The implementation of the Total Debt Servicing Ratio (TDSR) in June 2013 marked a turning point for the exuberance in the primary sales market seen in recent years.
Against a backdrop of reduced affordability levels and high land acquisition costs, there was a sharp reduction in developers' launches and sales volume.
The 2014 primary sales volume was 7,437 units - a 50 per cent decline from the 15,162 recorded in 2013.
Developers also launched 52 per cent fewer units for sale within the same period. Private home prices fell 4.1 per cent in 2014.
While the impact of the TDSR on sales volume was immediately felt in the months after its implementation, the effect on prices only became apparent in the fourth quarter of 2013.
In 2014, even though prices generally slipped in all segments, prices for property in the Outside Central Region (OCR) remained the most resilient of the lot - registering only a 2.2 per cent decline compared to a 4.3 per cent and 5.5 per cent drop in the Core Central Region (CCR) and Rest of Central Region (RCR) respectively.
And in recent years, despite numerous rounds of cooling measures, OCR prices outshone all segments with a 6.4 per cent growth in both 2012 and 2013, when others only showed marginal gains or even fell.
We believe that the OCR segment is well supported by first-time homebuyers as well as upgraders.
However, the market conditions for the private property market this year remain challenging. 2015 is expected to be another lacklustre year for the property market.
Primary market performance will continue to depend on developers finding the right pricing strategy which accurately portrays current sentiments.
Buyers will still remain very price and quantum sensitive and would only go in if they perceive a property to be a good value proposition.
BUYERS' MARKET IN 2015
While selected projects which are reasonably priced and well located will continue to attract homebuyers, prices are expected to come under pressure as the potential pool of buyers shrinks and developers face stronger competition for consumer dollars.
This could be exacerbated by the sizeable residential supply that is expected to come onstream, which will turn the market further in favour of home buyers.
It will be a subdued market in the private property sector this year with most launches centred on the mass market segment as they are more affordable.
The OCR is considered the suburbs of Singapore. This includes densely populated estates such as Punggol, Sengkang, Yishun, Woodlands, Jurong, Tampines and Bedok - where a wide variety of mass market condominiums are located.
Due to the cumulative effects of the cooling measures and TDSR which restricts liquidity, buyers have become increasingly quantum sensitive, which in turn, has benefited projects in outlying regions - where the overall quantum is more affordable compared to the central region.
We think that OCR homes are becoming more attractive due to the lower price quantum.
With the continued enforcement of loan curbs, buyers continue to be limited by the amount of debt they can take on, and as such, properties priced between S$800,000 and S$1.2 million will be more sought after, followed by homes in the up to S$1.5 million range.
For foreigners, the Additional Buyer's Stamp Duty (ABSD) will continue to be a stumbling block in their consideration for a purchase. As such, they will also look to more "budget friendly" alternatives in the OCR.
Apart from the lower price quantum, mass market properties are also increasingly becoming more appealing due to the government's decentralisation strategy to sustain Singapore's growth by developing regional centres at various parts of the island including the West and North regions.
Various industry analysts had predicted that it will be a turbulent year for the local property market, citing the government's cooling measures as the main reason in lieu of achieving its overarching aim of curbing property speculation and encouraging financial prudence.
As the impact of the measures trims buyers' purchasing power, affordability and the right pricing will become critical factors in the success of a project launch.
Be that as it may, home buyers still swarmed the show flats of the following mass market launches that were priced attractively and/or are in good locations:
The Inflora was sold out 30 days after its launch, at a median price of S$952 psf (October 2013);
Rivertrees Residences sold 218 units at a median price of S$1,111 psf (February 2014);
Riverbank@Fernvale sold 211 units at a median price of S$1,033 psf (February 2014);
Lakeville sold 210 units at a median price of S$1,318 psf (April 2014);
Coco Palms sold 590 units at a median price of S$1,018 psf (May 2014).
In view of the continued enforcement of various government policies and loan curbs as well as purchasers' cautious stance, developers are expected to price their projects competitively to maintain sales momentum.
For new projects, developers will be able to draw buyers through attractive price points.
This trend will be fuelled by the continued availability of credit in a low interest rate environment, along with developers' cautious pricing strategies.
This may put a fair bit of pressure on home sellers in the resale market, who may have to lower prices in order to make a sale.
With developers competing for the same buyers with offers of discounts and other enticing options, prices of resale private properties in the secondary market may face pressure and are expected to correct marginally, in tandem with the new launches.
Coupled with a number of new launches planned for this year, and fewer foreign buyers taking the bite, the only properties which will remain popular are mass-market homes in locations close to MRT stations, schools and shopping malls, such as the upcoming integrated project in Yishun North Park Residences, which we expect to achieve a strong take-up rate.
Why should buyers consider buying a condominium unit in 2015? Long-term stability, for one.
Notwithstanding the slowdown, the longer term prospects for the residential market remain intact in the light of the various initiatives announced by the government.
These include the unveiling of the 2013 Draft Master Plan which details key elements from the Population White Paper as well as the Land Use Plan for housing a larger population in quality living environments for the next 10 to 15 years.
They include the construction of new homes in Holland Village, Kampong Bugis and Marina South, as well as new redevelopment areas in Paya Lebar, Greater Southern Waterfront and Pasir Panjang and Tanjong Pagar in addition to the plans for new homes in Bidadari, Tampines North, Tengah New Town and Punggol Matilda.
There are also plans for new growth areas for accommodating industrial and business activity and supporting infrastructure.
These new plans and developments are expected to introduce a wider variety of housing options and new living environments - signalling another step towards exciting times for Singapore's urban housing landscape.
The initiatives signal the government's resolve to protect the value of homes while ensuring a stable and sustainable residential property market.
This bodes well for the Republic's long-term growth despite some near-term fragility in the residential property market - with mass market properties in the OCR enjoying the lion's share of all property transactions in 2015.
The writer is PropNex CEO.
Thursday, Mar 19, 2015
The Business Times
Source: Asiaone
Thursday, Mar 19, 2015
The Business Times
Source: Asiaone