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Thread: Home prices 'set for healthy gains'

  1. #1
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    Default Home prices 'set for healthy gains'

    [url]http://www.straitstimes.com/Money/Story/STIStory_546989.html[/url]

    Jun 29, 2010

    [B][SIZE="5"]Home prices 'set for healthy gains'[/SIZE][/B]

    [B]But high-end market likely to do less well amid fears of oversupply: Report[/B]

    By Joyce Teo, Property Correspondent


    PRICES of mass market homes, especially Housing Board flats, are set for healthy gains this year, according to a Citigroup report.

    But it is far more pessimistic about the high-end market. Citi is bucking an upbeat trend among property consultants by expressing fears of an oversupply of upscale homes.

    It said, for example, that one-third of prime District 9 units due for completion in the next 12 to 15 months remain unsold.

    However, HDB resale prices, which provide a strong base for the mass private market, are likely to stay firm due largely to the generally low supply since 2003, it said. Citi expects both HDB resale prices and rents, as well as mass market private home prices, to rise 5 per cent to 10 per cent by the end of the year.

    'With capital gains from existing Housing Board flats at a seven-year high, coupled with low mortgage rates, we believe new sales are likely to remain strong in the mass market,' it said.

    Mass market private home prices should be capped at $900 to $1,000 per sq ft (psf), though there is a chance they may overshoot, it said.

    Considering the high bids and breakeven costs for recent government sites, developers are likely to keep selling private homes at a minimum range of $850 to $1,100 psf and HDB executive condos at closer to $750 psf.

    Citi noted that overall resale volume is a hefty 50 per cent off levels in the boom times of mid-2007. Prime apartments are in worse shape than other home types. Prices of high-end homes are still some 10 per cent to 16 per cent off their 2007 peaks, while mass market prices are now almost 10 per cent above that most recent pinnacle.

    Citi believes high-end home prices will stay flat this year, unlike some property consultants who expect rises of 10 per cent to as much as 20 per cent this year, given that price levels are below the 2007 peak.

    'This is the sector that attracts more foreign buyers who have fewer buying constraints,' said DTZ's head of South-east Asia research Chua Chor Hoon.

    Colliers International director for research and advisory Tay Huey Ying said foreign buyers, including permanent residents, comprised over half of total buyers in the first five months of this year.

    'Moving on, as the world economy recovers, there could be some diversion of investments from countries which have imposed cooling measures in their respective property markets,' she said.

    But Citi said a much-awaited jump in high-end sales has yet to materialise despite the completion of both integrated resorts. The recent rise in rentals, driven by relatively low completion rates in the past two quarters, is not sustainable, it says.

    High-end rentals are up an average of 10 per cent from their recent lows but are still some 20 per cent off their peaks. Mass market rentals, on the other hand, are up more than 13 per cent and are just 8 per cent off their last peaks in 2008.

    Citi highlighted a jump in home completions, with about 10,000 units to be ready this year - more than anticipated.

    In the next two years, more than 11,000 units will be completed a year. And the bulk - or about 80 per cent - of those to be completed over the next 12 to 15 months will be in the central region.

    In District 9 alone, about 30 per cent of the new completions are unsold and in Sentosa, 75 per cent of the new units to be completed this year await buyers.

    Ngee Ann Polytechnic real estate lecturer Nicholas Mak said in the short term, the high-end segment may not boom until the supply imbalance is gradually resolved.

    Citi said: 'While we believe most of the listed developers under our coverage are unlikely to cut prices to move their inventory, other developers may be more willing to do so.'

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  2. #2
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    Citi is a contrarian - which is interesting. Most of the rest of the experts are predicting high end property to shine and appreciate by 20% this year - reason being PRCs are collecting our property in truckloads like LVs and Pradas (then they will bring up the ONE Sentosa Cove deal to support their detailed "analysis"). In the past, all the international schools are in town and prime areas, which helps prop up the rental yields in these areas. With international schools moving out to suburbs including suburban Jurong, the prime areas no longer can command a premium due to proximity to international schools. Most expats with good rental budget usually (i) drive (ii) married with kids who go to int'l school. Suburban areas are becoming more attractive due to upcoming development, improving infrastructure and more space. The gap between "prime" and "suburb" should be narrower. But of course if PRCs come and disrupt the system for "brand name" sake (i.e. their love of LV is translated into Singapore prime homes), then things may change. It will be sad indeed if the only potential buyers of our "prime" properties are PRCs - who are neither looking for owner occupation or rental yield - just a trophy asset for showing off.

  3. #3
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    even then, PRCs likely to be looking more at SUPER LUXURY ie around 3000psf and above type. if what u said is true, that means the rest of CCR could lag even more after the run-up in the past year.

    Quote Originally Posted by Wild Falcon
    Citi is a contrarian - which is interesting. Most of the rest of the experts are predicting high end property to shine and appreciate by 20% this year - reason being PRCs are collecting our property in truckloads like LVs and Pradas (then they will bring up the ONE Sentosa Cove deal to support their detailed "analysis"). In the past, all the international schools are in town and prime areas, which helps prop up the rental yields in these areas. With international schools moving out to suburbs including suburban Jurong, the prime areas no longer can command a premium due to proximity to international schools. Most expats with good rental budget usually (i) drive (ii) married with kids who go to int'l school. Suburban areas are becoming more attractive due to upcoming development, improving infrastructure and more space. The gap between "prime" and "suburb" should be narrower. But of course if PRCs come and disrupt the system for "brand name" sake (i.e. their love of LV is translated into Singapore prime homes), then things may change. It will be sad indeed if the only potential buyers of our "prime" properties are PRCs - who are neither looking for owner occupation or rental yield - just a trophy asset for showing off.

