Thursday, December 11, 2008

Bigger slice of a smaller pie?

Proportion of buyers with an HDB address looks set to increase

Cheow Xin Yi

[email protected]

WITH foreign buyers pulling out of Singapore’s property market on the back of deteriorating global economic conditions, Housing Development Board upgraders are forming an increasingly important group of buyers here.

According to a recent DTZ analysis of private property caveats lodged in the third quarter, purchasers with HDB addresses make up 1,718 — or 41 per cent — of the total number of transactions. This was the highest proportion for HDB upgraders since the third quarter of 2004. In thesecond quarter of this year, they made up 34 per cent of the market.

In absolute terms, the number of HDB upgraders also increased about 34 per cent from the previous quarter. Based on past experience, the proportion of HDB upgraders buying private property looks set to rise.

DTZ data show that their share of purchases was as high as 81 per cent in the second quarter of 2002, in the aftermath of Sept 11, 2001, terrorist attacks on New York. In the fourth quarter of 1998 after the Asian Financial Crisis, they made up 68 per cent of the market.

Most analysts attribute the trend to two factors: One is the narrowing gap between public and private housing prices with the HDB resale market still buoyant even as prices for private property soften.

The second is that the waning interest from foreign buyers leaves local buyers making up the bulk of remaining transactions.

“It is more affordable for HDB flat owners to upgrade to private housing. Singles who are getting married would also find the falling private home prices more affordable and may decide to buy a private home instead of HDB flat first,” said DTZ senior director(research) Ms Chua Chor Hoon.

For Jones Lang LaSalle head of research (South-east Asia) Chua Yang Liang, any further increase in the share of HDB upgraders will be due more to the drop in the number of foreign buyers, rather than an absolute increase in the number of HDB upgraders.

“This current economic downturn is led more by external forces, so foreigners are more likely to delay their spending,” he said, adding that there are now other countries with attractive property values, such as Australia and Japan, competing with Singapore.

Ms Chua believes developers would take into account pricing and location in upcoming launches to cater to this group of “price sensitive” buyers. “Developers are more likely to launch projects in suburban areas or projects with smaller units so that the absolute amount is affordable,” she said.

However, others believe there are likely to be better bargains in the secondary market, where individuals may be under pressure to offload their properties in a downturn.

Noting that prices for mass-market condos now average between $650 to $750 per square foot in suburban locations, ERA Asia-Pacific’s assistant vice-president Eugene Lim said that developers, especially those with the financial strength, will probably not cut prices until after the 2009 Budget at the end of January next year.