(SINGAPORE) Property cycles seem to be getting shorter and with sharper price swings, mirroring the trend in general economic cycles. In one of the quickest upturns in recent years, the official private home price index jumped 15.9 per cent quarter-on-quarter (q-o-q) in Q3 this year. The four quarters of price drops that preceded this mark the shortest downcycle in the past 18 years - assuming, of course, that prices do not decline in coming quarters.
The increase in Urban Redevelopment Authority's (URA) flash estimate of its Q3 2009 private home price index was the biggest change since a 27.2 per cent increase in the index in Q1 1981.
Jones Lang LaSalle also pointed out that the turn in the index - from a 4.7 per cent q-o-q contraction registered in second quarter this year to the 15.9 per cent jump in Q3 - was the sharpest since the series began in 1975.
The unprecedented loss of confidence last year from the global financial crash and the collapse of Lehman Brothers led to the unwinding of risky investments. By Q1, investors were awash with liquidity and looking for a trusty place to park their funds. 'Singapore real estate certainly fits the bill as a safe depository of wealth,' observes Real Estate Developers Association of Singapore CEO Steven Choo.
Also, the wealth accumulated by Singapore households - from en bloc sales, savings stashed away from wage rises and bonuses from earlier years and from the surge in the stock market after its March bottom - soon made its way into the property market as investors developed a strong dislike for structured products after the Lehman minibonds fiasco. The low interest rate environment and price cuts by developers in the first quarter also helped to draw property buyers from the sidelines.
URA's flash estimates yesterday also showed that price indices of non-landed private homes in the three geographical regions also posted the biggest gains since Singapore's planning authority started releasing these sub-indices in 2004.
In the Core Central Region - which covers the prime districts, CBD and Sentosa Cove - the index jumped 16.2 per cent q-o-q in Q3. The surge was even higher, at 19.1 per cent in the Rest of Central Region (RCR). The index for Outside Central Region, which covers typical mass-marketing housing locations, also rose 15.4 per cent in Q3. In contrast, respective indices for the regions had posted q-o-q declines of 5.2 per cent, 4.4 per cent and 2.3 per cent in Q2.
CB Richard Ellis executive director Li Hiaw Ho said new projects in RCR that sold well in Q3 and contributed to the steep rise in the price index for the region were Vista Residences in the Balestier area, Parc Imperial in Pasir Panjang, Ascentia Sky on Alexandra Road and Trevista in Toa Payoh.
Putting the latest numbers in perspective, property consultancy Knight Frank chairman Tan Tiong Cheng notes that the sharp jump in URA's Q3 headline private home price index probably reflects some 'catching-up effect' after the index posted a surprising decline in Q2 of 4.7 per cent. 'The Q2 drop had confounded property analysts, developers and the buying public as they had seen substantial price increases in Q2 over the preceding quarter. Major property consultants' data showed price gains in Q2 ranging from 10 to 20 per cent for new launches and an average price increase of about 5 per cent for secondary-market transactions,' Mr Tan recalled.
However, the latest index levels captured in URA's Q3 flash estimates are more in sync with consultants' indices and average price computations than they were for Q2, analysts say.
The strong price gains shown in URA's flash estimates reflect the kind of market exuberance that led the government to announce measures last month to cool the market - including banning the interest absorption scheme and promising to restart state land sales in the confirmed list in first-half 2010.
DTZ's SE Asia research head Chua Chor Hoon noted that the pick-up in private home sales and prices that began in the mass-market segment in Q2 soon spread to the mid-market, then to prime districts and even landed market.
Initially, the buying was led by owner-occupiers and investors but speculators soon made their presence felt.
Just how strongly sentiment-driven the property market had become is also reflected in DTZ's analysis which showed that in Q2 this year, there was no time lag between the benchmark Straits Times Index and DTZ's average price for prime-district freehold condos. Typically the STI leads the physical property market by three to six months.
Property consultants reckon the house-buying frenzy seen in Q3 has probably peaked and that sales will moderate over the next three to six months. However, prices are not likely to slide unless a 'double dip' manifests in the economy, they suggest.
DTZ's Ms Chua is forecasting a 0 to 5 per cent price increase generally. Colliers International's director Tay Huey Ying predicts a 5 to 10 per cent q-o-q rise in URA's overall private home price index in Q4.
Source: Business Times, 2 Oct 2009
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