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Thread: OCBC unit sees 10-20% fall in high-end home prices

  1. #1
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    Default OCBC unit sees 10-20% fall in high-end home prices

    http://www.businesstimes.com.sg/arch...nd-home-prices

    Published June 27, 2012

    OCBC unit sees 10-20% fall in high-end home prices

    Low interest rates, higher liquidity to buoy mass-market, shoebox demand

    By Mindy Tan


    EVEN as the gap between high-end and mass market residential prices hits a nine-year low, high-end prices are forecast to fall between 10 and 20 per cent in FY12.

    According to the latest OCBC Investment Research (OIR) report, while the historic average price premium between the high-end and mass-market segment (over Q1 2004 to Q1 2012) is 98 per cent on a psf basis, the price premium has shrunk to 82 per cent in Q1 2012.

    That said, OIR forecasts that prices would fall a further 10 and 20 per cent in FY12 following the ABSD measures - of which one key consideration was an additional 10 per cent stamp duty on property purchases made by foreigners and corporate entities - implemented in December.

    Stated the report: "These measures are particularly onerous as, from 1st Jan to 8th Dec 2011, we had estimated that 29 per cent of all transactions were by foreigners and corporate entities. As a result, we saw primary sales in the high-end core central region (CCR) segment dip 79 per cent year-on-year (126 units sold) in Q1 2012."

    Conversely, low interest rates and increased liquidity in the system is likely to sustain demand for shoebox and mass market units.

    Indeed, the fall in interest rates between 2008 and Q2 2012 translates into an increase of almost 210,000 in the number of households above the income hurdle for properties between $600,000 and $1 million.

    "To offer a perspective of this magnitude, if 5 to 10 per cent of these incremental households were to purchase private property, this would be equivalent to 70 to 140 per cent of total annual primary sales," said OIR.

    Coupled with the ample liquidity in the banking system, this would underpin sustained demand for shoebox and mass-market units, and unhinge prices from historical norms of affordability based on domestic wage levels and rental yields, said OIR.

    "All things considered, we forecast that mass market residential prices would increase by 0 to 5 per cent over FY2012."

    Shoebox units can also expect to continue enjoying a premium over non-shoebox units over FY2012 and FY2013. However, this premium could diminish or even reverse after 2015, particularly for shoebox units in the outside central region (OCR), noted OIR.

    Shoebox units currently enjoy a psf premium of about 7-9 per cent.

    "This phenomenon is within our expectations given the demand for units at lower price quantums, and would likely continue over FY12-13 as liquidity remains abundant," said OIR.

    Indeed, OCR shoebox prices might already be overextended. OCR transactions have mostly been in the same psf band as rest of central region (RCR) new sale transactions (mostly between $1,200 and $1,300 psf). Sales in the CCR, on the other hand, have mostly transacted between $1,600 and $1,700 psf).

    According to OIR estimates, the number of OCR shoebox units could grow by more than 450 per cent by 2015.

    In the event of this supply glut, OCR shoebox rents could fall 10-20 per cent, assuming that rents would fall to the level of a "reasonable substitute" - a HDB flat in a similar location with around 50 per cent more space.

    "Based on a sample of the current market, we estimate that current rentals of an OCR shoebox unit indicate a net rental yield of around 4.1 per cent," added OIR.

    In addition to falling rents, net rental yields of OCR shoebox units, particularly 99-year leasehold units, could expand closer to those of HDB flats in an environment of rising interest rates and higher supply of completed shoebox units, said OIR.

    "From our sensitivity analysis, we found that if the yield spread between OCR shoebox units and substitute HDB flats should shrink by 25 per cent, we could see a 15-30 per cent decrease in the capital values of shoebox units in a bear case scenario," said the report.

  2. #2
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    another RUBBISH analysis...

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    My own version:

    1. Is HDB resale price insane??

    Back in 1996, average family income per month including employer CPF is around 4k while HDB resale price index peaked at 140. Now average family income per month is around 7k while the HDB resale index is at 194. Is the market as insane as 1996?? Income is up 75% but resale index is only up by 37%. So the answer is no. As long as family income continues to climb, HDB is still very affordable.

    2. Immigration



    > 300k SPRs were imported since 2005, obviously our MND/HDB has not planned for them where to stay ... need I say more?

