Supply of homes, vacancy rates up, but buyers discouraged by high prices
THE lacklustre property market seen in the first quarter of this year is likely to persist, with developers expected to launch more projects in the months ahead, increasing the supply of new homes even as buyers stay away.
The prices of homes in both the private and public sectors rose at a much slower pace in the first quarter while the volume of transactions remained thin.
Private home prices rose 3.7 per cent in the first quarter, according to the Urban Redevelopment Authority (URA), lower than its earlier estimate of 4.2 per cent and well below the 6.8-per-cent rise in the previous quarter.
Developers sold 762 private residential units in the quarter, the lowest number of transactions since Sars-stricken 2003.
The URA data released on Friday for the full three months were an update from its April 1 estimates, which were based on transactions in the first 10 weeks of the quarter.
“This is quite a marked difference and it shows that in the last two weeks of the quarter, there has been some evidence of price cutting in the market,” said Mr Donald Han, managing director of real estate firm Cushman and Wakefield.
The vacancy rate for completed private residential units rose 6.3 per cent, up from 5.6 per cent in the previous quarter, the URA data showed. With more supply in the market, there is added pressure to reduce prices.
“If the vacancies continue rising at this rate, the market will definitely turn this year. Prices will peak for sure,” said Mr Colin Tan, head of consultancy and research at Chesterton International.
Among the projects to be launched in the coming months are the Marina Bay Suites and Duchess Royale on Duchess Avenue. They add on to developments such as The Verte at Telok Kurau and Waterfront Waves at Bedok Reservoir Road that were launched in the first quarter.
Foreigners — who have been a key catalyst in the 30-per-cent jump in private home prices last year — are increasingly being discouraged by high asking prices.
This is especially so amid the continued uncertainty over the United States economy and the fallout from the sub-prime mortgage crisis.
Kuwait Finance House, which last December took an option to buy 97 units of the luxurious Goodwood Residence condominium for $818 million from Guocoland, has decided not to go through with the purchase.
The lacklustre real estate market in Singapore and the region has affected the performance of listed property firms.
Keppel Land reported a 7.6-per-cent fall in property sales to $273.1 million in the first three months of the year due to the increasingly cautious sentiment.
Mr Ku Swee Yong, a director at property consultancy Savills, said that until global stock markets show clear signs of a recovery, investors would remain wary of putting their money in real estate. He noted that banks here had not been selling many home loans this year.
“Other parts of consumer expenditure are still going strong, it’s just that property is taking the brunt of it,” said Mr Ku.
For the office sector, rentals increased at a slower rate of 7.3 per cent, down from 10.9 per cent in the previous quarter.
The URA said there was a total supply of 16 million sq ft in gross floor area of office space at the end of the first quarter.
Since last July, the Government has made available land on short-term leases for transitional office sites to meet the high demand for such space.
Mr Han said that the pace of office rental increase would continue to moderate for the rest of the year.
Mr Nicholas Mak, a director from Knight Frank, said that despite this moderation in pace, rentals will still rise by 15 to 20 per cent this year as “demand for office space is still healthy”.
RESALE TRANSACTIONS FOR HDB FLATS DOWN 6 PER CENT
The public housing market is also showing nascent signs of waning.
The number of resale transactions of Housing and Development Board (HDB)flats fell 6 per cent to 6,360 in the first quarter of the year from 6,750 in the previous quarter. Meanwhile, the HDB Resale Price Index rose 3.7 per cent from the previous quarter, down from 5.7 per cent in the fourth quarter of last year.
“HDB flat buyers were resisting the rise in resale prices,” said assistant vice-president of property agency ERA Eugene Lim.
The median cash-over-valuation (COV) for resale transactions was $21,000 in the first quarter, slightly lower than the previous quarter’s $22,000. The COV is the difference between the actual transacted price of the flat and its valuation. It cannot be paid from a loan or from savings in the Central Provident Fund.
“We saw the resale market hitting resistance level in the fourth quarter last year as HDB flat buyers do not have or are not willing to part with so much cash. This resistance carried through to the first quarter,” said Mr Lim.
“Very often, the deal cannot be closed or takes much longer to close because of unrealistic sellers demanding high COV,” he added.
Also, with more new flats coming on stream, some demand will be removed from the resale market. Buyers who can afford to wait up to three years for the completion of the flats may prefer to buy new flats directly from the HDB as this often involves a very small or no immediate cash outlay.
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