  4. #4
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    the income distribution of foreigners coming here are likely to be even, so that means, you will have those who are looking at your entry level condos right up to your $36mio sentosa bungalows...

  5. #5
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    i was of the impression that its like an hour glass. OCR and RCR, there are entry level, but in CCR, more are looking at super luxury, which leaves rest of CCR hanging.

    Quote Originally Posted by kane
    the income distribution of foreigners coming here are likely to be even, so that means, you will have those who are looking at your entry level condos right up to your $36mio sentosa bungalows...

  6. #6
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    Quote Originally Posted by mr funny
    [URL="http://www.straitstimes.com/Money/Story/STIStory_546989.html"]http://www.straitstimes.com/Money/Story/STIStory_546989.html[/URL]

    Jun 29, 2010

    [B][SIZE=5]Home prices 'set for healthy gains'[/SIZE][/B]

    [B]But high-end market likely to do less well amid fears of oversupply: Report[/B]

    By Joyce Teo, Property Correspondent


    PRICES of mass market homes, especially Housing Board flats, are set for healthy gains this year, according to a Citigroup report.

    But it is far more pessimistic about the high-end market. Citi is bucking an upbeat trend among property consultants by expressing fears of an oversupply of upscale homes.

    It said, for example, that one-third of prime District 9 units due for completion in the next 12 to 15 months remain unsold.

    However, HDB resale prices, which provide a strong base for the mass private market, are likely to stay firm due largely to the generally low supply since 2003, it said. Citi expects both HDB resale prices and rents, as well as mass market private home prices, to rise 5 per cent to 10 per cent by the end of the year.

    'With capital gains from existing Housing Board flats at a seven-year high, coupled with low mortgage rates, we believe new sales are likely to remain strong in the mass market,' it said.

    Mass market private home prices should be capped at $900 to $1,000 per sq ft (psf), though there is a chance they may overshoot, it said.

    Considering the high bids and breakeven costs for recent government sites, developers are likely to keep selling private homes at a minimum range of $850 to $1,100 psf and HDB executive condos at closer to $750 psf.

    Citi noted that overall resale volume is a hefty 50 per cent off levels in the boom times of mid-2007. Prime apartments are in worse shape than other home types. Prices of high-end homes are still some 10 per cent to 16 per cent off their 2007 peaks, while mass market prices are now almost 10 per cent above that most recent pinnacle.

    Citi believes high-end home prices will stay flat this year, unlike some property consultants who expect rises of 10 per cent to as much as 20 per cent this year, given that price levels are below the 2007 peak.

    'This is the sector that attracts more foreign buyers who have fewer buying constraints,' said DTZ's head of South-east Asia research Chua Chor Hoon.

    Colliers International director for research and advisory Tay Huey Ying said foreign buyers, including permanent residents, comprised over half of total buyers in the first five months of this year.

    'Moving on, as the world economy recovers, there could be some diversion of investments from countries which have imposed cooling measures in their respective property markets,' she said.

    But Citi said a much-awaited jump in high-end sales has yet to materialise despite the completion of both integrated resorts. The recent rise in rentals, driven by relatively low completion rates in the past two quarters, is not sustainable, it says.

    High-end rentals are up an average of 10 per cent from their recent lows but are still some 20 per cent off their peaks. Mass market rentals, on the other hand, are up more than 13 per cent and are just 8 per cent off their last peaks in 2008.

    Citi highlighted a jump in home completions, with about 10,000 units to be ready this year - more than anticipated.

    In the next two years, more than 11,000 units will be completed a year. And the bulk - or about 80 per cent - of those to be completed over the next 12 to 15 months will be in the central region.

    [B][COLOR=red]In District 9 alone, about 30 per cent of the new completions are unsold and in Sentosa, 75 per cent of the new units to be completed this year await buyers.[/COLOR][/B]

    Ngee Ann Polytechnic real estate lecturer Nicholas Mak said in the short term, the high-end segment may not boom until the supply imbalance is gradually resolved.

    Citi said: 'While we believe most of the listed developers under our coverage are unlikely to cut prices to move their inventory, other developers may be more willing to do so.'

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    is this true ?

    i always thot its SELL OUT PROJECT EVERYWHERE

  7. #7
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    sentosa is becoz they build first. but slowly launch, ie seascape and W Residences are both almost completed.

    Quote Originally Posted by proud owner
    is this true ?

    i always thot its SELL OUT PROJECT EVERYWHERE

  8. #8
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    Mass market vs Prime.

    But what's the story on mid-tier?

  9. #9
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    mid-tier left hanging lor? haha...no lah.

    i think as long as affordable ones still can attract both local and foreign buyers. its those in CCR, yet high quantum (relatively high asking psf say 1700 to 2300psf? and high sq ft combined), yet not super luxury (around 3000psf has its niche of fans), yet many completing in 2011 ones, my personal feel is those could lag, neither here nor there.


    Quote Originally Posted by jencrs
    Mass market vs Prime.

    But what's the story on mid-tier?

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