    3. Record # of marriages

    http://www.straitstimes.com/STI/STIM...MARRIAGE15.pdf

    from about 22k in 2000/2001 to 27k in 2011 .... need I say more?

    4. Many fellow Singaporeans who bought CCR in 1996 still not making profit, need I say more?

    5. Since Lehman crisis, US garmen has printed 300T USD ... interest rate in G7 all near zero ... do u expect interest rate to go up in next 5y?? Hot money printed in UK, US, Japan must seek returns in Asia, need I say more??

    Ride at your own risk !!!

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    Quote Originally Posted by phantom_opera
    My own version:

    1. Is HDB resale price insane??

    Back in 1996, average family income per month including employer CPF is around 4k while HDB resale price index peaked at 140. Now average family income per month is around 7k while the HDB resale index is at 194. Is the market as insane as 1996?? Income is up 75% but resale index is only up by 37%. So the answer is no. As long as family income continues to climb, HDB is still very affordable.

    2. Immigration



    > 300k SPRs were imported since 2005, obviously our MND/HDB has not planned for them where to stay ... need I say more?

    3. Record # of marriages

    http://www.straitstimes.com/STI/STIM...MARRIAGE15.pdf

    from about 22k in 2000/2001 to 27k in 2011 .... need I say more?

    4. Many fellow Singaporeans who bought CCR in 1996 still not making profit, need I say more?

    5. Since Lehman crisis, US garmen has printed 300T USD ... interest rate in G7 all near zero ... do u expect interest rate to go up in next 5y?? Hot money printed in UK, US, Japan must seek returns in Asia, need I say more??

    What is your conclusion?

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    No wonder you are still earning 3.5k.

  6. #6
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    Quote Originally Posted by yowetan
    What is your conclusion?
    i think his conclusion is => "need I say more??"...





    btw:
    phantom, agree with your points,... but hor...
    - your pt 4... like that also can ??...
    - your pt 5... usa got print a lot lah... but not up to 300T...

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    Is this the same group of analysts that says prices will be down 30% within 1-2 quarters when CM5 was introduced ?

    Then later pretend nothing happened and make another prediction ?

    I think they are worse that the fake fortune tellers in Arab Street, Chinatown, etc ...

    Someone should hold them accountable for the things they say.

    Just like we disallow developers or agents make representations that prices will CONFIRM go up by 20xx, so better buy NOW! Kinda statement.

    But then if accountability rules sets in, i CONFIRM Ah B will be the first one to stay near Loyang Changi PC!

    DKSG

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    This type of analysis just can't stand up scrutiny. Let's check what they say:
    "OCBC unit sees 10-20% fall in high-end home prices"

    "OCR transactions have mostly been in the same psf band as rest of central region (RCR) new sale transactions (mostly between $1,200 and $1,300 psf). Sales in the CCR, on the other hand, have mostly transacted between $1,600 and $1,700 psf)."
    "All things considered, we forecast that mass market residential prices would increase by 0 to 5 per cent over FY2012."

    So OCR mostly transacting at about same price as RCR of $1200-1300 psf.
    CCR now mostly transacting at $1600-1700 psf.
    For CCR to fall 20% means to fall to 1280-1360 psf! <- Can that ever be possible when OCR expected to increase by 0-5% means increase to $1260-$1365 psf! In this case, it means OCR same price as CCR!
    Those analysts treat all property buyers as bloody stupid idiot, goodu, brain-dead to be willing to pay OCR property for same price as CCR?



    Quote Originally Posted by reporter2
    http://www.businesstimes.com.sg/arch...nd-home-prices

    Published June 27, 2012

    OCBC unit sees 10-20% fall in high-end home prices

    Low interest rates, higher liquidity to buoy mass-market, shoebox demand

    By Mindy Tan


    EVEN as the gap between high-end and mass market residential prices hits a nine-year low, high-end prices are forecast to fall between 10 and 20 per cent in FY12.

    According to the latest OCBC Investment Research (OIR) report, while the historic average price premium between the high-end and mass-market segment (over Q1 2004 to Q1 2012) is 98 per cent on a psf basis, the price premium has shrunk to 82 per cent in Q1 2012.

    That said, OIR forecasts that prices would fall a further 10 and 20 per cent in FY12 following the ABSD measures - of which one key consideration was an additional 10 per cent stamp duty on property purchases made by foreigners and corporate entities - implemented in December.

