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Q2 private home prices surge 7.9%, with gains reaching mass market and HDB resale segments

Official flash estimates show the rise in home prices spreading beyond the high-end to other parts of the market including private condos in the city fringe, mass market areas and even to the HDB resale market - prompting some words of caution from the Urban Redevelopment Authority (URA).

Climbing Q207

Market watchers say the trend is being driven by people who have sold their prime district homes through en bloc sales finding replacement properties further from prime locations.

The URA price index for private homes rose 7.9 per cent in the second quarter over Q1 - the biggest quarter-on-quarter gain since Q2 1999. The latest flash estimate shows a year-on-year gain of 20.6 per cent for Singapore as a whole.

The biggest price gains were not in luxury homes, as reflected in URA’s Core Central Region, covering districts 9, 10 and 11, Downtown Core (including Marina Bay), and Sentosa. While non-landed private home prices in this region increased by 7.6 per cent in Q2 over Q1, the Rest of Central Region (which covers places like Bukit Merah, Queenstown, Geylang, Toa Payoh and Katong) posted an even bigger 7.9 per cent gain over the same period.

Prices in the Outside Central Region - which covers suburban mass-market locations like Woodlands, Clementi, Jurong, Hougang, Tampines and Bedok - were 6.5 per cent higher in Q2 than in the first three months of the year.

The Housing & Development Board’s resale flat price index registered a 2.9 per cent increase in Q2 over Q1, going by the board’s latest flash estimate. This shows prices for public housing rising faster than before, as there was a quarterly gain of just 1.3 per cent in the index in Q1.

In a departure from recent tradition, the URA yesterday advised potential home buyers that they should take into account that there is ’sufficient pipeline supply of private housing, as well as the potential supply from Government Land Sales sites, when deciding to make a property purchase’.

The URA reminded people that the Government will ensure there are sufficient homes to meet demand, saying that it will continue to monitor the market closely.

DTZ Debenham Tie Leung executive director Ong Choon Fah said: ‘There has been a sense of urgency for some people to buy a home when they see the market going up. Obviously the Government is a little bit concerned, but this market is driven by fear and greed. Fear of missing the boat, and greed to make more. These are very emotional things, so people may not act rationally.’

Another property consultancy, CB Richard Ellis, noted that the URA’s overall price index for private homes has increased 13.1 per cent in the first six months of this year. It predicts a full-year gain of 20 to 25 per cent for the whole of this year.

ERA Singapore similarly forecasts an increase of 20 per cent or more for 2007. For the HDB resale flat price index, ERA predicts an increase for the whole year of about 8 to 10 per cent. PropNex also reckons the gain will be about 10 per cent.

Market watchers see yesterday’s data as evidence that the recovery in the high-end residential sector is at last filtering through to other parts of the market.

Knight Frank managing director Tan Tiong Cheng says the key driver of this trend is the growing number of owners of prime district homes who went through en bloc sales and are priced out of the most expensive districts. ‘They are instead forced to find replacement homes outside these locations, starting with city-fringe locations and even spreading to the suburbs,’ Mr Tan said.

In some cases, especially en bloc sales of privatised HUDC estates, the replacement homes may even be HDB resale flats in Queenstown, Bukit Merah and other areas, Mr Tan reckons.

ERA Singapore assistant vice-president Eugene Lim reckons that fear among home buyers that they may miss the boat and lose out on good property buys is also fuelling the current buying frenzy.

‘Everyone seems to want a piece of the action. Those who can’t afford the high prices in prime locations are moving outwards,’ Mr Lim added.

PropNex CEO Mohamed Ismail reckons the increases in the price indices for the Rest of Central Region and Outside Central Region are due to many buyers previously sitting on the fence deciding to buy out of fear that prices may escalate further.

CBRE executive director Li Hiaw Ho highlighted projects in several locations that saw new price levels being achieved in Q2, including Kallang (The Riverine By The Park, $1,400-1,500 psf), Novena (Novelis@Novena, $1,400 psf) and suburban areas (Botannia in the West Coast area, Casa Merah near Tanah Merah MRT Station, Northwood in Sembawang, and Parc Mondrian at Woodleigh Close, in the $600 to $720 psf range).

PropNex’s Mr Mohamed warned that the 7.9 per cent hike in the private home price index for Q2 is ‘bullish and if the growth continues at this pace, it is not healthy for the property market in the long run’.

Source : Business Times - 3 Jul 2007

Home prices in north, west remained flat or dropped: Savills

For property prices, this could be a tale of two cities. While housing prices in many parts of Singapore have shot up over the past two years, there are some places where they have only crept up, and others where they have even dropped.

