PRIVATE home prices surged an estimated 15.9 per cent last quarter - the sharpest quarterly rise in 28 years - and reversing four quarters of decline.
The initial property price estimates for the period ended Sept 30, released by the Government yesterday, offer new evidence of a private residential rebound despite an uncertain economy.
However, some market experts warn that this kind of price rises is not sustainable over the longer term, and note that buying interest has already slowed somewhat.
The latest price jump is the sharpest quarterly rise since a 27.2 per cent surge in the first quarter of 1981 and is the sharpest about-turn in the market since 1975, property analysts said.
By contrast, private home prices fell 4.7 per cent in the second quarter of this year, following a record 14.1 per cent slide in the first.
The flash estimates, from the Urban Redevelopment Authority (URA), marked an end to the shortest-ever severe market downturn here.
The private home market has now recovered about half the losses it has suffered since falling from a mid-2008 peak. The URA price index is near levels of the second quarter of 2007.
Property experts believe higher launch prices in the third quarter largely helped to push up prices. Developers sold more than 11,800 units in the first eight months of this year, far exceeding the 4,300 sold all last year.
A URA spokesman said the strong demand 'probably led to higher prices' in the third quarter. 'We will continue to monitor the property market closely to ensure that property prices and rentals move stably in line with economic fundamentals.'
The fast and furious rise in prices would explain why the Government intervened recently with measures to calm the market, analysts said.
There was clear anecdotal evidence of the boom, as buyers queued for new homes and submitted blank cheques in order to snag a unit. 'The rest of the world knows the market has risen since the second quarter,' said Knight Frank chairman Tan Tiong Cheng.
He said the fact that a feared depression did not happen may have spurred property buyers. They then took advantage of low interest rates, believing property to be the safest hedge against inflation, Mr Tan said, offering an explanation for the unusual recovery.
PropNex chief executive Mohamed Ismail said that once the rebound was under way, the 'feverish activity in a runaway market was fuelled by many investors and HDB upgraders who were afraid of losing out on a good investment opportunity'.
Another reason may have been strong demand from permanent residents, who boosted rising HDB resale prices, helping fuel the private homes boom, an industry source suggested.
The flash data showed that prices of non-landed private homes on the city fringes rose the most - 19.1 per cent. This was on the back of a strong showing in new projects such as Vista Residences in Jalan Datoh, Ascentia Sky in Alexandra Road and Trevista in Toa Payoh, experts said.
Suburban home prices jumped by 15.4 per cent while prices of city-centre homes surged 16.2 per cent.
These flash estimates are based on transaction prices of caveats lodged during the first 10 weeks of the quarter. Despite the startling numbers, the market for posh homes has yet to return to boomtime levels. The mass market has recovered to a greater degree while the mid-tier market is fairly close to full recovery, experts said.
The Government announced anti-speculative measures, such as offering more sites for sale, on Sept 14.
However, the effects of these measures have not been fully captured in the latest data and are set to continue seeping into the market, experts said.
At the same time, the performance for the rest of the year is likely to be hit by a seasonal slowdown, they said.
'At the new launches, a lot of the sales are due to pressure tactics. If you take away the speculators, you take away the froth so people will be more circumspect,' said an expert.
As it is, the frenzied buying has already slowed. 'There has been some slowdown in inquiries, especially in projects where prices have moved up significantly,' said DTZ head of Southeast Asia research Chua Chor Hoon.
New home sales may hit a record high of 5,200 units in the third quarter but prices are likely to remain stable for the rest of the year, said CBRE Research executive director Li Hiaw Ho.
Barring further cooling measures, the rise in the private home price index could slow to 5 per cent to 10 per cent for the fourth quarter, said Colliers International director for research and advisory Tay Huey Ying.
The recent price rises are not sustainable, said Jones Lang LaSalle's head of research South-east Asia, Dr Chua Yang Liang.
If prices, especially for mass market property, keep rising at such a pace, the Government may act again, though it will be aimed at stamping out speculation without hurting real demand, said Standard Chartered Bank economist Alvin Liew.
Source: Straits Times, 2 Oct 2009
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