Today: Simon says: Home prices have hit floor

Simon says: Home prices have hit floor

 

Head of property developer SC Global still bullish on the local real estate market

 

JUDGING from recent transactions, property prices appear to have hit or are near the floor, according to Mr Simon Cheong (picture), the president of the Real Estate Developers’ Association of Singapore (Redas).

 

As evidence, Mr Cheong, the head of high-end property developer SC Global, points to recent transactions of luxury apartments at Nassim Park and Goodwood Residences, which went for nearly $3,000 psf and $2,800 psf respectively.

 

“The high-end is the leading indicator. Why? Now you see the sophisticated investor coming in — people who spend $10 million, $20 million, $30 million (on a property) — these guys are no fools you know,” he says noting that during the 1997 financial crisis luxury flats like those at Ardmore Park were selling for just $1,000 psf.

 

Even mid-class units at developments like those at Dakota, Clover by the Park and Livia are enjoying brisk sales.

 

“Nett nett, property is still a great performer in the mid to long term. For example, the stock market index in 1998 was 800 and today it is 2900. Property appreciation is actually comparable, if not better, if one factors in rentals received,” Mr Cheong says.

 

The property market is driven very much by sentiment, and not just by the laws of supply and demand — the “feel good” factor, he says.

 

According to Mr Cheong developers’ prices have fallen by 30 per cent in all sectors of the market since their peak last year, but are still double those before the sub-prime problem kicked in last August.

 

“The current situation is timely, as since 2005 the property market has been climbing relentlessly for eight straight quarters according to URA (Urban Redevelopment Authority) figures. So, it’s time it took a breather.

 

“We developers were getting concerned that it was climbing so fast. So the sub-prime crisis, in a way hit at the right time and took some of the steam off the market. In a way it came as a relief to developers who were afraid that the steep climb in prices could tempt the authorities to take measures to curb speculation,” Mr Cheong told Today.

 

He also pointed out that it was not in the interest of developers to see prices going up too fast: “There is no reason why developers would like to see an exuberant market and see the bubble burst.”

 

But he claims that his positive outlook for the property market is also driven by fundamentals as interest rates are at present so low and the inflation rate so high it does not make sense to keep your money in the bank.

 

“What do I do if I have a lot of money in my bank account earning 0.6-per-cent interest while inflation is 6 per cent or more, and my money gets smaller and smaller by the day?” he asked.

 

One answer is to put your money in property as in the long run it is a better hedge against inflation than equities.

 

Furthermore, property rentals currently provide yields of 2 to 4 per cent, again better than putting your money in the bank.

 

And there is plenty of money around for when Standard Chartered Bank, earlier this month offered a promotional deposit rate of 2.28 per cent, it was so swamped that it had to withdraw the offer in just two days.

 

Mr Cheong expects interest rates to remain low over the next two years or so.

 

The supply of properties is also not as high as many people think. He pointed to a recent Citibank report which said that the bank sees no oversupply of homes over the next two years.

 

The report estimated that only 60 per cent of the 30,000 units forecast by the URA, will be completed during this period as by end March there were 6,000 en bloc flats that had yet to be demolished.

 

For en blocs to return, prices will have to be double what they are now, especially with no plot ratio increase in the recent announcement of the Singapore Master Plan by URA, Mr Cheong said.

 

High construction costs have also resulted in many projects being delayed. With the many building projects going on — both by the private (including the integrated resort projects) and public sectors — and high material costs caused by worldwide demand, constructions costs will remain for some years, Mr Cheong said.

 

He pointed out at the same time that construction costs here are currently higher than those of Dubai or Hong Kong.

 

“It takes three months to tear a building down but three years to put them up. Once you have taken it down, supply is taken off immediately but to put that supply back it will take three years,” he said.

 

Construction costs are now double what they were a year ago, with high end building costs between $600 and 800 psf and at the low end from $300 to $350 psf.

 

Sometimes Singaporeans also do not realise that market here being relatively small, it would take less than 1 per cent of the available global funds to see the market run up. So, it is not unreasonable to expect a strong turnaround when the sentiment improves, Mr Cheong said.:

 

He added that Singapore has also become a global city and price comparisons of property were now benchmarked against cities like London, Hong Kong, Shanghai and New York rather than against historical prices here.

 

“And contrary to market perception, funding is not an issue, There is no shortage of funding for end purchasers as evidenced by various bank packages (for mortgage loans),” he noted.

 

“My advice to potential buyers is that if you do not have high exposure to the property market, it is an opportune time to consider property”, he said.

