I've noticed some interesting and worrying trends in the Singapore property market that I want to share with you, and also dig into what they mean for the property financier and own-stay home buyer.
HDB prices are increasing faster than non-public property prices
The URA let slip that the personal residential price index grew 1.3% in the 3rd quarter of 2011. Contrast this with the HDB's Resale Price Index (RPI), which rose 3.8% from the previous quarter.
This raise in HDB prices is regardless of the 23,800 new units the HDB has pushed out in the first three quarters. The impact was not felt on prices but in the transaction volume for resale residences, which slipped 10percent to 5,903 units in the third quarter from 6,581 units in the second quarter.
The HDB will initiate another 4,200 BTO apartments in Nov, bringing the total number of flats launched this year to 28,000. And do not forget that there is another 25,000 BTO lofts to be launched next year.
The puzzling thing for many is how the costs of HDB lofts are still increasing regardless of the massive quantity of supply being pushed out. An example is the 888-unit Trivelis in Clementi, which is being developed under the Design, Build and Sell Scheme (DBSS). Costs of the 646 sqft three-room flat units ($375,000 to $470,000), 861-883 sqft four-room flat units ($530,000 to $650,000) and 1,130 sqft five-room terraces ($658,000 to $770,000) are pricier than the encompassing resale flat prices!
Personal house buyers are in a cautious mood, especially in the high end segment
The PPI's 1.3percent increase is the 8th consecutive quarter of slowing growth, which many market observers attribute to both demand (increasing doubt in world commercial situation) and supply (administration ramping up supply of non-private housing) factors.
Without reference to the cause, consumers are becoming more and more wary, especially in the higher end segment. The URA reported a price increase in non-landed properties in the Core Central Region (CCR) of just 0.7%, and a fall in transaction volume of 61% on a quarter-on-quarter basis.
Given the upcoming launches in the fourth quarter, many analysts expect a fall in the take-up rate whether or not costs stay steady. So it's obvious that the market is cooling down. The million dollar question is "will prices fall?
Developers are turning wary too
In the newest survey conducted by the National University of Singapore and the Real Estate Developers ' Association of Singapore (READAS), the Present Sentiment Index for property developers dropped from 4.6 in the second quarter to 3.6 in the third quarter, while the Future Sentiment Index dropped from 4.4 in the second quarter to 3.4 in the third quarter. This dragged the Composite Sentiment Index down from 4.5 to 3.5 respectively.
Developers also turned cautious on the office segment as shown by the future net balance (the biggest difference between respondents who assume the office segment will do better and people who think it will do worse), which staged a dramatic turnabout from +42percent in the 2nd quarter to -57percent in the third quarter. This was ascribed to weakening demand from the banking and financial services industry, which in general is having a hard time this year with feeble markets and trading volumes.
Apparently 56percent of developers expect prices to stay unchanged while 37percent envision a fair decline. The share of developers expecting a reduction increased more than 200 percent from 17% in the prior quarter.
Stockholders are going into commercial and commercial properties
Jones Lang LaSalle's study of URA Realis caveat info shows that backers with a sub-$1.5 million budget are departing from home properties into commercial and retail properties. The personal residential sector's share of caveats slid from 96.6 % in 2nd quarter 2009 to 87.2 % in 3rd quarter 2011. Speculators have both been driven by push (government measures to cool down the home market including the harsh stamp duty) and pull (higher yields for these properties) aspects.
Particularly, little business units with low prices and Promises of higher yields are very popular with backers. Have they thought about what the genuine rental demand is going to be once these units are finished? What type of companies will be renting them?
My opinion on what these movements mean
All in all I believe that these trends are worrying. Middle income families are dashing to buy high-priced HDB lofts and mass market home properties and small-time speculators are snapping up "shoebox" industrial units with a fairly ambiguous rental market. At the same time the wealthy and developers (the "insiders") are turning cautious on the market, and the weakening worldwide commercial situation means the yields of the economic and commercial properties could be in danger. Which group do you really think has a better grip on what is happening in the market?
I caution all financiers to look at the market carefully before committing your hard earned cash and credit to a property investment. Make sure you know what you are buying and if you're anticipating a yield, to do your due groundwork on what the genuine rental demand for your property will be. If you are purchasing for your own stay, don't just rush into the subsequent new launch and be impressed with the designer showflats. If you spend a little bit of time and effort looking around in the same area, you could find real "bargains" at 20% to 40% off the cost of a new flat.
Hope you enjoyed reading this Singapore property market article!
