Category Archives: Condos

Completed Condo market: Further downside expected as supply increases, leasing demand weakens

PRICES of completed private condos resumed their fall in June as distractions from the school vacation and World Cup fever dampened buying interests.

A looming supply of completed homes and weakening leasing demand will continue to weigh on prices, market watchers say.

Last month, the Singapore Residential Price Index (SRPI) released by the National University of Singapore (NUS) slipped one per cent month-on-month in June, after a revised 0.4 per cent rise in May.

Small units of 506 sq ft and below saw a 0.4 per cent dip in prices last month nationwide.

“Private resale home prices are expected to continue to soften with all the measures in place,” said ERA Realty key executive officer Eugene Lim. “In addition, private resale market is facing competition due to the increased supply. We will continue to see more deals being closed at realistic prices.”

The NUS indices, which track completed private condos and apartments, excluding executive condos, reflect transactions received as at July 21.

While the overall NUS SRPI for June reflects a 9 per cent fall from the peak in May 2013, it is still 36.1 per cent above the level in January 2008.

Excluding shoebox units, prices of completed homes in the Central Region – comprising districts 1 to 4 and districts 9 to 11 – fell 1.5 per cent in June from May, while those in non-central region edged down 0.4 per cent in June.

Official figures from URA last week showed that there are a total of 1,412 private homes that are completed but unsold as at end-June. And the bulk of these unsold units – 63.3 per cent – are located in the Core Central Region, which covers districts 9, 10, 11, downtown core and Sentosa.

Vacancy rate is also on the rise, according to URA, climbing from 6.6 per cent in the first quarter to 7.1 per cent in the second – the highest level since the 7.4 per cent recorded in the first quarter of 2006.

R’ST Research director Ong Kah Seng noted that buying interest for homes in the Central Region is very weak given ample unsold developer stock and the easing rental market as companies tighten housing budgets for expatriates.

“Even the pool of buyers of smaller/average size units in Central Region is shrinking as they usually require large loans but TDSR (total debt servicing ratio) limits put a cap to it,” Mr Ong added.

The Outside Central region (OCR) that has held up slightly better so far may also experience further weakness.

Nicholas Mak, executive director of SLP International, reckoned that a higher proportion of suburban condos bought during the property boom of 2009-2013 was investment-driven, compared to that during the 2005-2007 boom.

As more units in OCR reach completion next year onwards, there will be some pressures – first on the rental market and then on resale prices, Mr Mak said.

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More homes sold as prices slip in Q2

Buyers jumped back into the local housing market as prices of both public and private homes fell for another straight quarter, figures out yesterday showed.

A raft of cooling measures has kept a tight rein on the market, but clear evidence of softer prices is drawing buyers back.

Private property prices slipped by a gentler 1 per cent in the April to June period from levels in the preceding quarter, when they dropped by 1.3 per cent. However, the number of homes sold shot up 46.4 per cent to 4,118 units from the first quarter to the second.

A similar scenario played out in the public housing market: Prices of resale flats fell 1.4 per cent in the three months to June 30 – a slight improvement over the 1.6 per cent drop in the first quarter.

But 4,389 Housing Board (HDB) flats changed hands during the quarter, up 16.1 per cent from the previous quarter.

This was the fourth straight dip in the HDB’s resale price index, which has seen a 5.3 per cent decline since the peak in the public market a year ago.

Although buying volumes are rising, analysts say that an increasing supply of completed condo units and public flats will continue to hold prices down.

R’ST Research director Ong Kah Seng said sellers of resale HDB flats can no longer demand high prices as the mortgage servicing ratio, which caps loans for public flats at 30 per cent of a borrower’s gross monthly income, limits large home loans.

As more owners take possession of newly completed HDB flats, the number of public homes on the resale market is likely to rise, said SLP International research head Nicholas Mak.

“Buyers of Build-to-Order flats are required to dispose of their existing HDB flats within six months of taking possession,” he said. And the supply will only increase as upgraders move into new private homes.

A total of 24,893 new units, including executive condominiums, are estimated to be due for completion by the end of next year, Urban Redevelopment Authority figures showed yesterday.

Prices on the private home front fell across all segments. City-centre prices declined 1.5 per cent, while city-fringe prices fell 0.4 per cent. Prices of suburban homes dropped 0.9 per cent.

Even though developers dangled competitive offers at new launches, the overall slide was led by non-landed resale units, which fell 1.3 per cent, while new condo units saw a 0.5 per cent dip.

Ms Chia Siew-Chuin, director of research and advisory at Colliers International, said: “This could indicate that the stalemate between home owners and buyers has given way to a softer stance among sellers.”