A Broader View

Another Side of the Market

While private home prices in general have climbed 27.9 per cent from the Q2 2005 to Q2 of this year, official estimates released yesterday showed, in some parts of the island the price increase has been marginal, or even negative.

Partly because of this, a range of units in projects across the island are still available for under $500 per square foot (psf). Related article: Click here for URA’s press release

Data from property firm Savills Singapore show that while prices for the rest of the island have climbed by as much as 40 per cent over the past 24 months - with home prices in the prime districts of 9, 10 and 11 climbing by over 50 per cent - housing prices in the north, north-east and west of the country have either remained flat, or dropped.

‘Home prices in the north, north-east and west have dropped about 10 per cent on average over the past two years,’ said Ku Swee Yong, director of marketing and business development at Savills Singapore.

Savills identified Districts 23, 25 and 27 - Bukit Batok, Choa Chu Kang, Hillview Avenue, Upper Bukit Timah, Admiralty, Woodlands, Sembawang and Yishun - as those that have seen price drops.

At Euphony Gardens at Jalan Mata Ayer, prices have dropped from $404 psf in the second quarter of 2005 to $362 psf in the second quarter of this year - a fall of 10.4 per cent. At Palm Gardens at Hong San Walk, the price has fallen by 4.6 per cent to $373 psf, from $391 psf two years ago. The supply of private homes in these areas still outstrips demand for them, Mr Ku said. ‘Demand has not spilled over far enough from the core central region into these areas,’ he said.

It is then not surprising that a whole lot of projects going for under $500 psf can be found in these districts.

The data from Savills show that there are 65 properties - 14 freehold, 35 with 99-year leases and 16 executive condominiums - where units have transacted at under $500 psf over the past few months. Nineteen of these 65 projects are in Districts 23, 25 or 27.

The relatively low going rates means that buying a private condo in these projects might even be cheaper than picking up a HDB flat in a popular area. Last month, a 1,240 sq ft HDB flat at Kim Tian Place went for $720,000 - setting a record for five-room flats.

‘At less than $500 psf, a 1,200 sq ft unit will sell for less than $600,000,’ said Mr Ku. ‘There are a lot of private units that are not as expensive as top-tier HDB flats.’

Mr Ku however pointed out that the comparison does not hold true when comparing a private condo and a HDB flat located in the same area, when the price fetched by the condo will always be higher.

Over the past two years, prices in the core central region of Singapore - which includes Districts 9, 10, 11, Marina Bay and Sentosa - have climbed much faster than in the rest of the island.

The latest estimates by the Urban Redevelopment Authority put the increase of homes prices over the second quarter of this year at 7.6 per cent in the core central region, and a smaller 6.5 per cent in the ‘outside central region’ category.

As prices in the outlying areas of Singapore recover, property prices in Districts 23, 25 and 27 should see better growth, analysts said. And in line with this, the number of properties selling for under $500 psf can also be expected to drop.

Source : Business Times - 3 Jul 2007

Office space crunch, rising rents spur firms to look to high-tech properties

Average rents for high-tech industrial space have increased by 11.9 per cent, the highest quarterly increase in the past five years, boosted by a migration of businesses from the Central Business District (CBD).

On The Rise

Sources show that American Express is the latest financial institution to have moved its back-of-house operations, which have gone to Mapletree’s The Comtech at Alexandra Business Hub.

In its quarterly report on industrial space, CB Richard Ellis (CBRE) said it expects rents to keep rising.

CBRE director (industrial and logistics services) Bernard Goh said: ‘Further rent increases for high-tech space during the second half of the year are expected as demand for offices is unlikely to let up while supply of office space will still remain tight.’

Mr Goh says limited supply of office space coupled with rising rents has encouraged qualifying companies to look to high-tech properties to meet their needs. And average rents have increased from $2.10 per square foot (psf) in Q12007 to $2.35 psf in Q2.

DTZ Debenham Tie Leung also noted the double-digit increase in rents for high-tech space, compared with 9 per cent and 7per cent for average monthly industrial rents for first-storey and upper-storey industrial space.

In its quarterly report on industrial space, DTZ said: ‘Strong demand has led some landlords of high-tech industrial space, especially business park space, to ask for above $4 psf.’ It added that this compares favourably with rents for decentralised office space which averages $6 psf.

Supply for business space is expected to be alleviated with the completion of Cintech4 in Science Park1 with an estimated 103,340 sq ft coming on stream.

More significant supply can be expected in end-2010 when Mapletree completes its redevelopment of Alexandra Distripark to become part of its new business hub there.

Mapletree will demolish three existing industrial blocks with a gross floor area of around 1.6 million sq ft and build four new blocks with an estimated 1.96 million sq ft of business park space.

