IT WAS the rally that should never have happened. The world was in recession, credit was being crunched, investors across the board were in a state of near panic, yet no one seemed to have told real estate buyers.
After a tentative few months early in the year, property found its feet and staged the sort of upswing normally associated with economic booms, not near-busts.
Indeed, this year saw a recovery of Singapore’s residential market, said Frasers Centrepoint chief executive Lim Ee Seng.
‘We expected 2009 to be a very bad year for us but it turned out to be a good year,’ said EL Development managing director Lim Yew Soon.
Jones Lang LaSalle’s head of research for South-east Asia, Dr Chua Yang Liang, agreed: ‘It’s been a remarkable year – with transaction and pricing outperforming expectations, driven by latent demand, low interest rates and primed by lower pricing.’
Sales and prices of new private homes picked up significantly from April, a turnaround from the first quarter when sellers were cutting prices just to offload their homes.
As the private homes market swung quickly from despondency at the start of the year to ‘unwarranted enthusiasm’ in the middle, this year turned out to be a ‘record-breaking’ one, said DTZ head of South-east Asia research Chua Chor Hoon.
Record quarterly and monthly highs were achieved for launches and sales of new private homes while some new launches outside the city area sold at record prices, said Ms Chua.
Centro Residences in Ang Mo Kio, for instance, sold for more than $1,100 per sq ft (psf) – a suburban record.
Resale landed homes in prime districts also hit record prices while resale mass market home prices rebounded within two quarters to reach 2007 peak levels, Ms Chua added.
The four seasons
‘ONE of the hot topics this year was climate change, and if you apply that to the property market, it went through the four seasons for the first time ever,’ said Knight Frank chairman Tan Tiong Cheng.
The market is now in a ‘mild winter’ state, after a hectic year with an unusually hot summer, he said.
It started the year in deep winter – with only 108 new homes sold in January – the worst monthly sale figure on record. The mood was clearly grim.
Then came spring and sales quickly started to rise in February, easily pushing past the 1,000-unit mark to reach 1,332 units. March was similarly positive at 1,220 units.
By the time summer rolled around, market sentiment had improved tremendously.
Despite the heat, buyers were queueing outside showflats, eagerly awaiting their turn to pick a mass market unit.
Showflats of newly released projects aimed at HDB upgraders were packed to the brim on preview days with investors, singles, couples and families – often with grandparents in tow.
With affordability a key issue, developers turned to producing smaller and smaller units to satisfy those looking for an ‘affordable’ total outlay; never mind that the psf price may be high.
EL Development’s Mr Lim said: ‘Developers had to react to the market very fast. We were lucky to switch to small units for Illuminaire fast. Otherwise, we won’t be able to sell it out and at the price we achieved.’
Sales of new homes kept rising each month, culminating in a monthly record of 2,772 units in July.
‘We were supposed to be in a recession. The Government was talking about job losses which hit the lower-income group,’ said Knight Frank managing director, residential services Peter Ow.
‘Given the bleak outlook at that point, the momentum was surprising. It shows that you can never underestimate the purchasing power of the upgraders.’
Considering that the 2006-07 boom was led by the high-end segment with foreigners buying up a storm, many doubted the ‘bottom-up’ recovery was for real.
But it kept going strong amid concerns that a property bubble might be developing.
Government made its move
THAT prompted the Government to step in with anti-speculative measures in September.
It took away the interest absorption scheme, which allows buyers to defer payment until the project is completed, and said it will push out more supply.
An Urban Redevelopment Authority sample survey of recently launched projects showed that the average take-up rate of the interest absorption scheme was about 20 per cent to 25 per cent.
Property experts said at the time that the measures were minor and meant to get buyers to think twice about committing.
The Government continued to warn of the possibility of the market overheating. What followed seemed to suggest the measures had worked to some degree.
Signs of speculation disappeared, launches slowed and buyers were no longer rushing into new showflats to check out the latest launch and commit their cash.
Sales of new private homes slipped to 600 units last month, the second-lowest monthly sales this year.
But Jones Lang LaSalle’s Dr Chua feels the market will not see the full effect of the measures until early next year as activity traditionally winds down towards Christmas.
Ngee Ann Polytechnic lecturer Nicholas Mak believes there is a slowdown because developers have more or less run out of mass market projects while the high-end segment has yet to take off.
Looking ahead
EXPERTS say the slowdown – what DTZ’s Ms Chua describes as a ‘quieter and more rational mode’ – is a good thing.
It is a precursor to next year’s trend when the market is generally expected to revert to normal in terms of sales and upward price movements.
The bet is on a pick-up in the high-end segment as it has yet to push near previous peaks, experts say. With the opening of the two integrated resorts, more foreigners are expected to enter the Singapore market.
Dr Chua believes the high-end segment is likely to outperform the mass market on two levels.
Firstly, buyers of high-end homes are not so dependent on interest rates, which have been one of the key drivers in the mass market.
‘I reckon there is an upside to the currently low interest rates as we go into the second half of 2010 and that is likely to keep mass market activity in check,’ he said.
‘Secondly, regional economies have been performing better than expected and we can expect some of the higher-income foreigners to return to the Singapore market by the second to third quarter of 2010.’
Dr Chua does not expect a buying surge but more moderate growth.
‘I would describe the period since the collapse of Lehman Brothers in the later half of 2008 as that of a landscape of rolling hills. And now as we ascend, no one can really see what lies behind the knoll,’ he said.
Source: Straits Times, 30 Dec 2009
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