296 units for 2010 as well as the figures for the previous years, notes Credo's Mr Ong.

'This trend attests to the robust suburban mass market which has been the focus of market activity during this period. In contrast, for Core Central Region (CCR) only 207 units were sold in Q3, reminiscent of the volumes in 2008 when the market slumped. The 1,269 units sold in CCR from Q1-Q3 2011 is 59 per cent below that for the same period in 2010. The upper end of the market has become more sluggish, partly due to a lack of demand from investors,' he added.

Savills Singapore research head Alan Cheong predicts that it is unlikely the market will see any inflexion point for Q4 2011 or even Q1 2012 in the URA private home price index 'given the broad-based positive momentum from all (private residential) property types, both uncompleted and completed'. He predicts URA's headline index will rise 1.6 per cent in Q4 followed by 0.4 per cent in Q1 2012. 'Fundamentally this is supportable because HDB resale prices have also been rising strongly, thereby buttressing the lower end of the private property segment,' he added.

URA highlighted the build-up in the pipeline supply of uncompleted private homes to 76,255 as at end-Q3 2011, up 7.2 per cent from 71,111 units at end-Q2 2011 and the highest figure since such data was made available in 1999. Of the latest pipeline supply, 39,111 units were unsold. Credo's Mr Ong acknowledged: 'The number of unsold units has certainly increased in the past few quarters indicating a build-up in supply. However, this has to be seen in perspective to understand its severity. Back in 2008, when the market corrected due to the global financial crisis, the number of unsold units was as high as 43,473, constituting 64 per cent of the pipeline supply (67,569) in Q2 2008. The current 39,111 unsold units is 51 per cent of the Q3 2011 pipeline supply. What the current figures suggest is that the situation is not dire but could get risky if demand falls significantly,' he added.

DTZ's Southeast Asia research head Chua Chor Hoon noted that while the price increases of private residential homes continued to moderate in Q3, prices of office, shop and industrial space rose at a faster clip in Q3 than they did in Q2. 'This is likely due to investor interest as the non-residential sectors are not subject to cooling measures,' she notes.

'However, the pace of increase in commercial and industrial rents is slower in Q3 q-on-q as the slowdown in the economy and increasing concerns over the eurozone debt crisis take a toll on occupier sentiment. A continued slowdown in the rental increase will eventually filter down to prices as it will affect yields.'