http://www.businesstimes.com.sg/arch...-turn-20140103

Published January 03, 2014

Mass-market condo prices begin to turn

Property players see URA price index falling this year in the range of 1% to 10%

By Kalpana Rashiwala [email protected]


[SINGAPORE] Prices of mass-market private condos - the mainstay of Singapore's private housing market - have finally eased for the first time since the market bottomed out in the second quarter of 2009 after the global crisis.

Prices of landed homes, another pillar of strength of the residential sector, also registered the first decline since Q2 2009, according to the latest flash estimates from the Urban Redevelopment Authority (URA).

URA's overall private housing price index fell 0.8 per cent quarter on quarter in Q4 against a 0.4 per cent increase in Q3. The Q4 index is still 1.2 per cent higher than the year-ago period, though less than the 2.8 per cent rise for 2012.

Most property consultants expect the index to fall on a full-year 2014 basis, though predictions vary widely: one per cent to 10 per cent. The negative factors weighing on private home prices include the Total Debt Servicing Ratio (TDSR) framework, which has eroded borrowing capacity; weaker HDB resale flat prices, which will affect upgrader demand for mass-market private condos; and a significant supply of nearly 20,000 private homes expected to be completed this year.

"This year could be more of a buyer's and tenant's market," said Lee Lay Keng, head of Singapore research at DTZ, "with prices expected to continue to soften against a low transaction volume and rents could be affected by the large supply that will be completed this year.

"However, we do not expect a major price correction given moderately improving economic sentiment, and interest rates expected to still remain low."

URA also provided flash estimates for non-landed private homes in the three geographical regions.

In Outside Central Region (OCR), prices slipped 0.6 per cent in Q4, but the full-year increase of 6.8 per cent was ahead of 2012's 6.5 per cent. In Core Central Region (CCR) - comprising Downtown Core planning area (this includes the financial district), the old postal districts 9-11 and Sentosa Cove - prices declined 2.2 per cent in Q4 and 2.1 per cent for the full year. In Rest of Central Region (RCR) - which includes Bishan, Toa Payoh, Little India, Queenstown and Geylang - prices rose 0.8 per cent, in contrast to a 0.9 per cent drop in Q3. This was probably caused by a couple of major projects - Sky Vue in Bishan and Thomson Three - launched in Q3 at relatively attractive prices but transacted mean prices in the two projects were higher in Q4.

OCR's price drop may have been triggered partly by the Q4 launch of The Inflora in Upper Changi at an average price understood to be around $950 per square foot (psf) - below prices of existing projects in the location.

Knight Frank research head Alice Tan attributed the drop in CCR chiefly to Duo Residences in Bugis - at the fringe of the CCR - which was launched in Q4 at an average price of around $2,000 psf, significantly below prices in other parts of CCR including Marina Bay (where prices hover at $2,500 psf and above) and the Orchard area (above $3,000 psf).

OrangeTee research head Christine Li expects CCR to continue facing headwinds this year, as more "foreign" developers (which includes those listed on SGX) approach deadlines for completing and selling out residential projects, stipulated under Qualifying Certificate conditions. These projects are mostly on prime district sites bought through en bloc sales before the global crisis. "Developers of these projects may have to adopt a price-to-sell strategy if they don't wish to pay extension charges," she said.

In addition, developers will soon be required to declare net sale prices for new homes to URA. As the practice of giving incentives is more common for the high-end sector, this could cause a one-time technical downward adjustment to CCR index in Q1 or Q2, depending on when the change is made, she said.

Alan Cheong, research head at Savills Singapore, said that URA's price index may not trend uniformly down through 2014 as "it is not sensitive enough to factor out micro-locational and other softer attributes like the perceived quality of a project, design, layout, etc". "So depending on what gets launched in the quarter, we may see the index behaving in a saw-tooth fashion."

He predicts a 1-2 per cent dip in URA's overall private home price index this year. "Barring unforeseeable shocks, the market may surprise on the upside rather than down. Rooting for private residential prices to come down has now become group think and this is where the risk lies. (Based on) an objective assessment of the cost of production for the supply side . . . both land and construction costs have been increasing."

Developers may ultimately still be able to sell out their projects at an average price above the previous benchmark. This may be accomplished by marketing the lower floors first, giving the perception that prices are lower than the previous benchmark in the area. If the initial hype draws strong response, developers may open up better units - at higher prices, said Mr Cheong