Prices of private homes rise 1.5% in 2Q2019 - EdgeProp

Prices of private homes increased by 1.5% q-o-q in 2Q2019, reversing price falls recorded in the two previous quarters, according to URA data.

“For the first half of this year, prices have increased by 0.8%, which is still within our earlier projection of between 1% and 3% for the full year,” says Christine Sun, head of research and consultancy, OrangeTee & Tie (OTT).

Prices of landed properties decreased by 0.1% q-o-q in 2Q2019 compared with the 1.1% q-o-q increase in the previous quarter. Meanwhile, prices of non-landed properties increased by 2% q-o-q in 2Q2019, compared with the 1.1% q-o-q decrease in the previous quarter.

In the Core Central Region (CCR), prices of non-landed properties increased by 2.3% q-o-q in 2Q2019, compared with the 3% q-o-q decrease in 1Q2019. Elsewhere, prices of non-landed properties in Rest of Central Region (RCR) increased by 3.5% q-o-q, reversing the 0.7% q-o-q decrease in the previous quarter. Meanwhile, prices of non-landed properties in Outside Central Region (OCR) increased by 0.4%, compared with the 0.2% increase in the previous quarter.

Lee Sze Teck, Huttons Asia’s director of research, points out that the gains in the CCR and RCR supported the 1.5% increase in the URA price index in 2Q2019. “There were more launches and sales of city fringe projects with average pricing of above $2,000 psf and CCR projects transacting above $3,500 psf,” he says.

He adds: “Rising affluence among residents and non-residents saw them picking up units largely in the price range of $1 million to $2 million. Five years ago, the bulk of purchases were in the range of less than $1 million to $1.5 million.”

Prices of landed properties decreased by 0.1% q-o-q in 2Q2019 compared with the 1.1% q-o-q increase in the previous quarter. (Photo: Samuel Isaac Chua/EdgeProp Singapore)

From April to June, rents of private homes rose 1.3% q-o-q compared with the 1% q-o-q increase in the preceding quarter.

According to OTT’s Sun, recovery of rents was mainly driven by the non-landed home segment where rents rose across all three segments – CCR (1.5%), RCR (1.4%) and OCR (1.2 %). “With the growing political uncertainties and social unrest in Hong Kong, some MNCs may plan to shift their headquarters or key operations to Singapore in the long term which will benefit our rental market,” she says.

In 2Q2019, developers launched 2,502 uncompleted residential units (excluding ECs) for sale, compared with 2,989 units in the previous quarter. Likewise, the take-up of new launches also increased q-o-q with 2,350 units sold in 2Q2019, from 1,838 units in the previous quarter.

In the secondary market, there were 2,371 transactions in 2Q2019, compared with 1,858 units transacted in 1Q2019. Resale transactions accounted for 49.7% of all sale transactions in 2Q2019, compared with 49.6% in the previous quarter.

As at end-2Q2019, there was a total supply of 50,674 uncompleted private residential units (excluding ECs) in the pipeline with planning approvals, compared with 53,284 units in 1Q2019. Of the number, 33,673 units remained unsold as at end-2Q2019 compared with 36,839 units in the previous quarter.

According to Ong Teck Hui, JLL’s senior director, research & consultancy, the q-o-q decrease in unsold units could signal the start of the easing of oversupply of private homes for sale.

“After the cooling measures were implemented in July 2018, residential land sales have been relatively subdued. As the addition to supply inventory from post-cooling measures land sales has been outpaced by primary market unit sales, the inventory of units for sale may have started to decline,” he observes.

Ong adds: “However, developers still have to contend with the significant supply of units in the sales pipeline at a time when the market is facing uncertainties due to the economic slowdown.”

By Amy Tan / EdgeProp Singapore | July 26, 2019 3:03 PM SGT

Source: EdgeProp

HDB resale price index falls 0.2%, transactions up 29.8% - EdgeProp

The HDB resale price index dropped by 0.2% q-o-q to 130.8 in 2Q2019 from 131.0 in 1Q2019, according to data released by HDB on July 26. This was not surprising as the resale price index has remained unchanged from the flash estimate released four weeks ago, notes ERA Realty Network.

While this is the fourth consecutive quarterly decline, prices have dipped by less than 1% over the past year, indicating that the price decline has largely stabilised, notes Christine Sun, head of research and consultancy at OrangeTee & Tie (OTT).