Mapletree COO Tan Boon Leong added that redeveloping Alexandra Distripark is part of its efforts to ‘rejuvenate our assets’, following earlier projects at its HarbourFront Precinct.

Mr Tan added: ‘Apart from the Alexandra Business Hub, we are seeking planning approval to redevelop the SPI Building, our remaining redevelopment site at the HarbourFront Precinct. Upgrading works are also ongoing at PSA Building and Tanjong Pagar Distripark.’

Apart from high-tech space, other industrial space sectors also showed increases in average rents in Q22007.

CBRE notes that warehouse rents for ground-floor units rose to $1.45 psf quarter-on-quarter or 11.5 per cent and 4.5per cent for upper floors.

Factory space also increased about 4 per cent quarter on quarter to $1.35psf for ground-floor units and $1.10 psf for upper-floors.

With average capital values also rising, CBRE’s Mr Goh did, however, say: ‘Keen competition for investment-grade industrial properties could see Reit (real estate investment trust) players lowering their yield expectations for properties to be acquired.’

Source : Business Times - 3 Jul 2007

AN eight-unit freehold residential site in East Coast has been put up for collective sale with an asking price of $20 million. The price for the land at 16-22A Pulasan Road, measuring 21,334 square feet, works out to $548 per sq ft per plot ratio, and includes a development charge of $56,000, said marketing agent Newman & Goh yesterday. ‘Together with potential alienation of adjoining state lands totalling 6,826 sq ft, it can be built up to a gross floor area ceiling of 39,424 sq ft,’ said Newman. The site can be redeveloped into about 36 units of boutique apartments averaging 1,100 sq ft per unit for an average price $1,050 psf, said Newman. The sale has received full approval from the owners. The tender closes on July 20 at 3pm.

Source : Business Times - 3 Jul 2007

Second-quarter rise highest since 1999; spillover seen in HDB resale prices

PRIVATE home prices have shot up across the board with everything from luxury condos to humble suburban homes reaping the benefits.

Figures out yesterday - still just estimates at this stage - for the April-June period show that private property is on a dramatic upswing with plenty of momentum.

Prices rose 7.9 per cent - the biggest jump since the third quarter in 1999, when the market staged a brief recovery before sliding into a lengthy slump.

The increase comes on top of a 4.8-per-cent rise in the first three months this year.

‘We are clearly in the middle of a property boom now and the growth is escalating,’ said Knight Frank head of research Nicholas Mak.

The central core region, scene of some eye-catching condo launches and collective sales, turned in another solid performance, according to the Urban Redevelopment Authority (URA) yesterday.

Prices of non-landed private homes in the core zone - it includes districts 9, 10, 11, downtown and Sentosa - rose 7.6 per cent in the second quarter, compared with a 5.5-per-cent rise in the first.

But for all this area’s golden glow, the figures that stood out were from areas outside the central core. Non-landed homes in the rest of the central region - this includes areas like Toa Payoh - saw prices leap 7.9 per cent, well up on the 3.7-per-cent increase in the first quarter.

Rises were even more impressive outside of central, where non-landed home prices surged 6.5 per cent in the second quarter, trumping the anaemic 2-per-cent effort in the first.

There was occasional panic buying as some feared they could miss bargains, said agents.

Yet despite the positive numbers, private home prices are still about 18.8 per cent below the 1996 peak.

The positive sentiment has also spilled over to HDB resales, where prices rose 2.85 per cent - again, the highest growth since the third quarter of 1999 - and up from a 1.25-per-cent rise in the first.

‘We’re seeing a broad-based recovery plus a tiny spurt from the HDB side,’ said Savills Singapore marketing director Ku Swee Yong. The climb in the high-end market, where prices have hit $5,100 psf, is likely to be sustained, he said.

Property experts are looking at a 20- to 25-per-cent rise for private homes for the whole year. They said the strong collective sales market - with about 30 to 40 more estates waiting to hit the market in the next year - will keep demand for suburban and HDB flats chugging along.

PropNex chief executive officer Mohamed Ismail expects HDB prices will clock up a 10-per-cent rise this year.

The URA statement yesterday also touched an issue vexing many - is the market overheating and should some cold water be thrown over it?

It said the Government would continue to monitor the market ‘very closely’ and ensure there is sufficient supply to meet demand.

Many residential sites have been released in Government land sales (GLS) programmes with more earmarked for next year if there is a need.

The URA said the good stock of private housing and more GLS sites in the pipeline means supply should keep up.

Or as Mr Mak puts it, there is no need to rush in.

Source : Straits Times - 3 Jul 2007