Mid-Tier, Mass Market Homes May Lead Gains

Source : The Business Times, December 17, 2007

Performance hinges on HDB upgraders, en bloc millionaires, say consultants.

Next year could be the year of the mid-tier and mass market sectors with prices expected to rise between 8 and 15 per cent.

Whether this will happen depends largely on en bloc millionaires, the return of HDB upgraders, the resilience of the Singapore economy, and the possibility of more developers stemming supply and landbanking their redevelopment sites.

CBRE Research executive director Li Hiaw Ho expects 10,000-13,000 new homes to be sold, ‘with more activity seen in the mid-tier and mass market’.

The number falls short of the estimated total number of 15,000 units sold in 2007. But Mr Li said that, in the event of a downturn, developers who can hold will push back their launches until the market turns around.

‘This is possible because most of the collective sale sites are on freehold tenure,’ he added.

Mr Li also noted that while about 67 per cent of the development sites sold in 2006 were in the prime districts of District 9, 10 and 11, this fell to 49 per cent in 2007.

‘More sites outside the prime districts were acquired via the collective sale route in 2007, compared to 2006 when there was more supply in prime areas, and when prices were more affordable,’ he added.

Based on total sites sold, CBRE estimates that there could be about 14,000 units ready for launch outside the prime districts next year. This includes a potential 1,600-unit 99-year leasehold condo built by Frasers Centrepoint and Far East Organization in Tampines, and a 630-unit 99-year leasehold condo by Sim Lian Land in Bishan.

Savills Singapore director of marketing and business development Ku Swee Yong reckons that of the new launches, the majority would be mid-tier.

‘There are not enough launch-ready mass market sites of significant size,’ said Mr Ku.

He believes that there could be more mass market sites in the Government Land Sales (GLS) Programme, with prices for the mass market gaining 30-50 per cent, and mid-tier prices rising 20-40 per cent.

Apart from a rising number of new citizens and PRs (permanent residents), Mr Ku expects an influx of integrated resorts-related foreign manpower in the second half of 2008.

‘The high-end will be replenished with the re-construction of en bloc sites but the mass market housing for junior level expats and foreign talent will have to come from GLS sites,’ he added.

Colliers International director of research and consultancy Tay Huey Ying also expects buyers hoping to reap rental returns to make up a significant portion of the mass market.

However, Ms Tay believes that the mass market and mid-tier sectors will no longer be quite as easy to define.

With many developers improving their product to try and price their projects at benchmark levels, Ms Tay says, there is a noticeable blurring of tiers as the higher-end of each tier encroaches into the lower-end of the next tier.

‘As such, it would be more appropriate to segmentise the residential property market into seven tiers, namely, mass, upper-mass, mid-tier, upper mid-tier, high-end, luxury and super luxury,’ she explained.

Colliers’ target prices for the mass and upper-mass market developments are below $750 psf, and between $750 and $1,100 psf respectively.

Projected prices for the mid-tier market are from $900 to $1,800 psf, and upper mid-tier market, from $1,800 to $2,500 psf.

At these prices, HDB upgraders could be priced out of the private market.

Resale HDB prices are rising with cash-over-valuation now as high as $150,000. Although this is for very select units, sellers are nevertheless holding out for higher resale prices. ERA Singapore assistant vice-president Eugene Lim, for one, does not expect resale volume in 2008 to top the estimated 30,000 units sold in 2007.

PropNex CEO Mohamed Ismail reckons that resale prices will rise 10-15 per cent in 2008. In spite of this, he believes interest on mortgages, stamp duty and legal fees will still leave about 10 per cent of HDB sellers in negative equity if they sell now.

Highlighting a recent trend, Mr Mohamed notes that 5-room flats in areas such as Bishan, Bukit Merah, Bukit Timah, Central, Clementi, Kallang, Marina Parade, Queenstown and Toa Payoh commanded cash-over-valuation of $50,000 and above in Q307. He added that buyers were mainly private property downgraders or en bloc millionaires who are also finding private property too expensive.