    Stated the report: "These measures are particularly onerous as, from 1st Jan to 8th Dec 2011, we had estimated that 29 per cent of all transactions were by foreigners and corporate entities. As a result, we saw primary sales in the high-end core central region (CCR) segment dip 79 per cent year-on-year (126 units sold) in Q1 2012."

    Conversely, low interest rates and increased liquidity in the system is likely to sustain demand for shoebox and mass market units.

    Indeed, the fall in interest rates between 2008 and Q2 2012 translates into an increase of almost 210,000 in the number of households above the income hurdle for properties between $600,000 and $1 million.

    "To offer a perspective of this magnitude, if 5 to 10 per cent of these incremental households were to purchase private property, this would be equivalent to 70 to 140 per cent of total annual primary sales," said OIR.

    Coupled with the ample liquidity in the banking system, this would underpin sustained demand for shoebox and mass-market units, and unhinge prices from historical norms of affordability based on domestic wage levels and rental yields, said OIR.

    "All things considered, we forecast that mass market residential prices would increase by 0 to 5 per cent over FY2012."

    Shoebox units can also expect to continue enjoying a premium over non-shoebox units over FY2012 and FY2013. However, this premium could diminish or even reverse after 2015, particularly for shoebox units in the outside central region (OCR), noted OIR.

    Shoebox units currently enjoy a psf premium of about 7-9 per cent.

    "This phenomenon is within our expectations given the demand for units at lower price quantums, and would likely continue over FY12-13 as liquidity remains abundant," said OIR.

    Indeed, OCR shoebox prices might already be overextended. OCR transactions have mostly been in the same psf band as rest of central region (RCR) new sale transactions (mostly between $1,200 and $1,300 psf). Sales in the CCR, on the other hand, have mostly transacted between $1,600 and $1,700 psf).

    According to OIR estimates, the number of OCR shoebox units could grow by more than 450 per cent by 2015.

    In the event of this supply glut, OCR shoebox rents could fall 10-20 per cent, assuming that rents would fall to the level of a "reasonable substitute" - a HDB flat in a similar location with around 50 per cent more space.

    "Based on a sample of the current market, we estimate that current rentals of an OCR shoebox unit indicate a net rental yield of around 4.1 per cent," added OIR.

    In addition to falling rents, net rental yields of OCR shoebox units, particularly 99-year leasehold units, could expand closer to those of HDB flats in an environment of rising interest rates and higher supply of completed shoebox units, said OIR.

    "From our sensitivity analysis, we found that if the yield spread between OCR shoebox units and substitute HDB flats should shrink by 25 per cent, we could see a 15-30 per cent decrease in the capital values of shoebox units in a bear case scenario," said the report.

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    Default HDB Price

    Just got my HDB Title Deed.
    The first owner paid $61K for the 4-room flat in 1991. I guess fresh university graduates were paid something like S$2k / month at that time.

    Now first hand HDB is selling at S$300K++
    fresh graduates are paid S$3k /month.

    Is HDB affordable? Need I say more?

    Thanks,
    Richard

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    Wrong analysis. You should base on household income, not fresh graduate income! Last time, only 5% are graduates. Now >15% are graduates. The normal graduates are lousy graduates, that is why got paid $3k /month. The good graduates are paid >$5k pm now vs $2k pm in 1991.

    Last time 1991 medium household income $3k+ /month? Now medium household income $8k+ /month?

    Last time, $61k/($2k *12) = 2.54 years. It means a person just need to work for 2.54 years to finish paying off their new HDB flat! New HDB flat prices are just mis-priced, priced too cheap!

    Now $300k / ($8k * 12) = 3.125 years! Slight increase only! It means new HDB flat prices still very cheap! In fact, too cheap!

    A fairer number of years should be >=8 years, which means fair medium HDB flat prices should be at least = ($8k * 12)*8 = $768k! No wonder resale HDB flats are transacting at such prices!


    Quote Originally Posted by richwang
    Just got my HDB Title Deed.
    The first owner paid $61K for the 4-room flat in 1991. I guess fresh university graduates were paid something like S$2k / month at that time.

    Now first hand HDB is selling at S$300K++
    fresh graduates are paid S$3k /month.

    Is HDB affordable? Need I say more?

