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Thread: Singapore home prices seen reversing after a long downward trend

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    Default Singapore home prices seen reversing after a long downward trend

    Singapore home prices seen reversing after a long downward trend

    Sep 29, 2017

    Rachel Mui


    FOR the first time in four years, more analysts seem to be agreeing that the Singapore property market is at an inflection point, and on the cusp of recovery.

    In a report on Thursday, OCBC Investment Research noted that the Urban Redevelopment Authority's (URA) third-quarter price index is poised to rebound, marking the end of the Singapore housing bear. The URA's flash estimate will be announced next Monday, with official statistics to be released on Oct 27.

    Said OCBC analysts: "We believe that the trough is in fact behind us and Singapore home prices likely hit cyclical lows in mid-June 2017."

    They cited three reasons for their view. First, the URA had previously revised its second-quarter figures upwards from the flash estimate of -0.3 per cent to the official statistic of -0.1 per cent.

    This represents the smallest decline in 15 consecutive quarters of falls, signalling that an upcycle is in sight. Given firm market conditions, OCBC expects this upward trend to have continued into Q3 2017.

    Secondly, sales volumes and take-up rates in the primary housing market strengthened in July and August this year. Total new home sales rose 35 per cent year on year to 3,672 units in these two months, while the take-up rate (total sales over total launches) surged to 193 per cent from 131 per cent over the same period from a year ago.

    Thirdly, OCBC's research suggests that price expectations of developers and home sellers in the secondary market increased over the past few months, with the prices of new launches inching up simultaneously.

    Taken together, OCBC analysts are forecasting for Singapore home prices to be overall flat in 2017, and to appreciate by 3 to 8 per cent in 2018, as the rental market picks up and macroeconomic conditions remain robust.

    The report maintained the analysts' "overweight" rating for the property sector, with their top picks being City Developments, UOL Group and Wheelock Properties.

    Interestingly, it's not just OCBC that's foreseeing a reversal from a long downtrend of residential prices in Singapore.

    Earlier this month, Morgan Stanley said that a recovery in local housing prices has begun in the third quarter, with its analyst Wilson Ng predicting that private home prices will add 10 per cent by the end of 2018, and double by 2030.

    Similarly, UOB Kay Hian envisage that Singapore property prices will rise by 5 to 10 per cent next year after bottoming out this year.

    "Historically, spikes in en bloc sales have preceded property sector price recovery in the past cycles in 2007 and 2011," UOB said.

    It added that the levelling of taxation costs and cooling measures are building up the relative appeal of Singapore real estate. As such, they expect this nascent recovery to spread to the mid-range and high-end segments, driven by an en bloc fever and strong buyer sentiment from foreigners.

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    The property market - is it a-turnin'?

    Monday's flash estimates will confirm or debunk analysts' suspicions that prices have indeed bottomed out

    Sep 30, 2017

    Lee Meixian


    FLASH estimates released on Monday for Singapore's private housing sector could show the first increase after 15 quarters of decline. This is what most analysts are expecting - although the view has its dissenters as well.

    In notes to clients this week, both OCBC and Morgan Stanley said that they expect the first instance of a property price upturn in the third quarter of 2017, marking the turn of the property cycle.

    Morgan Stanley forecast a 0.8 per cent quarter-on-quarter rise in the private residential property price index, versus a 0.1 per cent fall in Q2.

    OCBC Investment Research said: "We also believe that the bottom is actually behind us, not shortly ahead as consensus states. Specifically, our view is Singapore home prices hit their cyclical trough sometime in mid-June 2017."

    In an interview with The Business Times on Friday, Lee Wee Liat, BNP Asia-Pacific head of research for financial institutions and property, also expects private home prices to rise 10-15 per cent over the next 12-15 months. On when it would start, he said: "As early as this or next quarter."

    He expects the recovery to begin with Singapore citizens returning to the market first. Later, when foreigners, particularly the mainland Chinese, become persuaded of the price recovery, they too will re-enter. At that time, he expects Singapore private home prices to surge another 20 per cent.

