Private home prices up more than expected

Much of Q1 price growth originates from landed property

PRIVATE home prices rose more than expected in the first quarter of 2010, with landed properties putting up a strong showing. Rents also climbed surprisingly, leading to greater optimism in the market.

Data from the Urban Redevelopment Authority yesterday showed that private residences were 5.6 per cent more expensive compared with a quarter ago. This exceeds the flash estimate of 5.1 per cent released earlier this month.

Still, the Q1 increase is smaller than the 7.4 per cent hike in Q4 last year, which spurred the government into introducing more measures to rein in sentiments in the housing market.

Sub-sale activity - a signal of speculation - also dipped in Q1. Sub-sales accounted for 8.5 per cent of all sale transactions, down from 11.6 per cent in Q4.

The cooling measures have been 'effective in keeping short-term speculators at bay' and have 'helped to take some pressure off prices', said Colliers International research and advisory director Tay Huey Ying.

Price resistance has also set in, since home prices have exceeded the lows in Q2 last year by more than 30 per cent, she added.

Much of price growth in Q1 originated from landed property. Prices in that segment went up by 8.3 per cent, at the same rate as in Q4.

Prices rose most for detached houses, by 9.6 per cent. Prices for semi-detached and terrace houses followed with 7.5 per cent and 7.4 per cent increases respectively.

Demand for landed property has been high and there have been many transactions, said RealStar Premier Property managing director William Wong. Such houses can have lower per square foot (psf) prices compared with condominium units and that could have attracted buyers, he suggested.

Colliers' Ms Tay added that the supply of landed property has always been limited, so this would provide a support to prices.

Despite the strong growth, landed property prices have yet to breach the historical high seen more than 10 years ago. The price index for this segment in Q1 was 176.3, about 9 per cent below the 193.4 in Q2 1996.

Over in the non-landed home segment, prices grew by 4.9 per cent in Q1, at a slower pace compared with 7.2 per cent in Q4.

Residences in the Rest of Central Region (RCR) led the increase, with prices going up by 7.9 per cent. Prices in the Core Central Region (CCR) and Outside Central Region (OCR) rose 4.4 per cent and 4.3 per cent respectively.

Consultants are optimistic about how private home prices and sales volume will fare this year. CBRE Research executive director Li Hiaw Ho pointed to the sharp economic growth in Q1, saying this 'makes for much positive market sentiment in the coming months'.

Developers managed to sell 4,380 new homes in Q1, more than twice the 1,860 in Q4, he said. 'If the pace of sales continues throughout the year, the total sales of new homes could even be comparable to last year's volume of 14,688 units.'

Property launches this month continue to prove hot. City Developments said yesterday that at Tree House, its latest project at Chestnut Avenue, over 85 per cent of the 350 units rolled out have been taken up. Prices were around $800 psf, and buyers snapped up all two-bedroom and two-bedroom-plus-study units.

More launches are set to come. For instance, Frasers Centrepoint plans to launch the former Flamingo Valley site in early May.

In terms of prices, Colliers' Ms Tay expects further increases ahead. They could breach the peaks in Q2 2008 and Q2 1996 by the next quarter, given they are just 1.4 per cent and 3.5 per cent below those highs respectively, she said.

Also, 'future price appreciation looks likely to be supported by a corresponding rise in rents', she said.

In Q1, rents of private homes increased by 4.7 per cent quarter on quarter, up from 0.6 per cent in Q4. Going by regions, across CCR, RCR and OCR, rents grew 5.3 per cent, 4 per cent and 4.8 per cent respectively.

Ms Tay believes rents could climb further - leading to a 10-15 per cent rise for the whole of 2010 - as companies reactivate hiring plans and more expatriates arrive on Singapore's shores.

CBRE Research's Mr Li suggested that residential rents could have bottomed out. 'Anecdotal evidence suggests an increase in the hiring of expatriate staff in the financial services and bio-medical sectors as economic fundamentals improve which in turn, have translated to the increase in rents,' he said.

Source: Business Times, 24 Apr 2010