Published July 3, 2007

URA signals caution as rise in home prices spreads

Q2 private home prices surge 7.9%, with gains reaching mass market and HDB resale segments


(SINGAPORE) Official flash estimates show the rise in home prices spreading beyond the high-end to other parts of the market including private condos in the city fringe, mass market areas and even to the HDB resale market - prompting some words of caution from the Urban Redevelopment Authority (URA).

Market watchers say the trend is being driven by people who have sold their prime district homes through en bloc sales finding replacement properties further from prime locations.

The URA price index for private homes rose 7.9 per cent in the second quarter over Q1 - the biggest quarter-on-quarter gain since Q2 1999. The latest flash estimate shows a year-on-year gain of 20.6 per cent for Singapore as a whole.

The biggest price gains were not in luxury homes, as reflected in URA's Core Central Region, covering districts 9, 10 and 11, Downtown Core (including Marina Bay), and Sentosa. While non-landed private home prices in this region increased by 7.6 per cent in Q2 over Q1, the Rest of Central Region (which covers places like Bukit Merah, Queenstown, Geylang, Toa Payoh and Katong) posted an even bigger 7.9 per cent gain over the same period.

Prices in the Outside Central Region - which covers suburban mass-market locations like Woodlands, Clementi, Jurong, Hougang, Tampines and Bedok - were 6.5 per cent higher in Q2 than in the first three months of the year.

The Housing & Development Board's resale flat price index registered a 2.9 per cent increase in Q2 over Q1, going by the board's latest flash estimate. This shows prices for public housing rising faster than before, as there was a quarterly gain of just 1.3 per cent in the index in Q1.

In a departure from recent tradition, the URA yesterday advised potential home buyers that they should take into account that there is 'sufficient pipeline supply of private housing, as well as the potential supply from Government Land Sales sites, when deciding to make a property purchase'.

The URA reminded people that the Government will ensure there are sufficient homes to meet demand, saying that it will continue to monitor the market closely.

DTZ Debenham Tie Leung executive director Ong Choon Fah said: 'There has been a sense of urgency for some people to buy a home when they see the market going up. Obviously the Government is a little bit concerned, but this market is driven by fear and greed. Fear of missing the boat, and greed to make more. These are very emotional things, so people may not act rationally.'

Another property consultancy, CB Richard Ellis, noted that the URA's overall price index for private homes has increased 13.1 per cent in the first six months of this year. It predicts a full-year gain of 20 to 25 per cent for the whole of this year.

ERA Singapore similarly forecasts an increase of 20 per cent or more for 2007. For the HDB resale flat price index, ERA predicts an increase for the whole year of about 8 to 10 per cent. PropNex also reckons the gain will be about 10 per cent.

Market watchers see yesterday's data as evidence that the recovery in the high-end residential sector is at last filtering through to other parts of the market.

Knight Frank managing director Tan Tiong Cheng says the key driver of this trend is the growing number of owners of prime district homes who went through en bloc sales and are priced out of the most expensive districts. 'They are instead forced to find replacement homes outside these locations, starting with city-fringe locations and even spreading to the suburbs,' Mr Tan said.

In some cases, especially en bloc sales of privatised HUDC estates, the replacement homes may even be HDB resale flats in Queenstown, Bukit Merah and other areas, Mr Tan reckons.

ERA Singapore assistant vice-president Eugene Lim reckons that fear among home buyers that they may miss the boat and lose out on good property buys is also fuelling the current buying frenzy.

'Everyone seems to want a piece of the action. Those who can't afford the high prices in prime locations are moving outwards,' Mr Lim added.

PropNex CEO Mohamed Ismail reckons the increases in the price indices for the Rest of Central Region and Outside Central Region are due to many buyers previously sitting on the fence deciding to buy out of fear that prices may escalate further.

CBRE executive director Li Hiaw Ho highlighted projects in several locations that saw new price levels being achieved in Q2, including Kallang (The Riverine By The Park, $1,400-1,500 psf), Novena (Novelis@Novena, $1,400 psf) and suburban areas (Botannia in the West Coast area, Casa Merah near Tanah Merah MRT Station, Northwood in Sembawang, and Parc Mondrian at Woodleigh Close, in the $600 to $720 psf range).

PropNex's Mr Mohamed warned that the 7.9 per cent hike in the private home price index for Q2 is 'bullish and if the growth continues at this pace, it is not healthy for the property market in the long run'.