Lee Sze Teck, director of research at Huttons Asia, says that prices were probably dragged down by flats older than 30 years. “With ageing flats in Singapore and more owners right-sizing, this proportion will likely increase,” he says. “Currently this proportion is around 40%. Many of these older flats are in their original condition and will require a fair bit of renovation. Therefore, they will not be able to command a better value than the previous transactions in the estate.”

Rise in resale transactions

The gradual decline in HDB resale prices appeared to attract more buyers to the resale market, despite the availability of new flats from the government, notes ERA. According to the HDB data, resale transactions rose by 29.8%, from 4,835 cases in 1Q2019 to 6,276 cases in 2Q2019. Compared to 2Q2018, resale transactions in 2Q2019 were 5.6% higher. This is also the first time sales volumes had increased since the implementation of the cooling measures in July 2018. For 1H2019, the number of resale transactions reached 11,111 units, 6.8% more than the 10,399 units sold in 1H2018.

This also comes after the government’s announcement in May this year, of changes regarding the use of homebuyers’ funds in their Central Provident Fund (CPF) for the purchase of older leasehold residential housing and HDB flats. Homebuyers will be able to obtain bigger housing loans for their property purchases, so long as the property's remaining lease covers the youngest buyer till the age of 95. The revised CPF policy also favours middle-aged HDB homeowners who may want to buy older resale HDB flats to live near their parents. This will then increase the demand for older HDB flats and create a “positive impact” on the HDB resale market once its effect comes into full swing, notes ERA.

There has already been an increase in buying interest for older flats. “After the policy changes in May, we have observed an increase in sales inquiries and a greater buying interest for older flats recently,” says OTT’s Sun. “We have also observed more en bloc owners purchasing older flats after collecting their sales proceeds. Some may regard older flats as affordable given their low price quantum and large living spaces, and they get to keep a sizeable balance amount of their sales proceeds for retirement or reinvestment.”

Sun feels sales volume may continue to trend upwards in the coming months, although she reckons a price recovery may not be as quick given the increasing supply of HDB resale flats. “Given the influx of HDB flats reaching their five-year minimum occupation period this year and potentially more sellers vying for buyers, prices of flats may continue to face downward pressure for some locations. We maintain our price projection of between -1% and -2% for the whole of this year,” she says. 

Upcoming supply

HDB will offer about 3,300 Build-To-Order (BTO) flats in Punggol and Tampines in August 2019 and about 4,500 BTO flats in Ang Mo Kio, Tampines and Tengah in November 2019. There will also be a concurrent Re-Offer of Balance Flats (ROF) exercise and Sale of Balance Flats exercise in August and November 2019 respectively.

Meanwhile, unselected ROF flats are available for open booking by eligible home buyers throughout the year

By

Bong Xin Ying

/ EdgeProp Singapore

|

July 26, 2019 5:22 PM SGT

Source: EdgeProp

It’s 2019: Are CCR Condos Still a Good Investment? - 99.co

Core Central Region (CCR) condos are an interesting investment: it’s said these days that people don’t invest in them to get rich. Rather, they have to get rich first, and then invest in them. After all, you could fund a coup in a small country, for the cost of a shoebox flat in District 9, 10, or 11. But have these investments really made money over the past decade?

A game-changing decade for Singapore’s property market

2009 to 2019 has been a game changer. It’s been a wild 10 years, consisting of:

• A Global Financial Crisis in 2008/9 that saw interest rates plummet to record lows, so that bank loans are cheaper than even HDB loans
• A slew of cooling measures that kept intensifying, from 2012 to the present
• An oil price slump in 2014, that punched a gaping hole in the belief that high-end property maintains demand even in downturns
• Dramatic price pick-ups in former “ulu” areas, as Singapore decentralises; such as an EC in “cheap” Punggol that’s reaching $1,052 per square foot
• A weak rental market, that’s put an end to the dream of the “property paying for itself”
• The end of seeing a flat as an investment, and the creeping reality of lease decay
• Brexit, a US-China Trade War, and a rise in protectionism that’s playing havoc with the Singapore economy

We could go on, but you get the picture: it’s time to revise our long-held assumptions, in the face of big changes. And the first of these we’re addressing is Core Central Region (CCR) properties, a long-time darling of Singapore’s real estate market.

One more cooling measure and the past decade will count as an ice age

Quick summary:

• Rental yields are lower for many CCR condos (around 1.8 to two per cent)
• Rental income for CCR condos have mostly moved in tandem with the overall decline
• Mass market condos have appreciated better, but mainly because of cooling measures rather than a lack of demand
• CCR condos did recover faster after the last financial crisis though, and it might happen again

What are prices in the CCR like today?