    "There isn't going to be an impact on them (the foreign buyers) if they expect prices to increase. Look at Hong Kong. It has a 30 per cent stamp duty (for foreigners buying Hong Kong property), but the percentage of mainland Chinese buyers in Hong Kong properties continued to increase from 10 per cent two years ago to about 25 per cent now. This is because they expect home prices in Hong Kong to go up as much as 50 per cent. That is why they feel it doesn't really matter if you pay 30 per cent; this will be transfered to the next buyer buying from them. The same may happen in Singapore if they start to see prices coming back."

    Other reasons cited for the expectation of a recovery include the substantial growth in Singapore's household income of about 6-7 per cent in the last 10 years, amid income growth and restraint among Singaporeans from buying property, he added.

    Another is improved sales volumes and take-up rates in the primary market, and higher prices at new launches this year.

    OCBC Investment Research noted, for instance, that total new home sales in July and August rose 35 per cent year on year to 3,672, while the take-up rate (ie total sales over total launches) also improved to 193 per cent, from 131 per cent over the same period last year.

    But amid the sea of bullish sentiment is a minority of cautious bears, such as Ku Swee Yong, chief executive of International Property Advisor, who this week also released a paper challenging Morgan Stanley's April forecast that Singapore home prices are on track to double by 2030.

    His prognosis is surprisingly sombre: "We are likely to see property prices dragging along on a protracted downturn for several more years before recovering."

    Speaking to BT, he said: "I think I have in the last two months become the one and only person in the market who believes that property prices will go down."

    He cited three reasons for his pessimism. The first is the weak job market. In the second quarter of 2017, total employment fell by 7,900 (excluding foreign domestic workers), the second straight quarter of contraction, due to drops in work permit holders in construction and manufacturing.

    The second is the slow growth in Singapore's population, which expanded by a mere 0.1 per cent - or about 5,000 - to 5.6 million as at June this year, chiefly due to the decrease in the number of work permit holders. All these will affect housing demand.

    The final reason is his anecdotal experience with banks that showed no improvement in the valuations they gave for resale properties. "The data right now is just not tallying with how bad the situation is and we are not helped by some of these forecasts," he said.

    If one had to trace, the start of sentiment brightening in the sector seemed to follow the government's relaxation of seller's stamp duty (SSD) measures in March this year. Following that tweak, homeowners who buy houses need to wait only three years instead of four to avoid the SSD when they sell their properties. If they cannot wait, they will also pay less in tax - some four percentage points less - compared to homeowners who bought their properties previously.

    Mr Lee said that although it was only a "slight tweak", it had managed to unleash a lot of pent-up demand. Since then, land bidding among developers has also turned aggressive, and more home owners are gunning for collective sales. "What then is the amount of potential buying (that could come about), backed by strong income and wealth growth?" he said.

    The estimates will be released by the Urban Redevelopment Authority on Monday morning, with the official statistics slated for Oct 27.

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    The average property size has really shrunk. It just that CCR shrunk more and OCR shrunk less. It was price quantum game the developers are playing.

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    Quote Originally Posted by indomie View Post
    The average property size has really shrunk. It just that CCR shrunk more and OCR shrunk less. It was price quantum game the developers are playing.
    Price did not increase they just move the kitchen to the living room better than the open kitchen. You can watch movie and see your wife cook at the same time. Wife also happy can see what the husband watch while cooking.

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    I reckon is a function of optimising bided land use and increasing smaller family nucleus in Singapore. Smaller families do not need such huge space BUT they might need more units as the kids grow up and wanting something of their own. They might or might not live in it but thats besides the point. This is partially driving up current demand but not sustainable as the installed base population is negative growth or shrinking.

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    Not only that, the bedroom of newer condos is now about half the size of the bedroom of older condos. Has Singaporeans shrunk by half in size? Don't think so, I think more children are now obese and need bigger space instead.

    Quote Originally Posted by Arcachon View Post
    Price did not increase they just move the kitchen to the living room better than the open kitchen. You can watch movie and see your wife cook at the same time. Wife also happy can see what the husband watch while cooking.

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    Quote Originally Posted by teddybear View Post
    Not only that, the bedroom of newer condos is now about half the size of the bedroom of older condos. Has Singaporeans shrunk by half in size? Don't think so, I think more children are now obese and need bigger space instead.
    Obese children just need to lie on sofa and use iPad. Methinks you no children.
    The three laws of Kelonguni:

    Where there is kelong, there is guni.
    No kelong no guni.
    More kelong = more guni.

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