Upcoming launches such as Keppel Land’s The Highline Residences are expected to underpin sales volumes, which are likely to be around 4,000 to 6,000 for the second half, predicted Dr Tan Tee Khoon, executive director of residential services at Knight Frank. Private home prices could moderate by 5 to 6 per cent by the fourth quarter, he said.

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URA private home index down 1%; HDB resale index retreats 1.4%

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PRICES of private homes and HDB resale flats have continued to soften in the second quarter amid a pick-up in transaction volumes.

But even though the quarter-on-quarter dips are smaller than in Q1, the prognosis is hardly cheery – besides mounting supply, demand is clipped by the total debt servicing ratio (TDSR) framework, and in the case of HDB flats, the mortgage servicing ratio as well.

The Urban Redevelopment Authority’s private home price index fell one per cent in Q2, after easing 1.3 per cent in Q1. This is the third straight quarterly drop. Total transactions – new sales, resales and subsales combined – rose 46.4 per cent to 4,118 units from 2,813 in Q1. Year on year, the Q2 index was down 2.8 per cent.

Meanwhile, HDB’s resale flat price index eased 1.4 per cent, compared with 1.6 per cent in Q1. This is the fourth consecutive drop in the index. The 4,389 resale applications registered in Q2 was up 16.1 per cent from a quarter earlier. The Q2 index reflects a year-on-year drop of 5.3 per cent.

Property consultants expect the full-year drop for the HDB index to be 4-8 per cent and for the the URA index, 5-8 per cent.

The trend is expected to continue next year. Eugene Lim, key executive officer of ERA Realty, said: “MAS (Monetary Authority of Singapore) has maintained their stand that TDSR will remain for the long term and that it is still early days to tweak any of the cooling measures. Therefore, we can expect the moderation in property prices to continue into 2015. Volumes are likely to be flat.

“Economically, we are doing well. The employment situation is good. Logically, the property market should be moving upwards in tandem with the economy. However, we are seeing moderate price declines due to the increasing supply as well as policy measures which are designed to put a check on property prices.”

JLL national director Ong Teck Hui said: “What I will be looking out for is whether the market has softened to a stable level, characterised by mild or gradual price decline of about one-odd per cent per quarter, and steady transaction volume – or whether the converse will happen: volumes could decline significantly further and leading to greater magnitude of quarterly price declines.”

URA’s Q2 data out yesterday shows that the price decline for landed homes has gathered pace – 1.7 per cent compared with 0.7 per cent in Q1.

The price decline for non-landed private homes, however, moderated to 0.8 per cent, from 1.3 per cent. Prices in suburban locations, or the Outside Central Region, retreated 0.9 per cent, faster than Q1’s 0.1 per cent dip.

In the city-fringe, or Rest of Central Region, prices edged down 0.4 per cent, compared with a 3.3 per cent drop in Q1.

Core Central Region (CCR) fell 1.5 per cent, compared with Q1’s 1.1 per cent drop. CCR covers the Downtown Core planning area, Sentosa and the traditional districts 9, 10 and 11.

Chia Siew Chuin, director at Colliers International, noted that “the CCR has been hit by a prolonged drought in foreign buying, high price tags and some potential buyers facing difficulty obtaining loans for higher-value properties due to TDSR”.

She also said that developers of high-end properties affected by Qualifying Certificate rules are facing pressure to finish selling their projects within two years of obtaining Temporary Occupation Permit (TOP). This has made them more inclined to trim prices to move units.

Ms Chia forecasts a 10-15 per cent price drop for luxury and super-luxury condos for the year.

Meanwhile, URA’s rental index for private homes dipped 0.6 per cent after shedding 0.7 per cent in Q1.

In the first half, 9,016 private homes were completed, that is, received TOP. With 8,066 more slated for completion in H2, taking full-year completions to a record 17,082, rents are expected to come under greater pressure.

The vacancy rate of private homes has risen to 7.1 per cent at end-Q2 from 6.6 per cent at end-Q1.

In the public housing market, substantial supply is also expected to put a dampener on resale flats. Based on HDB data, launches of Build-To-Order (BTO) flats are expected to total about 22,400 units this year, following 2013’s 25,139 and 2012’s 27,084.

On top of that, the Sale of Balance Flats (SBF) will amount to some 6,400 units this year. In 2013 and 2012, the figures were 7,074 and 7,153 respectively. The large numbers of BTO and SBF flats will reduce appetite for resale flats, say market watchers.

Adding further pressure on HDB resale flat prices, said PropNex CEO Mohamed Ismail, is an “imminent flood in supply of HDB resale homes from existing HDB flat owners collecting the keys to new BTO flats and private properties”.

