Roaring start to the year of the tiger

Encouraging start to 2010

Singapore’s private property market continued to show resilience with close to 4,000 private homes sold in the first quarter of 2010, according to CB Richard Ellis (CBRE).

First quarter performance was more than double the 1,860 units sold in the prior quarter.

This is despite added government measures to cool the property market in February.

In January, 1,480 new homes were sold, almost one and a half times the average monthly volume of 620 units in the previous quarter.

In February, new home sales remained encouraging with 1,196 units sold.

The measures, which took the market by surprise, were announced on February 19 to remove speculators from the property market.

They include a stamp duty of 3.0 per cent on residential properties sold within one year (applicable to properties purchased on or after February 20, 2010) and the reduction of the loan-to-value (LTV) limit from 90 per cent to 80 percent.

Analysts say the strong demand can be attributed to genuine homebuyers buying long-term properties.

“The government did not make any drastic moves to kill the real estate market. They only introduced stamp duty and LTV limit reduction with the intention of preventing speculation. Therefore, the strong demand in the first quarter showed that buyers they weren’t speculators but had intentions of holding their properties beyond a year. It also means the property market is a bit more buoyant based on the fundamentals of the economic recovery. We are also seeing more foreign investors coming in to buy properties.” says PropNex executive director Mohamed Ismail.

Slower growth rate in Q12010

In fact, the strong demand was also reflected in the Urban Redevelopment Authority’s (URA) preliminary estimates for the first quarter, which show that the price index has continued to rise.

It went from 165.7 points in the fourth quarter of 2009 to 174.2 points in the first quarter of 2010, reflecting an increase of 5.1 percent.

However, the pace of growth was slower than the 7.4 percent increase from October to December last year, due to the new set of property restrictions the government implemented in February.

Compared to the boom times of previous years, the index stood at 2 and 4 percent below the peak levels of mid-2008 and 1996, respectively.

CBRE expects the brisk pace to continue into March with 1,200-1,400 new homes expected to sell.

Strong collections for prime properties

The URA data shows that the demand for private homes in the prime area remains strong in the first quarter.

Homes in the rest of the Midwest experienced the largest price increase at 7.2 percent, followed by those in the Midwest and Outer Midwest at 4.5 percent and 3.9 percent. , respectively.

Analysts say prime properties enjoyed strong acceptance rates in the first quarter as there is increased confidence in the market among high net worth investors.

“Many of the major real estate investors last year stayed away from the market, waiting for the market to clear up because the economy was still stabilizing. These investors were wary of where the market was headed. As such, they were waiting for some form of indication that the economy has returned to normal, as it did last year. This has renewed investor confidence,” says Mohamed Ismail.

In fact, developers were also reading what the market wants when launching new high-end projects in the first quarter.

“In the first quarter of 2010, most of the projects launched were upscale and located in the prime Sentosa Cove and Downtown Core districts,” says Joseph Tan, CEO of CBRE Residential.

New projects in these areas that did well included Cube 8, Holland Residences, and The Laurels.

Cube 8 witnessed 175 units sold out of 177 at an average price of S$1,350 per square foot.

Holland Residences saw 78 units sold out of 83 at the median price of $1,680 per square foot.

Meanwhile, The Laurels sold 212 units out of 229 at a median price of $2,800 per square foot.

Two projects that launched in the Tanjong Pagar neighborhood, Altez and 76 @ Shenton Way, also enjoyed good acceptance rates.

Altez sold 150 units of 280 at the median price of $1,817 per square foot, while the 202 units were purchased at 76 @ Shenton for $1,600 per square foot at $2,600 per square foot.

CBRE said sales for both developments were dynamic due to their in-town location and composition of small-format apartments, comprising one- and two-bedroom units from 500 square feet to 800 square feet each.

Minor HDB upgraders on the market

Unlike 2009, which was the year of HDB upgraders, the first quarter of this year saw lower proportions of such buyers in the market.

Based on warnings filed to date, private homeowners made up the largest share of buyers at 66.3 percent this quarter.

“Unlike last year, when the mass market was working well, luxury properties are enjoying higher demand because more foreign investors are coming in,” reiterates Mohamed Ismail.

The remaining 33.7 percent of buyers in the first quarter of 2010 were those with HDB addresses.

By comparison, HDB upgraders accounted for 63.7 percent of the market share a year ago in the first quarter of 2009, following the hiatus in 2008.

Foreigners bought about 23.5 percent of new homes in the first quarter.

The top three foreign buyers were Indonesian, Malaysian and Chinese.

small advantage

CBRE data shows that, overall, home prices in the first quarter reflected a small 2 to 5 percent increase over the fourth quarter of 2009, supported primarily by resale transactions.

So far, developers have kept prices for new releases in the same locations at last quarter levels.

Citing recent resale transactions at The Sail @ Marina Bay and Caribbean At Keppel Bay, CBRE notes that both developments averaged $2,213 per square foot and $1,372 per square foot respectively, up from the corresponding $2,101 per square foot and $1,346 per square foot in the fourth quarter of 2009.

In the luxury segment, units in Ardmore Park sold for $2,982 per square foot in the first quarter of this year compared to $2,936 per square foot previously.

Looking to the future

The real estate market looks promising in the second quarter with more new releases with serious investors in the market.

“Buyers can anticipate the launch of some 99-year lease projects on Chestnut Avenue, Dakota Crescent and Lorong Ah Soo and freehold projects on the sites of the former Parisian, Pin Tjoe Court and Anderson 18,” says Tan.

“The results of the second quarter will be equally strong, full of investors buying properties in the medium and long term,” says Mohamed Ismail.