Jury is out on outlook for private homes

Jury is out on outlook for private homes

SINGAPORE - The jury is out on just how private home prices will fare next year, after the Urban Redevelopment Authority's third-quarter flash estimate shows a return to firmness in private home prices, with much of the gain coming from the suburban condo market.

Two new suburban condos released last week saw pretty brisk sales. Hoi Hup moved close to 370 units or 94 per cent of its 393-unit Kovan Regency over the weekend. The average price of the 99-year project at Simon Road/Kovan Rise is $1,250 psf. Allgreen Properties has sold slightly over 200 units at Riversails at Upper Serangoon View since Friday. The average price is $827 psf. The 99-year project has 920 units.

Property consultants say developers are expected to end the year with record sales of 20,000 to 22,000 private homes (excluding executive condos) - up from last year's 15,904 units and busting the previous record of 16,292 units in 2010.

URA's flash estimate shows its widely watched overall private home price index rose 0.5 per cent in Q3 over the preceding quarter. This is slightly better than the 0.4 per cent quarter-on-quarter increase for Q2. In Q1 the index dipped 0.1 per cent.

The authority's split of regional performances in price indices of non-landed private homes reflects a 1 per cent quarter-on-quarter gain in Outside Central Region (where suburban homes are located) in Q3, compared with a 0.5 per cent rise in Q2. In city-fringe locations, or what URA terms Rest of Central Region, the price index was up 0.7 per cent in Q3, again a stronger showing than Q2's 0.4 per cent increase.

The index for Core Central Region (which includes the traditional prime districts 9, 10 and 11 as well as the financial district and Sentosa Cove) edged up 0.2 per cent in Q3, a smaller rise than Q2's 0.6 per cent gain.

URA's overall private home price index has appreciated just 0.9 per cent year-to-date and analysts expect a further marginal increase in Q4. Jones Lang LaSalle's national director (research and consultancy) Ong Teck Hui estimates a full-year increase of 1.5 to 2 per cent. Savills Singapore's research head Alan Cheong, too, reckons the rise will be 2 per cent at most.

The index climbed 5.9 per cent in 2011 and 17.6 per cent in 2010.

Colliers International director Chia Siew Chuin reasons that marginal price increases posted in recent quarters are evidence that "although developers may not be able to adopt an aggressive pricing strategy compared with one or two years ago as a result of growing price resistance from home buyers, neither do they need to resort to a price-to-sell strategy to move sales".

Views diverge on the outlook for next year.

Savills' Mr Cheong suggests "2012 may be a year of quiescence for private home prices before they come roaring back in 2013". He points to an "inflationary bias" in the market arising from Government Land Sale (GLS) sites fetching higher prices. He also cites specific instances of land parcels sold over the past 18 months in Pasir Ris, Bedok, Farrer/Jervois Road and Alexandra Road which have seen winning land bids rise 15-27 per cent.

"Given that land price is like 60 per cent of total development cost, if there is full cost transfer to the market, prices in these locations may rise 9-16 per cent in 2013," he estimates.

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