RESIDENTIAL MARKET

Private home prices dip after nearly 3 years

PRIVATE home prices have fallen for the first time in almost three years, according to estimates out yesterday.

Overall prices fell 0.1 per cent in the three months to March 31 - the first decline since the global financial crisis in the second quarter of 2009 and a reversal from the 0.2 per cent rise in the fourth quarter last year.

The decline had been tipped for a while, given the slowing pace of price increases over the past two years as the Government introduced five rounds of cooling measures. Prices have risen about 55per cent from the middle of 2009 to now.

Experts say weaker economic conditions and cooling measures have subdued demand, hitting sales activity and resale prices.

One clear sign of the slowing market is that resale transactions were down by half across all segments in the first quarter over the previous three months.

The numbers from the Urban Redevelopment Authority (URA) also point to a tale of two diverging sectors, with the higher-end city centre and fringe homes slumping, while mass-market homes powered ahead.

City centre home prices dipped 0.9 per cent, and prices fell 0.7 per cent in city fringe areas. Foreign demand has been fizzling out since a 10 per cent additional buyer's stamp duty was introduced in December.

But suburban prices rose 1.2 per cent - double the 0.6 per cent gain in the previous quarter - thanks largely to a string of popular mixed-development suburban projects and small apartments launched in the period.

While acknowledging the strains on the sector, experts noted the strength of the mass-market homes segment, which has accounted for more than 80 per cent of new home sales so far this year.

ERA Realty key executive officer Eugene Lim said the 50 per cent decrease in resale transaction volumes had taken its toll on private residential prices.

The sustained price increase for suburban homes is underpinned by robust demand for new mass-market projects that is fuelled by low interest rates and the continued availability of project launches.

Creative promotions and sweeteners dangled by developers to cushion the impact of the additional buyer's stamp duty have also enticed home buyers to commit.

For instance, suburban mixed-use projects such as The Hillier and Watertown, priced at between $1,200 and $1,300 per sq ft, helped drive up values in the first quarter.

Experts are divided on the likelihood of further cooling measures in the light of yesterday's figures.

One expert noted that it is 'challenging' for the Government to deal with a market moving in two different directions.

The chance of more measures is higher, given stronger-than-expected growth in suburban home prices, together with record new home sales of more than 3,100 units in February.

This divergent market is likely to continue into the second quarter of this year, unless there are further government interventions.

One expert suggested that the state could discourage excessive purchases by raising eventual holding costs, such as a temporary increase in residential property tax rate for investment purposes.

Had the indices for the city centre, city fringe and suburban segments all declined, the risk of intervention might have been less.

But the current situation is where the suburban segment is bucking the trend, leaving the market with the lingering uncertainty of further cooling measures.

Further cooling measures are unlikely in the short term. A host of factors working to take the heat off record-high home prices, such as the slow resale market, the languishing high-end sector, the bumper supply of state land released, and home buyers' resistance towards ever-increasing prices are already in play this year.

Overall prices are expected to fall 5 per cent this year, while another property observer expects city centre and city fringe home prices to fall 5 per cent but suburban prices to rise 3 to 5 per cent.

URA's flash estimates are based on transactions in the first 10 weeks of the quarter. They will be updated in four weeks.

Source: The Straits Times – 3 April 2012

Curbs on backdoor buys of landed homes

Starting today, Urban Redevelopment Authority (URA) will no longer allow strata landed homes to be built in projects with 'condominium' status.

Market watchers say that this will effectively close an avenue which has allowed foreigners to buy strata landed homes within such projects without having to seek permission from the Singapore Land Authority's Land Dealings (Approval) Unit.

However, foreigners can continue to buy such strata landed homes in existing condos and in condo projects that have yet to be built but already approved by URA.

In a circular issued yesterday evening, URA said it has observed that 'in recent years, there has been an increase in the number of condominium proposals comprising a mix of strata landed and apartment units within the same development'.

Analysts list D'Leedon in the Farrer Road area, Thomson Grand, euHabitat at Jalan Eunos, Archipelago facing Bedok Reservoir Park and Woodhaven in Woodlands, among the projects with 'condo' status containing strata landed homes. Developers have taken to including some strata landed homes within their condo projects to cater to the strong demand for such landed homes from foreign buyers, who don't need LDAU's permission to buy them.

In contrast, foreigners wishing to buy any other type of landed homes, including units in a pure strata landed housing development, need LDAU's approval. They have to fulfill certain criteria before LDAU will give the nod, including being a Singapore permanent resident and making significant economic contribution to Singapore. However, under a further tightening in approval criteria last year, approvals to PRs to buy landed homes is expected to fall.

