Unlikely to have Significant Drop in Property Prices

Channel News Asia: Significant drop in property prices unlikely: analysts

Jan 27

SINGAPORE : The recent government cooling measures in Singapore's property market will bring down sales volume, but not to the extent of causing a significant fall in prices.

According to a report by DTZ Research, sales volume is expected to fall as short-term speculators will be weeded out by the hefty seller's stamp duty of up to 16 per cent within the first year of purchase.

However, the property consultancy said not all investors will withdraw from the market.

Some may find the 4 per cent stamp duty by the fourth year of sale to be surmountable and shift their focus to buying uncompleted units with completion dates three to four years later.

DTZ's Executive Director for Residential, Margaret Thean said landed homes, small apartments and high-end apartments will be less affected by the measures. That's because small units with their low price quantum will continue to attract investors with spare cash or singles wanting their own units.

Thean added that the 4-year seller's stamp duty will have little impact on landed homes as most purchase them for long-term owner-occupation.

Meanwhile, high-end apartments will likely continue to see foreign interest.

DTZ added that prices in 2011 are expected to be largely stable with a decline of not more than 5 per cent.

This is underpinned by economic growth, low interest rates, strong holding power of developers, the appreciation of the Singapore dollar and inflow of foreign purchasers due to the property market clampdown in mainland China and Hong Kong.

The property consultancy does not rule out the possibility of more government measures should demand remain at a high level after a period of cooling-off.

The report also noted other challenges in the form of a spike in the number of completed units in a few years' time as the government is putting out a record high amount of units through the public housing and government land sales programmes.

There is also uncertainty over the strength of recovery of the major western economies.

If they recover well, interest rates will move up and reduce the affordability of mortgage payments.

On the other hand, if they continue to languish, this will have an effect on the Singapore economy and optimism in the property market eventually.

With the residential market facing numerous challenges, DTZ said investors are likely to take the extra effort to identify opportunities in other property sectors and alternative investment products.

Latest round of cooling measures

Here are the latest round of Government property market cooling measures.

1. Sellers SSD increased from 3 to 4 years on sliding scale at 16% of selling price 12%, 8%, and 4%.

2. LTV lowered from 70 to 60% for 2nd and subsequent loans

3. 50% LTV for non individual buyers (exclude developers buying en bloc for redevelopment), e.g. corporations, trusts and collective investment schemes.

Full information can be found at: http://www.mas.gov.sg/news_room/press_releases/2011/Measures_To_Maintain_A_Stable_And_Sustainable_Property_Market.html

Top Schools = Top Students?

Recently I've seen an increasing emphasis on 'schools within 1km' criteria as being a deciding factor when it comes to purchasing a home. There is no denying that being in a good school brings about immeasurable benefits. Property investors may do well to sit up and take note of this factor when considering your next investment.

Top Scorers for 2010 PSLE and their schools

*Note: Gallop Gables is near to Nanyang and Raffles Girls' Primary School!

Market Talk: CapitaLand

Below is an excerpt from
Straits Times: No shoebox flats for CapitaLand
By Cheryl Lim published on MON, JAN 10, 2011.

"At CapitaLand Residential Singapore, chief executive Wong Heang Fine noted that changing market dynamics would inevitably lead to smaller homes, but he stressed that the firm would not build flats under 500 sq ft. He said its focus for the year ahead would be on replenishing its land bank.

It has 2,500 launch-ready homes that have yet to be released for sale. It will launch 1,700 units this year, with the majority entering the market over the next three months.

At d'Leedon, more units will be released this year - 750 - with the first batch being rolled out this week. The remaining 390 units at The Interlace will be released soon after, followed by 55 luxury homes at The Nassim. Some of the 500 units set aside for the new development at the Bedok Town Centre site will also be launched this year, during the second or third quarter.

In addition, the 64 homes from the Urban Resort project at Cairnhill Road will come on stream this year. Units at both Urban Resort and The Nassim will be sold through private appointments.

Mr Liew indicated that CapitaLand had its eye on several collective-sale sites. He said it was also keen on residential sites - on both the confirmed and reserved lists - offered as part of the first half of this year's Government Land Sales programme.

Sites at the city fringe or near MRT stations would be high on CapitaLand's wish list.

Still, Mr Wong and Mr Liew agreed that even though CapitaLand's balance sheet was healthy enough to allow it to bid for all the sites it was interested in, it would do so with 'disciplined aggression'.

CapitaLand predicts that home prices are likely to increase by 5 to 10 per cent this year, with those in the high-end segment rising by 10 to 15 per cent.

Its optimism with regard to this segment has spurred it to market projects such as The Interlace in China and India.

It does not believe government measures will be introduced to curb foreign interest in the high-end market.

'Singapore is a very open economy. If we start to have such restrictions, it would destroy the image we have of being an open economy,' said Mr Liew."

Singapore's Economy to Expand 4% to 6% in 2011

The economy will continue to expand next year; extending an expansion that has already prompted the central bank to allow the currency to rise to a record to damp inflationary pressures.

Won't rising exchange rates coupled with already rock-bottom interest rates accelerate asset price inflation?

A stronger Singapore Dollar might curb imported inflation but will also dampen exports & tourism. The Singapore Dollar has gained about 8 percent against the U.S. dollar this year, and closed at a record S$1.2835 on Nov. 4.

Property Market Update

October 2010 primary private sales market volume was up 16% month on month to 1,058 units compared to last month's 911 units - a rather strong recovery. Strong sales of 529 units of Executive Condominiums (EC) units contributed to the total primary market sales of 1,587 units in October. The strong sales were despite the Singapore government’s recent property cooling measures – suggesting HDB upgraders' demand could be stronger than expected. 

Sales are again weighted to the Outside Central Region (OCR), though sales in Core Central Region (CCR) picked up to 21% of all new sales - driven mainly by two projects: The Glyndebourne and Suites at Orchard. Aborted sales options returned fell to 29 units from 65 units compared to the previous month, signaling less uncertainty in the market outlook. Sentiment certainly has improved markedly since the new measures were announced.

New sales since the beginning of this year now stands at 13,860 compared to 14,688 in 2009.

Recently launched projects in November like KeppelLand's Lakefront Residences (mass market:; average selling price of $1,020 psf) and UOL's Spottiswoode Residences (mid-market; average selling price of $1,700 psf) are witnessing healthy demand. However, pricing appears to be flat to marginally positive for new
launches, and secondary market volumes are down by an anecdotal 25%.

Looking ahead, sales volumes could hold up but price growth is likely to remain muted. Also, it is likely that  the government will continue to push out more land supply to cater to this demand - which will cap rhe mass market residential price growth. More onerous demand-side measures might be on the cards if prices rise sharply. The high-end residential market, which has been rather muted this year, will start to show more signs of life going forward and into 2011.