Monday, June 1, 2009

Private home sellers raise asking prices

Recent stock rally may have lifted sentiment, but experts say sellers are too optimistic

PROPERTY market sentiment appears to have improved fast and furious, judging by the prices being asked by some individual sellers - though observers suggest they are being somewhat optimistic.

These sellers may be taking their cue from the stock market, experts said. Asking prices for some properties that have just been completed or are close to completion have jumped significantly in recent months.

The improvement follows strong data for new private home sales, which have crossed the 1,000-unit mark for three months in a row since February, after a period of severe stagnation.

Property experts said the recent strong rally in the stock market has given quite a lift to property market sentiment.

Still, lower prices have also played a part in stronger sales. Some recent launches have done well after developers finally cut their asking prices.

For instance, Parc Centennial in Kampong Java Road is now sold out, after developer EL Development relaunched the 44 remaining units at an average price of $1,175 per sq ft (psf), about 20 per cent lower than last year's average price.

But individual sellers are tending to raise, not lower, prices. For instance, some sellers of high-floor units at Marina Bay Residences are advertising their properties at $2,000 psf or more - regarded by analysts as a key resistance level for many buyers.

Some recent classified advertisements in The Straits Times for Cosmopolitan in River Valley show asking prices of $1,380 psf to $1,395 psf, compared with asking levels of about $1,250 psf earlier in the year.

In late February, an ad for RiverGate units displayed prices of $1,118 psf to $1,399 psf. But last week, some ads for RiverGate, at Robertson Quay by the Singapore River, offered units at prices starting from $1,380 psf, with one ad even offering two three-room units at $1,900 psf.

Some sellers, with an eye to the longer term, are actually withdrawing properties from the market, sensing an uptick in sentiment. 'We are seeing some sellers changing their minds to sell, seeing that the market is rising,' said Savills Residential director Phylicia Ang.

HSR Property Group executive director Eric Cheng said the property market has performed beyond expectations in the past three weeks, but is starting to slow a tad as sellers retreat and wait for better prices.

A 31-year-old house-hunter, who is scouting for his first home, said two out of his three property viewing appointments near East Coast Road a week ago were cancelled almost at the last minute because the sellers decided to withdraw from the market. And over the weekend, his agent failed to get him any viewing appointments in the same area for the same reason.

Ms Ang said individual sellers face fewer risks by testing higher prices in the market. 'If I don't like the price, I can always withdraw,' she said.

Still, market sentiment has moved up very fast. 'It's the 'too good to be true' scenario now,' she said.
But one thing is for sure: There are buyers out there with cash and there is clearly demand for projects that are seen as good value, experts said.

Compared with the situation three months ago, sellers are more willing to negotiate prices today as there are more keen buyers, said Mr Cheng.

Just three days ago, a deal for a 2,150 sq ft UE Square unit in River Valley was closed nearly on the spot at slightly more than $1.8 million, as it worked out to an attractive level of below $850 psf, he said.

In general, even though there are still desperate sellers around, some sellers may be asking for about 5 per cent higher than the prices three months ago, Mr Cheng said. 'You can see more sellers asking for a bigger premium, but no one will buy if you price your property too high. One high-price caveat does not reflect the price of the development,' he added.

Market sentiment has improved, but it is still early days as short-term fundamentals have not exactly corrected, said PropNex chief executive Mohamed Ismail.

'If the sellers start to increase their prices in anticipation of higher levels, they may kill the deal,' he added. 'We saw that in 2007 when prices were rising. Many sellers were not contented with their offers, so many deals did not materialise.'

He said sellers can ask for high prices, but the key is whether the banks are willing to match those asking prices.

'It is no point if your own optimism is not matched by the valuation. That is the valuers' view of the current market, taking into account the better sentiment.'

To sum up, said Mr Cheng, there are still more sellers than buyers.

Source: Straits Times, 1 June 2009

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