Private home prices may hit new high in 2010

Private home prices here are expected to hit a new high in 2010 and perhaps rise even further after that, should the economy continue to grow.

But analysts said on Friday that sales volumes in 2010 are likely to fall back to sub-10,000 levels seen in previous years.

Observers are projecting that 15,000 to 16,000 units will be sold in the primary market in 2009 – the highest on record.

The launch of a mass market project in Jurong West – Caspian – broke the dam for new home sales in Singapore earlier in 2009.

Some 10 months later, home sales during the economic downturn are projected to exceed even July 2007’s record of 14,811 homes. Data already shows that about 13,905 units have been sold from January to September this year.

Analysts said this performance is driven by pent-up demand, and is unlikely to be repeated in the years ahead.

Donald Han, managing director, Cushman & Wakefield, said: “This has been a spectacular year by virtue of pent-up demand. The second and third quarter probably produced about 60 to 70 per cent of total demand for 2009.

“In the third quarter alone, we sold something like 5,700 new home units. We sold more in the third quarter than in 2008. That kind of demand is not sustainable.

“The fact is that the government put on the brakes by discontinuing the interest absorption scheme. Also, they are making promises to ensure enough supply in the marketplace by introducing more government land sales programmes in 2010.”

Mr Han said sales are likely to average around 800 new homes a month, or some 9,000 to 10,000 units for the whole of 2010. However, some analysts said prices will not be falling in tandem with lower sales.

That is because the strong economy and fundamentals of the country will support prices, and may even drive them higher.

Nicholas Mak, real estate lecturer, Ngee Ann Polytechnic, said: “Going forward, average home prices still have some way to grow. They could still expand conservatively at about 10 per cent, while in some segments they could go as high as 20 per cent.”

Units in the mid- to high-end segments will see prices rise higher than those in the mass market.

Analysts said this is mainly because prices in the mass market, which accounts for about 45 per cent of all private homes sold to date, started heading upwards earlier, and are close to their peak.

But they are not ruling out factors that could temper price growth such as government measures to cool the market, should speculation get out of hand.

Source: Business Times, 4 Dec 2009