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reporter2
04-11-17, 23:26
Private home prices finally head north

OCT 28, 2017

Collective sales will add more unsold private homes to pipeline: URA

Annabeth Leow


The private residential market seems to have turned the corner in the third quarter, with prices heading higher after almost four years of decline.

Overall prices rose 0.7 per cent in the three months to Sept 30, compared with the previous quarter. This trumped earlier flash estimates of a 0.5 per cent rise and ended 15 quarters of decline, according to Urban Redevelopment Authority (URA) data out yesterday.

The agency also said that the recent flurry of collective sales could eventually deliver an additional 9,300 units to the market - the first time that it has publicly put a number to the impact of the deals.

Coupled with a further 7,400 units from government land sales in the years ahead, the yield from collective sales could nearly double the number of unsold private homes in the pipeline, assuming that planning approval is obtained. There are already 17,178 units that have received approval on the way.

"As en bloc sales of existing sites have been very active over the past one to two years, the redevelopment... will add a significant number of housing units to the existing supply pipeline," URA said in a report that accompanied the quarterly figures.

But industry analysts do not expect the impact of collective sales to be felt so soon. These potential new homes are expected to hit the market in the next one to two years, and will be ready for moving in only from 2021 onwards.

Edmund Tie & Company research head Lee Nai Jia noted: "The impact of supply tends to lag, and it should have marginal impact on prices in 2018."

Mr Desmond Sim, head of research for Singapore and South-east Asia at property consultancy CBRE, told The Straits Times: "What we see is that URA is definitely monitoring this situation, especially for collective sales, and with that in mind would tweak the supply coming for government land sales... Developers are also eyeballing one another. They don't want to over-cannibalise one another."

The price recovery took the overall year-on-year growth in private home prices to 0.3 per cent in the first nine months of the year, against a 2.6 per cent decrease in the same period last year.

Values rose for both landed properties and apartments across the island, so "the price recovery appears to be broad-based, supporting the likelihood of prices continuing to rise", said Mr Ong Teck Hui, national director for research and consultancy at JLL.

Edmund Tie & Company's Dr Lee added: "While the private residential market tends to be slower in the third quarter (owing) to the Chinese Seventh Month, the uptick in prices suggests that the market has bottomed out."

But home prices are not expected to shoot up overnight, said Mr Eugene Lim, the key executive officer at ERA Realty Network.

"This may be a strong indication that the market is finally turning, after stabilising over the last four years. However, buyers need not be overly worried that prices will see a robust spike, as the market recovery is expected to be gradual."

Mr Lim pointed to cooling measures, such as the total debt servicing ratio and additional buyer's stamp duty, that remain in play.

CBRE's Mr Sim also cautioned that the rise in home values looks likely to be driven by an inflation in land prices "rather than an exuberance in demand".

reporter2
04-11-17, 23:40
Private home prices 'on firm ground' after index shows uptick

Q3 increase of 0.7 % q-o-q a result of en bloc fever, developers running short of new units or delaying new launches: analysts

OCT 28, 2017

KALPANA RASHIWALA


PROPERTY analysts said the 0.7 per cent quarter-on-quarter increase in the official private home price index for the third quarter is a reflection of firmer prices in the last 21/2 weeks of September.

The figure beat the 0.5 per cent increase in the flash estimate.

"With private home price indices in all segments in positive territory, the price recovery appears to be broad-based, supporting the likelihood of prices continuing to rise," said Ong Teck Hui, national director of research and consultancy at JLL.

Cushman & Wakefield Singapore's research director Christine Li, said that the renewed interest in en bloc sales has encouraged more home owners to withdraw their units from the resale market in a bid to jump on the collective sale bandwagon.

The private residential market has gone "from having too many units for sale at the end of last year to not having enough units to sell".

Developers, too, have been running short of units for sale, she said, pointing to the trend in the ratio of private homes sold by developers to the units launched.

In Q3, this was 2.25 times the units they launched. It was up from 1.53 times in Q2 2017 and 1.52 times in Q1.

The ratio for Q3 is the highest seen for a quarter in the past 10 years and an indication that developers are selling units faster than they can replenish them.

