Central, Prime Condo Take-Up Rates Outpace Other Areas

Source : The Business Times, July 01, 2008

Softer H1 prices in these areas cited, pointing to strong latent demand: JLL

Softening condo and private apartment prices in the first six months of this year in the prime and central districts - the latter of which covers the financial district, Harbourfront area and Sentosa Cove - have been accompanied by a push in demand in these locations.

























This, according to a study by Jones Lang LaSalle, has been reflected in the higher primary market take-up rates for properties in these locations.

'This suggests the presence of a strong latent market where potential buyers are waiting at the sidelines, eagerly buying up properties when the price is right,' Jones Lang LaSalle's head of research (Southeast Asia) Chua Yang Liang says.

JLL measured the take-up rate as the ratio of the number of non-landed private homes sold by developers to such homes launched by developers. It then compared these take-up rates against the average resale prices in four locations on the island - prime (districts 9, 10 and 11), central (districts 1-4), east coast (15 and 16) and mass market (all other districts).

The prime and central districts achieved relatively higher take-up rates of 87 per cent and 250 per cent respectively during H1 2008 compared with take-up rates of 67 per cent for east coast and 66 per cent for mass-market during the same period.

The prime and central districts also saw weaker price movement. The average resale price for prime districts in H1 2008 was 12 per cent higher than in H1 2007 but down 3 per cent from the figure for full-year 2007. In the central districts, the H1 2008 average resale price represented an improvement of 9 per cent year-on-year but was flat against the full-year 2007 figure.

In the east coast, the H1 2008 average resale price raced 20 per cent ahead against a year ago while mass-market locations topped the chart with a 25 per cent year-on-year price gain.

'The conservative attitude of buyers coupled with cautious outlook by developers will continue to moderate market performance in terms of take-up rates. Buyers are generally sensitive and cautious about prices.

'Developers are more likely to discount prices to maintain the demand, either through direct discounts of between 5 and 10 per cent on selling prices as we're already seeing, or absorption of other costs like stamp duty and furnishing vouchers,' Dr Chua reckons.

JLL's study also showed that amidst the overall quieter market the number of non-landed private homes bought by those living in HDB flats as well as those with private addresses fell in the first five months of this year.

However, there was an increase in HDB upgraders' share of total non-landed private homes bought (in both primary and secondary markets) during the first five months of this year in all locations.

This was the case even in the prime districts, where buyers with HDB addresses made up 16 per cent share of total private apartments/condos bought in January to May 2008. This was higher than a 10 per cent share for the whole of last year in this location.

Most of the HDB upgraders who bought a prime district property in the first five months of 2008 picked up a unit in District 9, mainly at new project launches like Wilkie 80 and Mount Sophia Suites, according to JLL.

HDB upgraders accounted for 33 per cent of non-landed homes sold in the east coast in the first five months of 2008, up significantly from a 21 per cent share in full-year 2007.

In the mass-market districts - the traditional haunt of upgraders buying private property - their share was 39 per cent in Jan-May 2008, up from 32 per cent in 2007. In the central districts, the upgrader share edged up from 16 per cent last year to 19 per cent in the first five months.

'Although prices in 2007 have moved past the average-income buyers' affordability, the current softer prices as well as stronger economic performance in 2007 have provided the impetus for many HDB upgraders in all locations,' Dr Chua notes.

'As HDB resale flat prices are likely to remain strong given limited supply, upgraders who benefit from the gain in the resale market are likely to enter into the private market. We reckon the percentage of upgraders is likely to grow by year-end if developers and sellers keep prices at realistic levels,' he added.