Today, the typical price of a CCR condo (i.e. a condo is districts 9, 10, and 11) averages $2,247 per square foot. The average total price is about $3.17 million, with the majority of units being about 1,400 square feet (three to four bedrooms).

Using 99.co data, we pulled up a comparison of how the prices look now, compared to 2019:

Between 2009 to 2019, the average price of CCR condos rose 38.45 per cent. This is below the performance of private non-landed properties island-wide (excluding Executive Condominiums), which stands at 42.44 per cent.

But there are two details of note:

First, if you go back just one year, CCR condos were actually starting to outperform the overall condo market. But CCR prices took a sharp fall after July 2018, when the government raised the Additional Buyers Stamp Duty (ABSD) for foreigners to 20 per cent (it was previously just 15 per cent).

Higher ABSD impacts CCR condos more than mass market condos.  It dissuades the foreign buyers, who make up a significant portion of this property segment (based on our data, close to 41 per cent of CCR properties are owned by foreigners). Also, many CCR properties – roughly half as of 2016 – are bought by investors rather than owner-occupiers.

While a true home owner may not be dissuaded by the ABSD (they are buying for personal use, not for rental yield or capital gain), investors are. Even Singapore citizens face ABSD rates as high as 12 per cent for the second house; at that rate, investors may decide they’re better off buying into some other asset class.

Second, CCR properties fared much better in the aftermath of the financial crisis

CCR properties bounced back quicker than mass market counterparts, in the immediate aftermath of the financial crisis

In the immediate aftermath of the financial crisis, CCR prices rose much faster compared to the overall condo market. In the period between 2009 to 2012, CCR prices picked up by around 20.4 per cent, whereas the overall condo market lagged behind at around 16.7 per cent.

Some of the analysts we spoke to attribute this to the “safe haven” effect – when markets are in turmoil, some investors turn to Singapore real estate as it’s seen as a stable place to park their money (e.g. conventional stock and bond markets were both in turmoil in 2009, causing many to re-invest in real estate).

It also helped the US Federal Reserve lowered interest rates to stimulate the economy. This sent home loan rates in Singapore to record lows, and in 2009 it was quite possible to find interest rates below one per cent per annum. This further increased the attractiveness of non-landed private property.

So while CCR condos have under-performed the general condo market over the past decade, we can note that:

• CCR condos can win out in the aftermath of an economic downturn, which is precisely the kind of situation Singapore faces now and in 2020
• There is a strong fundamental demand for CCR properties; stronger than the actual numbers suggest. It’s policy intervention (cooling measures), rather than lack of demand that’s driving prices down

What’s happening on the rental front?

Singapore’s rental market is soft at the moment, with rental transactions in the CCR moving in tandem with the overall market.

Average rental rates in the CCR are about $3.95 psf, down from $4.64 a decade ago. In terms of average price, CCR condos are fetching about $4,954 per month, down from $6,129 a decade ago. This is a 14.9 per cent decline.

In the overall condo market, rental rates have fallen from about $4 psf, to about $3.43 psf. Average rental rate for a condo in Singapore is now about $3,500, down from $4,680 a decade ago.

Average rental yield for a CCR property now ranges between 1.8 to two per cent, notably below the 2.3 to 2.5 per cent average for the overall condo market. But this won’t be a surprise to investors in high-end properties, who know they’re buying at a premium.

So, are CCR properties still a good investment?

CCR condos are not a bad investment; but the marketing has been exaggerated

CCR properties are not a bad investment; but they may be a victim of their own, highly successful marketing machines. It’s time that investors temper their expectations, against the oft-exaggerated sales pitches used to push CCR developments.

We can see, for example, that CCR condos weather the weak rental market only a little bit better than than mass market counterparts (about half a percentage point). This casts doubt on the old marketing spiel that CCR condo rents are “recession resistant” due to prime location.

Investors should also be strict on the numbers and blind to the glamour – there may be condos in less prestigious regions that nonetheless present better investment prospects.

Investors who believe in Singapore real estate as a safe haven should also keep watch. CCR properties surged ahead in the aftermath of the last financial crisis; and with the US facing growing pains in its trade war (and the Fed again freezing or potentially cutting interest rates), we could see a repeat performance.

by Ryan Ong

Source: 99.co (30 Jul 2019)