Big hike in secondary market deals shows genuine demand: analysts
(SINGAPORE) The broad-based recovery in the property sector is gathering pace with data showing a spike in the number of property transactions by Housing and Development Board (HDB) upgraders.
Looking at data which captures transactions made by buyers with registered HDB addresses - traditionally considered HDB upgraders - Citigroup noted that, in Q2 2007, HDB upgraders made about 1,750 transactions in the secondary market, an increase of 75 per cent from the previous quarter when around 1,000 transactions were recorded.
On the significance of secondary market transactions, Citigroup analyst Wendy Koh said that these represented 'genuine demand as full payment is required for completed developments'.
Although there is always some level of speculation in a rising market, the mass market appears to be safe for now, with Citigroup noting that subsales in the mass market segment stood at about 9 per cent of total sales compared to 27 per cent at the peak of 1995/1996.
DTZ Debenham Tie Leung executive director Ong Choon Fah also believes buyers in this segment are genuine. 'Most speculation still takes place in the prime districts because price increases (in the mass market) are still not as significant,' she said
Mrs Ong added that the recovery of prices for the HDB resale segment has also boosted the number of upgraders and noted that about 70 per cent of resale flats transacted at above valuation in Q2.
DTZ's figures show that combined primary and secondary market transactions by upgraders increased by about 50 per cent in Q2 over the previous quarter. Popular new developments among upgraders were The Quartz near Buangkok MRT Station, Northwood in Sembawang and Ferraria Park Condo in Pasir Ris. Upgraders made up 80 per cent, 58 per cent and 54 per cent of the buyers respectively.
'There is also now more urgency to buy because there is the belief that prices seen in the prime areas will filter out into the suburban districts,' she added.
Upgraders have also bought into more upscale developments.
A spokesman for UOL said that they formed about 16 per cent of the buyers for Pavilion 11 at Minbu Road while Frasers Centrepoint said a similar 16 per cent have bought into The Soleil at Novena. Even at the more expensive The Seafront on Meyer, CapitaLand said that just under 5 per cent are buyers with HDB addresses.
HDB upgraders are still, however, price sensitive and Mrs Ong attributed the spike in secondary market transactions to this as the secondary market offers lower-cost private residential alternatives.
Speculation could, of course, raise prices. A recent report by Credit Bureau (Singapore) revealed that people living in the heartlands of Serangoon Gardens, Hougang and Punggol recorded the highest number of borrowers with multiple property loans, suggesting that they owned homes for reasons other than to live in.
Savills Singapore director (marketing and business development) Ku Swee Yong, who also believes speculation has yet to hit the mass market, reckoned that the increase in the number of borrowers with multiple loans could be due to the fact that several developments in the area, including Kovan Melody and Tangerine Grove, have obtained temporary occupation permits (TOP), requiring existing homeowners who opted for deferred payment schemes to apply for loans.
He also noted that some collective sale beneficiaries have had to apply for housing loans because more banks are refusing to give bridging loans.
CB Richard Ellis executive director Li Hiaw Ho does believe that speculation is increasing in new suburban projects like One Rochester and Sky@Eleven. Although Mr Li said that it is still 'quite minimal', he believed that it will impact overall prices, and that mass market projects will not be spared. 'You just have to look at the recent land sales price at Ang Mo Kio,' he added. The site in question sold for about $600 per square foot per plot ratio and is expected to sell for over $1,000 psf.
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