In the first nine months, developers have moved 8,702 private homes in the primary market, up 53.9 per cent year on year.

Said JLL's Mr Ong: "New sales launches have been lagging take-up with 5,143 units placed on the market in the first nine months, a mere 4.3 per cent increase y-o-y."

Secondary market transactions of private homes surged 59.3 per cent to 10,098 units in the first nine months, making up 53.7 per cent of the total sales volume, compared with 52.8 per cent in 2016 and 46.5 per cent in 2015.

"With new launches remaining low-key and more buyers returning to the market, resale market activity is expected to strengthen and lead the primary market in the near term," said Mr Ong.

Landed and non-landed

Given that some developers are likely to delay sales launches to make the most of the price recovery, Mr Ong has revised his forecast of new private home sales in the primary market in 2017 to 10,500-11,500 units from around 12,000 units previously.

In the first nine months, 18,800 private homes were transacted across the primary and secondary markets - 56.8 per cent higher than the same period last year, and the strongest first nine months in five years, according to JLL's analysis of URA data.

The 0.7 per cent q-o-q rise in URA's private home price index comes after 15 consecutive quarterly declines since the peak in Q3 2013.

The subindex tracking prices of landed properties rose 1.2 per cent in Q3 2017 after dipping 0.3 per cent in Q2 2017.

Prices of non-landed properties increased 0.6 per cent after dipping 0.1 per cent.

The subindex for suburban areas or Outside Central Region (OCR) was up 0.8 per cent, against a 0.3 per cent fall in the previous quarter.

Non-landed private homes in the city fringe or Rest of Central Region (RCR) climbed 0.5 per cent, following a 0.6 per cent increase in the previous quarter.

In the prime areas or Core Central Region (CCR), prices rose 0.1 per cent against a 0.5 per cent drop the previous quarter.

Most property consultants are expecting URA's benchmark overall private home price index to end the year in positive territory by up to 1 per cent, contrasting with a 3.1 per cent drop last year.

ZACD Group executive director Nicholas Mak expects the index to end the year 0.7 per cent to 1.5 per cent higher, and grow by another 4 per cent to 8 per cent next year.

URA's rental index for private homes remained unchanged, compared with a 0.2 per cent decline in the previous quarter.

Rentals of non-landed private homes in CCR retreated 0.8 per cent, against an increase of 0.1 per cent in the previous quarter. In the city-fringe or RCR, rents climbed 0.9 per cent, against a drop of 0.4 per cent in the previous quarter; and rentals in the suburbs contracted 0.3 per cent after sliding 0.6 per cent the previous quarter.

ERA Realty Network key executive officer Eugene Lim is expecting URA's overall private residential rental index to post a 2 to 3 per cent full-year decline.

Still, he said: "a recovery in the rental market could possibly happen as soon as 2018, as the number of private home completions is expected to be 7,893 units; this is less than half the 17,000-odd expected completions in 2017".

Rising vacancies

Savills Singapore research head Alan Cheong said: "A rental base appears to be forming despite rising vacancies. This could be due to landlords pushing back against tenants seeking even lower rents.

"The low interest rate charged for mortgages in Singapore, which at today's rates is even lower than before the Fed started to hike rates in December 2015, is strengthening landlords' holding power."

URA's data showed that the vacancy rate of completed private homes (excluding ECs) rose to 8.4 per cent as at end-Q3 2017, from 8.1 per cent as at end-Q2 2017.

Giving a breakdown by region, URA said the vacancy rates of completed private homes as at end-Q3 2017 in CCR, RCR and OCR were 10.9 per cent, 8.3 per cent and 7.3 per cent respectively - up from 10.3 per cent, 8.1 per cent and 7.1 per cent in the previous quarter.

As at end-Q3 2017, there was a total supply of 35,022 uncompleted private residential units (excluding ECs) in the pipeline with planning approvals, fewer than the 35,423 units at end-Q2 2017.

Of these figures, 16,031 units remained unsold as at end-Q3 2017, an increase from 15,085 units at end-Q2 2017.