    Thanks,
    Richard

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    Quote Originally Posted by ikan bilis
    i think his conclusion is => "need I say more??"...





    btw:
    phantom, agree with your points,... but hor...
    - your pt 4... like that also can ??...
    - your pt 5... usa got print a lot lah... but not up to 300T...
    Pt 4 is pure technical analysis and it is 3trillion not 300 trillion sorry

    To ruchwang, After 1992, Cpf is allowed to pay for property under the great asset enhancement program becos pap wants u to commit ur money here lol
    Ride at your own risk !!!

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    Quote Originally Posted by teddybear
    Wrong analysis. You should base on household income, not fresh graduate income! Last time, only 5% are graduates. Now >15% are graduates. The normal graduates are lousy graduates, that is why got paid $3k /month. The good graduates are paid >$5k pm now vs $2k pm in 1991.

    Last time 1991 medium household income $3k+ /month? Now medium household income $8k+ /month?

    Last time, $61k/($2k *12) = 2.54 years. It means a person just need to work for 2.54 years to finish paying off their new HDB flat! New HDB flat prices are just mis-priced, priced too cheap!

    Now $300k / ($8k * 12) = 3.125 years! Slight increase only! It means new HDB flat prices still very cheap! In fact, too cheap!

    A fairer number of years should be >=8 years, which means fair medium HDB flat prices should be at least = ($8k * 12)*8 = $768k! No wonder resale HDB flats are transacting at such prices!
    Bro... Full salary go to paying off the house ah? No need to eat meh...

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    Quote Originally Posted by richwang
    Just got my HDB Title Deed.
    The first owner paid $61K for the 4-room flat in 1991. I guess fresh university graduates were paid something like S$2k / month at that time.

    Now first hand HDB is selling at S$300K++
    fresh graduates are paid S$3k /month.

    Is HDB affordable? Need I say more?

    Thanks,
    Richard
    Your analysis not accurate lah..
    Last time army recruits wear short pant earned $20/mth.. 3-rm $20k.... now army recruits wear long pant earning $480/mth.. 3-rm should be $480k..

    Wow!! our housing is so affordable!!! Need I say more lor..

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    i'm intending to add 1 more to my portfolio, need I say more?

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    Quote Originally Posted by Rysk
    Your analysis not accurate lah..
    Last time army recruits wear short pant earned $20/mth.. 3-rm $20k.... now army recruits wear long pant earning $480/mth.. 3-rm should be $480k..

    Wow!! our housing is so affordable!!! Need I say more lor..
    Hahaha......that's correct. And furthermore, u need two fresh grad to buy a hdb which make it 6k/mth. Should be alright. And for 3rm flat should be enough for starter...and if they insist on location or bigger flat, then of course they have to be ready to pay more.

    By the way, hdb got what title deed meh??

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    Default Duplicate of Title Deed

    True, there is no title deed. It is a duplicate. And it clears says I am pay $1 rental per year. I guess the original Title Deed (they call it Master Title Deed) is still with HDB?

    Thanks,
    Richard

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    Default Degree Inflation

    Last time, only 5% can get U Degree. Now there are 15%.
    But does that mean U Degree must worth less?

    If we go down to that direction, people will be force to get masters.
    And the good ones will need to get Ph D.
    That's what is happening in China.
    Every year, there are millions of U graduates. They are willing to be paid S$0 for the 1st job, so after one year, they are no long "fresh" graduates.
    To land a good job, masters are the norm.
    The biggest problem is for ladies. When they get Ph D, getting married is a real challenging. That's why some ladies declined to get a Ph D.

    Life for the younger generation is not easy.

    Thanks,
    Richard

  18. #18
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    Alamak! this is a general rule/guide that every country used to compute the affordability of house based on your salary la..

    You are right to say that generally people will not/can't pay off in such as a short period because you still need to divert some money for foods/investment/maintenance/leisure.. so using this guide to see whether you can afford a house comfortably for a long run (some use 1/3 of salary rule to installment la).

    Quote Originally Posted by carbuncle
    Bro... Full salary go to paying off the house ah? No need to eat meh...
    Last edited by teddybear; 08-07-12 at 11:14.

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    Default Army pay is a joke

    I find the army pay/allowance was a joke (and it still is).
    How can you use that to justified HDB price increases.

    For your information, the right price for army pay is:
    around $4k for U holders
    around $3k for Poly
    around $2k for JC graduates.