HDB resale transaction volumes, however, may improve slightly due to lower asking prices. Mr Ismail expects around 17,000 resale HDB flat transactions for this year. SLP International’s Nicholas Mak forecast 15,500-16,800 units. Both their figures would be the lowest since 1997. Last year, 18,100 HDB flats changed hands in the resale market.

Possible Reason why cooling measures not removed: Rise caveats in Q2

Here’s a possible reason why the authorities are not inclined to remove any property cooling measures just yet: There was an across-the-board increase in caveats lodged for private home purchases in the second quarter compared to the previous quarter.

DTZ’s analysis of URA Realis caveats database shows a 37.1 per cent quarter-on-quarter increase in the total number of private homes transacted to 3,369 units in Q2.

A segmental breakdown showed that the number of units picked up in the resale market climbed nearly 41 per cent or 386 units to 1,328 units in Q2 from 942 units in Q1 – ending three consecutive quarters of decline.

New sales by developers too rose by 511 units or 36.8 per cent to 1,898 units. In the subsale market, 143 units changed hands in Q2, up 11.7 per cent from Q1.

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Purchases by Singaporeans rose nearly 45 per cent quarter-on-quarter to 2,491 units in Q2. The number of private homes picked up by Singapore permanent residents climbed 24 per cent to 574 units, while purchases by non-PR foreigners rose 2 per cent to 260 units.

Those with HDB addresses bought 1,629 units in Q2, up 41.3 per cent from Q1. The number of private homes acquired by those with private addresses climbed 33.4 per cent to 1,740 units.

Despite the recovery in Q2, the 5,826 total private homes sold in the first-half of this year is not even half the 13,651 units transacted in the first-half last year – reflecting the dent on transactions created by the Total Debt Servicing Ratio (TDSR) framework since its introduction in late-June 2013, notes Lee Lay Keng, regional head (SEA), research at DTZ.

Still the pick-up in the Q2 caveats would give the policy makers a reason to pause and reflect, amid calls by developers and other parties urging the authorities to start rolling back cooling measures such as the additional buyer’s stamp duty and the seller’s stamp duty, she added.

Most industry watchers accept that TDSR is here to stay for the long term. Under the framework, banks granting new property loans to individuals have to ensure a borrower’s total monthly debt obligations (including car loan and credit card repayments) do not exceed 60 per cent of gross monthly income.

“The reason caveats have recovered in Q2,” said Savills Singapore research head Alan Cheong, “is that demand is extremely price elastic or price sensitive. Even a slight price decline would lure many potential buyers back to the market”.

“In 2012 and 2013, the market was fixated with new property launches. In 2014, the genuine upgraders and even investors who are not overwrought by new-fangled small-format homes have started to look at the resale market where more habitable, larger apartments are to be found, and they have started to plunge into the market.

“And the sellers of such properties being individuals, unlike developers, have little bargaining power and acceded to the buyer’s price offers. Hence, prices in the resale market have gone down.”

DTZ’s Ms Lee said the strong new home sales in Q2 was amid an increase in launches by developers.

“Based on preliminary monthly numbers, developers launched 2,843 private homes in Q2, compared with 1,964 units launched in Q1. Big projects were released in Q2 in good locations and at attractive prices – such as Commonwealth Towers, Lakeville, Coco Palms and The Sorrento – resulting in relatively good sales,” said Ms Lee.

“Moreover, some previously launched projects saw renewed interest after new units were released at lower prices in Q2. For instance, the developers of The Panorama and Sky Habitat sold another 149 units and 153 units, respectively in Q2 after median prices were reduced by 10-15 per cent since these developments were first launched in Q1 2014 and Q2 2012, respectively.”

DTZ’s caveats analysis also showed that because Singaporeans’ share of private home purchases rose at a faster clip in Q2 compared with the more modest increases in buying by PRs and foreigners, the proportion of units bought by Singaporeans rose four percentage points quarter-on-quarter to 74 per cent.

Conversely, PRs saw a two percentage point retreat in their share to 17 per cent in Q2. Foreigners too posted a three percentage point fall in their share to 8 per cent.

Another finding is that 58 per cent of private homes picked up by Singaporeans in Q2 were new sales by developers. Among foreigners, the figure was 62 per cent. For PRs, however, it was a roughly equal split of the source of units between new sales and resales. Of the 574 units PRs acquired in the second quarter, 47 per cent comprised new sales, and 46 per cent resales, with the balance 7 per cent involving subsale transactions.

“It appears that a higher proportion of PRs are buying for owner occupation and hence want a completed property they can move into immediately,” suggests Ms Lee.