 

Source: Today Newspaper

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Prime property districts’ prices show 1st fall in 4 years: DTZ

Prime property districts’ prices show 1st fall in 4 years: DTZ

Downward pressure may increase as speculators dispose of units, it says

 

(SINGAPORE) Property prices in the prime districts of District 9, 10 and 11 have registered their first fall in four years and DTZ Debenham Tie Leung believes that this downturn in sentiment could spill over to the non-prime districts.

 

In an analysis of resale prices based on its own basket of properties, DTZ found that prices of private residential properties in Q2 this year reflected the first correction in the past four years, led by non-landed residential units in the prime districts.

 

DTZ’s basket of properties for prime freehold non-landed resale residential homes include Cairnhill Crest, The Pier at Robertson and Botanic on Lloyd and capital values averaged $1,410 per square foot (psf) in Q2 2008, reflecting a 4.7 per cent quarter-on-quarter (qoq) decline. Capital values had remained at $1,480 psf for the two previous quarters.

 

While it should be pointed out that luxury home prices have reached new heights in recent years, DTZ said that it also tracks a separate basket of luxury properties which includes premier developments like Ardmore Park.

 

Outside the prime districts, capital values of freehold and leasehold non-landed resale residential units remained unchanged, averaging $750 psf and $610 psf respectively, holding steady at this level for three consecutive quarters after both sectors registered 7 per cent increases in Q4 last year.

 

And the outlook for rest of the year is likely to be challenging.

 

DTZ said that with high inflation compounding the expected economic slowdown globally, prices of private residential properties are set for further corrections.

 

‘Besides smaller developers, some of the bigger developers are also likely to reduce selling prices to move sales especially for developments that have been on the market for some time.’

 

‘In addition, the sub-sale market is expected to be active with speculators disposing their units, especially those who have purchased multiple units on Deferred Payment Schemes and are most likely to dispose some or all units to avoid stretching their financial limits,’ it added.

 

While some speculators may feel that renting remains an option for them, DTZ said that as rentals come under pressure in 2009-2011 due to the surge in new home completions, it is unlikely that speculators will want to hold on to their units for rental income.

 

DTZ does believe that there was significant wealth creation in the run-up to the recent ‘economic boom’ of 2006 and last year, and there is ‘pent-up demand’ from many who have been waiting for an opportune time to buy. ‘Take-up will eventually pick up when the market senses that prices have bottomed,’ it added.

 

On the pick-up in sales towards the end of Q2 2008 for ‘attractively located and reasonably-priced projects’, DTZ’s executive director (Residential) Margaret Thean said: ‘At the end of the second quarter, we began to witness the return of market confidence and an improved buying sentiment. Some residential projects are enjoying sell-out status while others are being are well-received. This is clearly indicated by the sell-out status of projects such as Suites 123 while Nassim Park, Parc Sophia, Dakota Residences and Clover by the Park received encouraging response.’

 

Source: Business Times

Flash estimates of private residential property prices up 0.4% in Q2

Flash estimates of private residential property prices up 0.4% in Q2

 

SINGAPORE: Private residential property prices rose 0.4 per cent in the second quarter of this year, according to flash estimates released by the Urban Redevelopment Authority.

 

This compares to the 3.7 per cent increase in the first quarter.

 

Prices of non-landed private residential properties increased by 0.2 per cent in Core Central Region, 0.7 per cent in Rest of Central Region and 1.3 per cent in Outside Central Region in the second quarter of the year.

 

In comparison, for the first quarter of 2008, prices of non-landed private residential properties increased by 3.8 per cent in Core Central Region, 3.3 per cent in Rest of Central Region and 3.8 per cent in Outside Central Region.

 

Analysts note the softening prices contributed to a pick up in sales toward the end of the second quarter in some attractively located and reasonably-priced projects launched.

 

On the supply side, as at first Quarter of 2008, there were about 67,700 private residential units in the pipeline, of which about 56,500 new private housing units are expected to be completed between 2008 and 2011.

 

About 42,700 units of the supply in the pipeline (or 63 per cent) had not been sold by developers yet.

 

Said Ms Margaret Thean, DTZ’s Executive Director for Residential: “This is clearly indicated by the sell-out status of projects such as Suites 123 while Nassim Park, Parc Sophia, Dakota Residences and Clover by the Park received encouraging response.”

 

DTZ also foresees further price corrections in private residential properties going forward as high inflation compounds the expected economic slowdown globally.

 

Source: Channel NewsAsia