Steep discounting at city-fringe projects could be a reason that home prices in the segment fell by the most last year.
Values of apartments in city-fringe areas declined by a sharp 5.3 per cent last year, after registering a dip of 1.2 per cent in the fourth quarter, preliminary Urban Redevelopment Authority figures out yesterday showed.
This outstripped the 4.3 per cent slide in the city centre and the milder 2.2 per cent drop in the suburbs.
Demand for luxury homes in the city centre has languished since cooling measures such as the Additional Buyer's Stamp Duty weeded out foreign demand. Many observers were surprised this segment was not the worst performer last year.
Experts noted that city-fringe homes are in a segment "sandwiched" by luxury and mass-market homes and, as a result, could be more sensitive to factors such as a mounting number of cheaper homes in the suburbs.
There were also 2,411 new units launched in city-fringe areas last year compared with 1,300 luxury units in the same period. "With the larger supply in the city fringes, there is more impetus for developers to offer discounts in the region to move sales," said Ms Chia Siew Chuin, director of research and advisory at Colliers International.
Mr Nicholas Mak, research head at SLP International, pointed out that price cuts at some city-fringe projects could have led to the price dives.
SLP data showed that at least three projects in this segment had lowered their median prices last year, causing a significant jump in sales.
At The Panorama in Ang Mo Kio, Wheelock Properties adjusted its median prices from $1,349 per sq ft (psf) to $1,236 psf in May - a drop of 8.4 per cent.
Developer CapitaLand also lowered median prices at its Sky Habitat condominium in Bishan from $1,566 psf to $1,364 psf in April. It later trimmed prices for units at its D'Leedon project in Leedon Heights - from $1,633 psf to $1,559 psf - in October.
The sub-index for city-fringe prices recorded the steepest decline of 1.2 per cent in the fourth quarter, compared with a 0.9 per cent dip in both the city centre and suburbs.
Prices of city-centre homes fared better than city-fringe units given the stronger holding power of owners there, noted Ms Chia. "There is less urgency here for them to reduce prices," she said.
Mr Mak said that although transaction volumes have thinned in the luxury market, their prices will always be underpinned by city-fringe units.
"Home prices in the city centre cannot keep falling at the fastest rate or else they will end up lower than prices in the city-fringe areas," he pointed out.
This article was first published on Jan 3, 2015.
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