Thursday, June 12, 2008

HDB Upgraders Hold Key To Property Market Turnaround

Source : The Business Times, June 12, 2008

Squeezed out of private home market for some years, they see their share rise again

HDB upgraders could once again provide the base for a recovery in private home buying, just like they did in 1998, property consultancy group DTZ argues, based on its latest analysis of caveats data which show an increase in these upgraders' share of private homes bought in Q1 this year.

HDB upgraders accounted for 28 per cent of all private homes purchased in Q1 2008, up from a 22 per cent share in the preceding three months. Their Q1 share was also the highest in seven quarters, according to DTZ's analysis of caveats released to BT.

'This is in line with the current profile of private home buyers we've been seeing amidst a quieter market; they're buying more for owner occupation rather than for investment.' DTZ executive director Ong Choon Fah says.

'HDB upgraders are price sensitive and very careful with their purchase. They're waiting for the right opportunity,' she added.

Mrs Ong compares the growing share of HDB upgraders in the private home-buying pie in Q1 2008 to the surge seen in 1998, at the trough of the last big property slump during the Asian financial crisis. In that year, HDB upgraders made up a whopping 60 per cent of caveats lodged for private home sales, up from a 42 per cent share in 1997 and 34 per cent share in 1996.

Another surge in HDB upgraders' share of private home buying was seen in 2002, when it hit 59 per cent, after private home prices fell during the 2001 economic slowdown. Since 2002, HDB upgraders' share has been slipping, hitting a low of 22 per cent last year. The falling share of HDB upgraders over the past few years has come in tandem with rising property prices - which squeezed them out of the market - and the emergence of more foreign buyers, industry watchers said. The first quarter of this year saw their share rise again.

DTZ's Mrs Ong reckons HDB upgraders' share of private home purchases should continue to rise in the coming quarters but this will also be a function of the type of projects developers launch. Typically, HDB upgraders go for mass-market developments in the suburbs.

'They're pretty comfortable living in their HDB flats and face no pressing need to upgrade to a private home. So upgrading is quite an aspirational thing; they're not satisfying a need, but a want. They will buy selectively; it has to be a project that suits their lifestyle but it must also be priced attractively,' Mrs Ong stresses.

'Part of the reason developers have not been selling many homes lately is that they are not offering many mass-market projects at attractive price-points. They have not re-priced existing projects. It's only for their new launches that prices are being set at the lower end of, or below, earlier market expectations,' she added.

Agreeing, Knight Frank executive director Peter Ow noted that the level of activity in the HDB resale market is still healthy. 'So mass-market condos that are reasonably priced should appeal to HDB dwellers aspiring to upgrade to private housing. These buyers are very price sensitive though,' he said.

DTZ's analysis, based on caveats captured by Urban Redevelopment Authority's Realis system, showed that the total number of caveats lodged for private home purchases fell 40 per cent quarter-on-quarter to 3,066 in Q1 this year.

Amid the slower home sales, the number of private homes bought by those with HDB addresses also fell 25.8 per cent, from 1,145 units in Q4 2007 to 850 units in Q1 2008.

However, this decline was lower than a 44.4 per cent slide in the number of private homes bought by those who already have a private home address over the same period. As a result, the share of private homes bought by HDB upgraders rose in the first three months of this year.

Districts 15, 9 and 16 were the top picks for HDB upgraders who bought private apartments/condos from developers in Q1 2008. The most sought-after projects included Waterfront Waves in the Bedok area (District 16), Wilkie 80 (District 9) and Zenith in the Zion Road location (District 10).

Landed properties made up 13 per cent or 111 of the total 850 caveats lodged for private home purchases in Q1 2008.

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