    If you don't believe it, just ask any lady who is in the BMT. (Yes, that's the right price to attract a person to join army willingly. Of course, u need other characters and fitness.)

    Thanks,
    Richard

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    any income must take emPloyer Cpf into consideration so teddybear not that far off, the very fact is that employer Cpf was reduced to 12pc was a killer to Property market, now restored to 16pc is positive, if u factor in employer Cpf avg family income in 2001 was 4k now probably around 8k pm, since pc is for top 20 pc, it could have even higher growth relative to 2001
    Ride at your own risk !!!

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    Default Household Income is Misleading

    The birth rate in Singapore is dropping,
    but the household size recently is increasing.
    What does that tell you?
    More youngsters are staying with their parents.

    If someone is squeezing parents and in-laws into the same condo unit, household income just increase with the each person's pay to increase.

    Young couples are forced to work in double income mode.
    Housewives are disappearing.

    How to increase birth rate?

    Thanks,
    Richard

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    Due to the 27k record marriages, we have hard demand, not everyone can wait for bto which takes 4y to deliver key, ppl also marry much later comPared to 199x and thus can decide btw EC and PC, one year rollout 12k Btos and 12k ECs N PCs is just all right no oversupply
    Ride at your own risk !!!

  23. #23
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    Default Real Rich kids

    Sure, there are real rich kids.
    If you visit NUS and think the BMW belongs to a professor, you can be wrong.
    Students driving high end cars are not unheard of.

    Question? Is the money really earned by them?

    Thanks,
    Richard

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    Default Record Marriage Number is misleading

    The record high number of marriage is once again misleading.
    The number counters non-Singaporean marriages.

    The truth is more and more local Singaporeans are not married.

    Thanks,
    Richard
    PS. Agreed the marriage number (regardless local or not) will push up the property price. But is it sustainable? Can local Singaporeans accept a Singapore where locals are minority?

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    Default High End Price is dropping

    Back to the topic of high end property price.
    If Reflection is of any guide, it is dropping.

    Thanks,
    Richard

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    u want to be like Japan? First we import malaysians and indon Chinese and now Indian n mainland Chinese nothing wrong with that as India and china will be as strong as US one day, Singapore is a tiny island surrounded by Muslims, in that context life wont be easy, if u want to enjoy life work hard invest smart as there is no free lunch, losers not welcome
    Ride at your own risk !!!

  27. #27
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    Based on your suggested figures, JC and Poly graduates will be overpaid!

    Quote Originally Posted by richwang
    I find the army pay/allowance was a joke (and it still is).
    How can you use that to justified HDB price increases.

    For your information, the right price for army pay is:
    around $4k for U holders
    around $3k for Poly
    around $2k for JC graduates.

    If you don't believe it, just ask any lady who is in the BMT. (Yes, that's the right price to attract a person to join army willingly. Of course, u need other characters and fitness.)

    Thanks,
    Richard

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    Default Define Winners

    In the old good days of 1980s, every HDB owner is a winner.
    Just buy 1st hand HDB and sell in 2nd hand market.
    So 80% was winners.

    Now you need to be multiple property owners, so inflation will indeed be good news for you.
    How many multiple property owners do we have in Singapore?
    10% are winners?

    For the next generation, maybe you need to be top 1% to be considered as winners.

    If we continue with that direction, only top 1000 earners in Singapore will be winners.

    Good luck!
    Richard

  29. #29
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    Not true lah. Scadinavian countries are known to have very high birth rates, but parents both all working at same time. This is not the problem. The problem is somewhere else as demonstrated by real-life example.

    Quote Originally Posted by richwang
    The birth rate in Singapore is dropping,
    but the household size recently is increasing.
    What does that tell you?
    More youngsters are staying with their parents.

    If someone is squeezing parents and in-laws into the same condo unit, household income just increase with the each person's pay to increase.

    Young couples are forced to work in double income mode.
    Housewives are disappearing.


    How to increase birth rate?

    Thanks,
    Richard

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    Default Army is always better paid

    Army around the world is better paid because they are indeed risking their lives.
    I was double paid than my friends when I was in Chinese army.
    I don't think the BMT girls here are overpaid. They are just better paid.
    If you like, you can send your daughters to the army. I will complain they are getting better pay.

    Thanks,
    Richard

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