Sentosa Cove is the only place in Singapore where even non-Singapore PR foreigners may purchase a landed home, although still subject to obtaining LDAU approval.

Foreigners have increasingly taken to buying strata landed homes in projects with 'condominium' status.

A URA spokesperson said that for the whole of 2011, 97 strata landed housing units in condominiums were sold by developers, of which about 90 per cent were bought by foreigners (including PRs).

For the whole of 2010, 16 strata landed housing units in condominiums were sold by developers, of which about 60 per cent were bought by foreigners (including PRs).

In its circular yesterday, URA noted: 'Strata landed housing is essentially a form of landed housing except for its strata title arrangement. Hence, developments comprising only strata landed housing are not accorded condominium status. URA clarified this through a professional circular in October 1994.

'To align with the treatment of strata landed housing developments announced in 1994, we will no longer accord condominium status to developments comprising a mix of strata landed and apartments units. Only residential developments comprising purely apartment units and complying with the condominium guidelines will continue to be approved as condominiums.'

The new guidelines will take effect today. 'Only formal development applications (excluding Outline Applications) submitted prior to 03 Apr 2012 which have already been granted Provisional Permission or which will result in a Provisional Permission will continue to be evaluated under the old guidelines.'

Development applications submitted prior to April 3 resulting in an advice or refusal of written permission will be evaluated based on the new guidelines upon submission after the advice or refusal, URA added.

Developers have been using the current guidelines as a clever way to market their strata landed properties to foreigners because a development scheme comprising strata landed homes within a project approved as 'condominium' is open to foreign buying. With the latest change, URA guidelines are aligned with the general intention to safeguard landed properties for locals.

However, some experts questioned the rationale behind URA's rule change to disallow strata landed units in projects with condo status. All the different unit types currently in projects with condo status, including strata landed units, share common facilities and make contributions for the maintenance of the shared facilities and common areas.

Such units legally, are not the same as landed homes. The unit cannot be torn down and rebuilt, expand it by one square inch or change the facade or roof or appearance.

Source: Business Times – 3 April 2012

Bumper supply takes its toll on resale HDB flats

The hype over HDB resale flats is starting to fizzle out as the government continues to roll out an extensive pipeline of Build-To-Order (BTO) units across the island, providing a greater array of choices to buyers.

In the first quarter alone, HDB released a total of 8,076 BTO flats into the market, in addition to another 3,825 flats which were offered under a sale of balance flats exercise. But buyers can expect the number of BTO launches to hit a generous 25,000 by year's end, HDB indicated.

The influx of supply is already starting to trigger signs of fatigue in the resale market with the statutory board's flash estimate of the first quarter's resale price index (RPI) rising an anaemic 0.6 per cent from the previous quarter, reflecting a slowdown from the 1.7 per cent increase in the fourth quarter last year. This also marks the lowest growth in the index since Q3 2006.

Said Eugene Lim, Key Executive Officer at ERA Realty Network: 'Resale prices are stabilising and cash-over-valuation (COV) is coming down. The main reasons are that prices have hit a ceiling and homebuyers are attracted by HDB's continued BTO launches of a variety of flats in a variety of locations.'

In addition, the recent policy change of setting aside 15 per cent of the BTO flats in non-mature estates for second timers has also drawn more home buyers away from the resale segment, he added.

Overall resale transaction volumes slid in the first quarter of the year, with larger units - comprising 5-room and executive flats - bearing the brunt of the fall.

Potential buyers of three-room flats usually with lower income relative to buyers of larger flats can now opt for a BTO flat which is more affordable while those who intend to buy a five-room or executive flat have an option of purchasing an executive condominium (EC) with the revision in income ceiling.

In the subsequent months, resale prices are expected to continue stabilising on the back of declining COV and the impact of recently implemented policies such as a raised income ceiling.

Notably, median COV has come down across all flat types during the first quarter and is expected to continue trending south in the coming months before stabilising at around $15,000 by the end of 2012, say two consultants.

A decline in HDB resale prices by year's end is expected should this downward trend continue, attracting back buyers who are not willing to wait for the completion of a BTO flat or those who simply do not meet the requirements to apply for one.

In the pipeline ahead, HDB will be launching 4,640 BTO flats in areas such as Choa Chu Kang, Kallang/Whampoa, Punggol and Sengkang next month.

Source: Business Times – 3 April 2012