Published July 2, 2011

Impact of anti-speculation measures kicks in

Prices of private homes in Q2 up by smaller degree, those of resale HDB flats climb faster as demand stays strong


ANTI-SPECULATION measures for the property market are taking effect - but with different outcomes in the private and public sectors - as flash estimates released by the government yesterday show.

Prices of private homes rose by a smaller degree in the second quarter as would-be buyers kept a wary eye out for state intervention. In the HDB market however, resale flat prices climbed faster as demand stayed strong and potential sellers retreated to the sidelines.

According to the Urban Redevelopment Authority (URA), the private residential property price index gained 1.9 per cent over the quarter to Q2, reaching 202.8 points. The increase is lower than the 2.2 per cent hike in Q1, and marks the seventh consecutive quarter since Q4 2009 that prices have risen at a slower rate.

'Price increases in Q2 were marginally below expectations,' said Savills Research and Consultancy associate director Alan Cheong.

'Cautious market sentiment has put a lid on price escalation,' said Colliers International research and advisory director Chia Siew Chuin, adding that developers, home seekers and investors are waiting for a 'clearer direction on policy changes' after the general election in May.

The government has introduced several rounds of measures to cool the property market. The industry has been on tenterhooks about whether more tightening rules would come, especially after home prices became a hot topic during the pre-election campaigning.

Q2's price increase slowdown was clearest in the suburban districts outside the central region. Prices of non-landed private residential properties there went up by 1.6 per cent, paling in comparison to Q1's 3.1 per cent.

In the city-fringe or rest of central region, prices increased by 1.2 per cent, also lower than Q1's 2 per cent. Only in the core central region did the price hike speed up - prices rose 1.6 per cent and outstripped Q1's 1.1 per cent.

URA computes the property price index using data from all sales transactions of private homes, covering both completed and uncompleted units. The price movements that it captures may vary from those computed by consultants and academics who cover different types of homes - just completed non-landed units for instance - and use different methodologies.

Most property consultants have a conservative view about how far private home prices can continue to climb. Colliers' Ms Chia believed that low interest rates and high liquidity will continue to support buying, and hence prices for the rest of the year. But with policy risks and other global uncertainties looming, 'the pace of price increase is likely to moderate further', and price growth for the year could reach 7-8 per cent, down from 17.6 per cent last year.

CB Richard Ellis executive director (residential) Joseph Tan expected private home prices in Q3 to remain at current levels. He noted that popular new launches in Q2 such as Eight Courtyards were priced at $790-1,000 per square foot (psf) on average. This is comparable with what top projects in Q1 were selling for, at $830-1,000 psf.

'Bid prices of recent suburban leasehold condominium sites in state land tenders will translate to a similar price range when they are launched in the next six to 12 months,' he said.

Fervour waned in the private property sector but not in the HDB market. The resale price index gained 2.9 per cent over the quarter to 179.9 points in Q2, beating the 1.6 per cent rise in Q1.

Consultants noted that the supply of resale flats has shrunk as a result of various cooling measures. For instance, many private home owners have become reluctant to sell flats that they also own, said ERA Realty key executive officer Eugene Lim. This is because if they decide to buy a flat again later, they would have to sell their private homes, as required by a rule introduced last year.

While supply has fallen, buyers who took time to work out the impact of recent cooling measures have returned to the resale market, said PropNex CEO Mohamed Ismail.

Both ERA and PropNex registered rising median resale flat prices and cash premiums in Q2. Based on its own data up till the last week of June, Propnex projected an overall median cash-over-valuation of $32,000 in Q2, exceeding the official number of $21,000 in Q1.

HDB has been ramping up the supply of new build-to-order flats to help meet demand. It is on track to offer 22,000 such flats by September, and another 3,000 in Q4. It also plans to launch 2,000 flats under a sale of balance flats exercise, scheduled in August.