Solid gains await with double-digit price growth and Singapore's scarcity of land, says LEONARD TAY
THE private residential market has been hogging the headlines in the past 18 months. Overall prices recovered in 2004 and 2005 by 0.9 per cent and 3.9 per cent respectively, and home prices shot up by 10.2 per cent in 2006 and another 13.5 per cent in the first half of 2007, led mostly by the condominium segment of the market.It has been pretty obvious that non-landed homes have been leading the way in the strengthening residential market, with prices growing from a marginal 1.1 per cent in 2004 to 4.5 per cent in 2005, 11.1 per cent in 2006 and 14.2 per cent in the first six months of 2007 alone, according to numbers from the Urban Redevelopment Authority (URA).
What of landed properties then? Will landed properties match their high-rise counterparts in the price spiral?
Prices of landed homes have risen in line with the rest of the market. (See Table 1) From a marginal 0.6 per cent rise in 2004, prices of landed homes grew by 2.4 per cent in 2005, 6.7 per cent in 2006 and 10.1 per cent in the first half of 2007.
A breakdown in price of the different landed property types shows that detached houses have made the most headway over the past year. According to URA numbers, prices of detached houses rose by 12.3 per cent in H1 07, after increasing by 8.1 per cent in 2006.
As for semi-detached and terrace houses, their indices rose by 7.6 per cent and 9.3 per cent respectively in the first half of 2007, from 5.3 per cent and 5.2 per cent respectively in 2006. As detached houses comprise Good Class Bungalows (GCB), the price increases have been more pronounced given the demand for high-end homes.
Based on caveats for GCBs, the average price has risen by an estimated 30 per cent in 2006 and a further 25 per cent in the first half of 2007. Not only are prices registering double-digit growth, it has also been observed that certain GCBs have been sold and resold within 12 to 18 months.
An example of this trend is a GCB at Queen Astrid Park that was sold for $12.5 million in April 2006, only to be resold at $16 million in May and then again in December 2006 for $18 million. This is an increase of 44 per cent in seven months. Another GCB at Nassim Road was first sold for $9.8 million in February 2005 only to be sold another three times for $15 million in August 2006, $18.4 million in December 2006 and $24.2 million in June 2007, an increase of 147 per cent over some 28 months.
Overall, it appears that there are several solid reasons for optimism in the landed housing market, especially in the next 12 months.
As prices of landed property in Singapore have not risen as steeply as their non-landed counterparts, there would generally be some better bargains in the landed market compared with luxury condominiums that have already attained very high benchmarks.
Aside from the GCB market, the comparatively slower rise in prices for landed properties could be viewed more favourably vis-a-vis upper and middle-upper income local home buyers who might have been priced out of the luxury condominium market, especially in the very prime locations.
Secondly, landed housing will always be considered a scarce commodity in the Singaporean landscape. With limited land, landed housing at present comprises 29 per cent of all housing stock throughout the island as at June 2007, or 68,360 units out of 233,143 private homes. Due to its inherent scarcity, landed housing would always be the ultimate goal of Singaporeans, especially since foreigners are not ordinarily allowed to purchase these properties.
With regard to scarcity, landed housing can be an attractive investment property in the near future as a source of regular income. As Singapore welcomes more foreign professionals to its shores, houses for rent could prove to be valuable assets for rental income, especially so for foreign professionals who might be used to living in landed properties back home and are not allowed to purchase similar types of accommodation while working in Singapore.
In the first six months of 2007, URA's rental indices for all the landed property types improved significantly. (See Table 2) During this period, rents of detached houses increased by 13 per cent followed by a 11.4 per cent rise for semi-detached houses and a extraordinary 17.3 per cent jump in rents for terrace houses. Compared with capital values of landed residences, rents have increased much faster.
Examples of recent rental transactions where the increases were evident include a detached house at Woodgrove Estate which was renewed at $15,000 a month, a 25 per cent increase from the previous rent of $12,000 a month. A detached house at Chancery Lane was rented at $16,500 a month, while a semi-detached house at Lim Tai See Walk was rented at $11,000 a month.
From a supply standpoint in the next five years, 1,872 landed units are under construction with another 2,579 landed units planned. Compared with the 28,082 non-landed units under construction and the 35,077 non-landed units that have not started, new supply of landed homes only account for 6.6 per cent of all new supply expected from the second half of 2007 to 2011, making it fairly certain that landed residential homes are going to remain a scarce product for the foreseeable future.
An increase in landed prices of some 20 per cent for the whole of 2007 might very well be on the cards, given an accumulation of the above factors. Demand for landed housing should increase, and prices would follow suit once the home-buying public realises that there are investment, as well as rental income opportunities in landed houses, and that prices have also not risen as much compared with condominiums in the prime areas.
Ultimately though, it will be the fundamental reality that landed housing will always be a scarce product in Singapore's urban landscape that bodes well for this type of housing in the medium to long term.
The writer is director, CBRE Research
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