HDB prices are increasing faster than non-public property prices
The URA let slip that the personal residential price index grew 1.3% in the 3rd quarter of 2011. Contrast this with the HDB's Resale Price Index (RPI), which rose 3.8% from the previous quarter.
This raise in HDB prices is regardless of the 23,800 new units the HDB has pushed out in the first three quarters. The impact was not felt on prices but in the transaction volume for resale residences, which slipped 10percent to 5,903 units in the third quarter from 6,581 units in the second quarter.
The HDB will initiate another 4,200 BTO apartments in Nov, bringing the total number of flats launched this year to 28,000. And do not forget that there is another 25,000 BTO lofts to be launched next year.
The puzzling thing for many is how the costs of HDB lofts are still increasing regardless of the massive quantity of supply being pushed out. An example is the 888-unit Trivelis in Clementi, which is being developed under the Design, Build and Sell Scheme (DBSS). Costs of the 646 sqft three-room flat units ($375,000 to $470,000), 861-883 sqft four-room flat units ($530,000 to $650,000) and 1,130 sqft five-room terraces ($658,000 to $770,000) are pricier than the encompassing resale flat prices!
Personal house buyers are in a cautious mood, especially in the high end segment
The PPI's 1.3percent increase is the 8th consecutive quarter of slowing growth, which many market observers attribute to both demand (increasing doubt in world commercial situation) and supply (administration ramping up supply of non-private housing) factors.
Without reference to the cause, consumers are becoming more and more wary, especially in the higher end segment. The URA reported a price increase in non-landed properties in the Core Central Region (CCR) of just 0.7%, and a fall in transaction volume of 61% on a quarter-on-quarter basis.
Given the upcoming launches in the fourth quarter, many analysts expect a fall in the take-up rate whether or not costs stay steady. So it's obvious that the market is cooling down. The million dollar question is "will prices fall?
Developers are turning wary too
In the newest survey conducted by the National University of Singapore and the Real Estate Developers ' Association of Singapore (READAS), the Present Sentiment Index for property developers dropped from 4.6 in the second quarter to 3.6 in the third quarter, while the Future Sentiment Index dropped from 4.4 in the second quarter to 3.4 in the third quarter. This dragged the Composite Sentiment Index down from 4.5 to 3.5 respectively.
Developers also turned cautious on the office segment as shown by the future net balance (the biggest difference between respondents who assume the office segment will do better and people who think it will do worse), which staged a dramatic turnabout from +42percent in the 2nd quarter to -57percent in the third quarter. This was ascribed to weakening demand from the banking and financial services industry, which in general is having a hard time this year with feeble markets and trading volumes.
Apparently 56percent of developers expect prices to stay unchanged while 37percent envision a fair decline. The share of developers expecting a reduction increased more than 200 percent from 17% in the prior quarter.
Stockholders are going into commercial and commercial properties
Jones Lang LaSalle's study of URA Realis caveat info shows that backers with a sub-$1.5 million budget are departing from home properties into commercial and retail properties. The personal residential sector's share of caveats slid from 96.6 % in 2nd quarter 2009 to 87.2 % in 3rd quarter 2011. Speculators have both been driven by push (government measures to cool down the home market including the harsh stamp duty) and pull (higher yields for these properties) aspects.
Particularly, little business units with low prices and Promises of higher yields are very popular with backers. Have they thought about what the genuine rental demand is going to be once these units are finished? What type of companies will be renting them?
My opinion on what these movements mean
All in all I believe that these trends are worrying. Middle income families are dashing to buy high-priced HDB lofts and mass market home properties and small-time speculators are snapping up "shoebox" industrial units with a fairly ambiguous rental market. At the same time the wealthy and developers (the "insiders") are turning cautious on the market, and the weakening worldwide commercial situation means the yields of the economic and commercial properties could be in danger. Which group do you really think has a better grip on what is happening in the market?
I caution all financiers to look at the market carefully before committing your hard earned cash and credit to a property investment. Make sure you know what you are buying and if you're anticipating a yield, to do your due groundwork on what the genuine rental demand for your property will be. If you are purchasing for your own stay, don't just rush into the subsequent new launch and be impressed with the designer showflats. If you spend a little bit of time and effort looking around in the same area, you could find real "bargains" at 20% to 40% off the cost of a new flat.
Hope you enjoyed reading this Singapore property market article!
About the Author:
Propwise.sg, a top Singapore property blog, is devoted to helping you understand the real estate market and make better choices. Visit us to read more Singapore property market articles.
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