Saturday, July 24, 2010

Private home sales slower, but prices up

Prices hit new high, could rise further with economic recovery

SALES of private homes slowed towards the end of the second quarter but prices still kept heading north into record territory.

Prices rose 5.3 per cent in the second quarter - above the preliminary estimate of 5.2 per cent and not far from the first quarter rise of 5.6 per cent.

According to Urban Redevelopment Authority (URA) data released yesterday, prices are up 11.6 per cent since January and are expected to continue climbing although the pace may ease, said analysts.

Prices are now at record levels, eclipsing the 1996 peak, after shrugging off a dip in sales that began in May when Europe's debt crisis rocked global stock markets, observers said.

Rents were also rocketing - up 5.9 per cent in the second quarter to take the half-year rise to 10.9 per cent. Rents fell by 14.6 per cent last year.

'The continuing recovery in the economy facilitated the increased hiring of expatriate staff, which in turn, drove the rental market,' said Mr Li Hiaw Ho, CBRE Research's executive director.

Cushman and Wakefield managing director Donald Han added: 'In the second half of last year, prices went up more than 20 per cent but rents fell. So, there was some fear of a bubble forming.

'But prices are now moving in line with rent rises. As long as rents go up, the price rise should be supported.'

Non-landed home prices rose the most in suburban areas, up 5.7 per cent, from a 4.3 per cent increase in the first quarter.

City-fringe home prices were up 4.6 per cent while city-centre ones rose 5.4 per cent.

Prices of landed homes also continued to surge, climbing 6.2 per cent in the second quarter after jumping 8.3 per cent in the first quarter.

Luxury homes are the only sector yet to reach record heights, experts noted.

Yesterday's URA data also showed that 4,033 new homes were sold in the second quarter, down about 8 per cent from the first.

As at the second quarter, there were 61,831 private residential units in the pipeline. Of these, 32,630 units were still unsold. The URA said: 'This number is equivalent to about three years of supply based on the average take-up of about 11,300 units per year over the last three years.'

While some buyers hesitate, others have been snapping up property.

Copywriter Daryl Lee, 34, said: 'The last thing I want is to lock my cash up in a mortgage when all people are doing is chasing higher prices to pay higher asking prices.'

Another potential buyer Alex Wee, 37, said: 'On the one hand, things are pricey. But on the other hand, we're afraid that if we don't buy, we will miss the boat.'

Accounts executive Kris Lau, 33, who bought a small investment unit at a newly released project, 368 Thomson, after selling her HDB flat, said: 'It's a good time to cash out and upgrade.'

Jones Lang LaSalle's head of residential project sales, Mr David Neubronner, told The Straits Times: 'Prices... should take a breather. But given the current backdrop where our economic recovery is generating wealth, they are likely to continue to rise this year.

'Quite a lot of people are parking their money in property for the long term. In the worst-case scenario, I think prices may stay flat.'

Ngee Ann Polytechnic real estate lecturer Nicholas Mak believes private home prices will continue to rise this year and possibly into next year but at less than 5 per cent a quarter as sales slow.

The level of speculation now is within manageable levels, he felt.

URA data shows that sub-sales fell to 723 units in the second quarter, from 996 in the first.

Mr Li said the surprisingly strong economic growth in the second quarter will help keep market sentiment positive.

'However, as the Government is also anticipating a slowdown in the growth momentum for the rest of the year, the residential market is likely to move at a more moderate pace,' he said.

Sales of new homes may still reach 14,000 units this year - below last year's 14,688 units while home prices may rise by 12 to 15 per cent, he said.

Mr Mak is looking at a price rise of 16 to 21 per cent this year.

Meanwhile, office rents rose 1.1 per cent in the second quarter compared with 0.4 per cent in the first quarter.

Rents for shops and industrial properties rose by 0.5 per cent and 1.3 per cent respectively in the second quarter.

Source: Straits Times, 24 Jul 2010

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