Published January 23, 2010

Property market eyes fruits from Remaking S'pore

Analysts bullish after URA data shows hike in Q4 prices and dip in vacancies


THE increase in Singapore private home prices moderated in the fourth quarter, but there are also signs of things firming again if the economy continues to grow. After all, much of the physical infrastructure for the Remaking Singapore story is being delivered this year.

Urban Redevelopment Authority's private residential rental indices posted modest quarter-on-quarter increases in Q4 - marking a reversal of the declines posted in the preceding quarter. The islandwide vacancy rate for private homes dipped to 5 per cent as at end-2009, compared with 6.2 per cent as at end-Q3 2009 and 6.1 per cent as at end-2008.

A total 10,488 private homes received Temporary Occupation Permit (TOP) last year - the highest level since 2004 when 11,799 homes were completed. Taking into account demolitions, the net increase in the stock of completed private homes last year was 8,285. However, there was an even bigger net jump in demand for physically completed private homes last year to a nine-year high of 10,520 units, said Colliers Intenational.

DTZ executive director Ong Choon Fah argues that with the number of private homes receiving TOP this year expected to slip 28 per cent to 7,584 units (based on URA's surveys of developers), vacancies will ease further and rents will continue to firm up across the board.

Singapore also expects to see an influx of workers and expats as the integrated resorts and Marina Bay Financial Centre become operational. This will drive up demand for rental homes across the whole spectrum - from HDB flats to upscale condos.

Landed home prices, especially those for terrace houses, posted a sparkling performance last year. URA's landed property price index rose 7.7 per cent in 2009, compared with just a 0.5 per cent rise for non-landed homes. The terrace house price index appreciated 10 per cent in 2009, followed by semi-detached houses (up 8.8 per cent) and detached houses, (up 5.6 per cent). Agents credit the landed sector's resilience to its relatively more limited supply.

URA's overall private home price index (covering both landed and non-landed segments) rose 7.4 per cent quarter-on-quarter in Q4, translating to a full-year increase of 1.8 per cent. The index slipped 18.1 per cent in the first half of 2009 before recovering 24.3 per cent in the July to December period.

Developers sold 14,688 units in 2009, nearly 3.5 times the 2008 figure and close to the all-time high of 14,811 in 2007. DTZ's South-east Asia research head Chua Chor Hoon forecasts a take-up of 8,000 to 10,000 units in 2010. Consultants generally predict 8 to 15 per cent increase this year for URA's overall private home price index, with greater upside for high-end homes.

Knight Frank chairman Tan Tiong Cheng, however, said the pace of price increase for upmarket homes will depend on how many expat tenants pour into Singapore and the size of their rental budgets since the majority of such properties are bought for investment.

On the other hand, mass-market private condo prices may still have room to power up, assuming HDB resale flat prices continue to rally, and especially if the condo launches are in plum locations, Mr Tan added. 'Landed homes will also continue to do well in 2010 due to the scarcity factor,' he added.

URA's figures also show that the supply pipeline of private homes with either provisional or written permission shrank from nearly 65,000 at end-2008 to 60,476 units at end-2009. The number of unsold units in uncompleted private housing projects contracted from 43,414 at end-2008 to 34,234 at end-2009, reflecting developers strong sales last year.

The office market achieved its second consecutive quarter of positive net demand of 301,389 sq ft in Q4 2009, higher than the 32,292 sq ft posted in Q3. For full year, net demand was minus 236,806 sq ft; nonetheless, this was better than in 2002 and 2003, when net demand was minus 926,000 sq ft and 1.13 million sq ft respectively, notes Colliers director Tay Huey Ying.

Islandwide office vacancy improved slightly from 12.2 per cent at end-Q3 2009 to 12.1 per cent at end-Q4.

The median monthly rental for the choicer Category 1 office space based on rental contracts signed in Q4 was $8.76 per square foot, down 7.8 per cent from Q3. DTZ says a recovery in office rentals at the end of this year is plausible if the economy grows more strongly than expected and more existing office blocks are redeveloped.

In the retail property segment, URA's shop rental index for the Central Region dipped 1.4 per cent in Q4 over the preceding quarter, resulting in a 7.4 per cent full-year drop. Despite another 404,723 sq ft of new shop space being completed in Q4, the islandwide shop vacancy rate improved to 5.7 per cent from 6 per cent in Q3.

Knight Frank's Mr Tan said: 'There is a lot of confidence that with the completion of the IRs, there will be multiplier effects for the retail and private residential property markets. The IRs will attract a lot of MICE visitors, who tend to have higher spending power than the typical tourist. Some overseas visitors drawn by IRs may end up liking Singapore and want to buy a home here, especially if there are prospects of economic recovery.'

'The Government began telling the Remaking of Singapore story about five years ago. Now the physical part of the story is almost ready. And it's about time to reap the fruits of these investments.'