Source : The Business Times, July 2, 2009 URA flash estimates show 5.9% fall but many expect final showing to be betterSingapore's private home prices fell for a fourth straight quarter in Q2 2009 - but the marked slowdown in the rate of decline shows that the residential market here is recovering, analysts said.
The private residential price index fell 5.9 per cent in the second quarter, according to flash estimates from the Urban Redevelopment Authority (URA) yesterday. By contrast, the index fell 14.1 per cent in Q1.
The continuing fall in the index caught many analysts by surprise, as anecdotal evidence showed that private home prices started climbing again in the second quarter.
'The decline is surprising as prices have picked up in the latter part of the second quarter, especially in the prime districts of 9, 10 and 11,' said DTZ's head of South-east Asia research Chua Chor Hoon.
Echoed Li Hiaw Ho, executive director of CBRE Research: 'This smaller decline in the price index is contrary to the present market perception where actual price levels in the second quarter were known to be more than 10 per cent above those in the first quarter.'
CBRE's data showed that the median price registered in the second quarter for new 99-year leasehold projects was $788,000 - some 13.2 per cent higher than the median of $696,000 in Q1. For new freehold non-landed properties, it was $928,000 - 26.6 per cent higher than the first quarter's $733,000. Some 3,800- 4,000 new homes were estimated to have been sold in Q2, 50 per cent more than the 2,596 units sold in the first quarter, the firm said.
DTZ's Ms Chua pointed out that URA's flash estimates are based on transaction prices from caveats lodged during the first ten weeks of the quarter, while the buying frenzy gained pace in June. 'I expect the final price index to fall less or show some increase when more caveats in June are included in the computation of the index,' she said.
A URA spokesman said that while some developers had started raising prices recently, the extent of price increase quarter-on-quarter was small and pertained to selected projects.
'On the other hand, more projects had seen a fall in prices over Q2 2009,' said the spokesman. 'Hence, overall prices in Q2 2009 as reflected by the flash index fell in comparison with Q1 2009.'
The revised index (which will be out on July 24) will capture caveats beyond the first 10 weeks of the quarter.
Meanwhile, the slower pace of decline for private home prices was seen across the whole island.
In Q2, prices of non-landed private residential properties decreased 6.6 per cent in the core central region (which includes the prime districts, financial district and Sentosa Cove), 6.3 per cent in the rest of central region, and 2.6 per cent in the outside central region (which is a proxy for suburban mass-market locations).
In comparison, in Q1 2009, prices fell 16.2 per cent in the core central region, 17 per cent in the rest of central region and 7.3 per cent in the outside central region.
The improved sentiment was also evident in the resale prices of Housing and Development Board (HDB) flats.
The HDB resale price index, which fell for the first time in Q1 2009 after nine straight quarters of growth, also recovered somewhat to climb 1.2 per cent in Q2. The resale price index fell 0.8 per cent in the first quarter.
'This price rebound shows that demand for HDB flats is still very strong despite current economic challenges,' said Eugene Lim, ERA Asia Pacific's associate director.
ERA, which says it has a 45 per cent market share of the HDB resale market, observed that its transaction volume surged some 52 per cent in Q2 over Q1.
Buyers are returning to the HDB market because sellers have become more realistic about asking prices - especially those selling five-room and executive flats, analysts said. Rather than holding out for higher cash-over-valuation (COV) amounts, most are now willing to sell at valuation or with a slight COV.
Analysts expect the property market recovery to continue - but cautioned against over-exuberance.
OCBC Investment Research analyst Foo Sze Ming said that property prices in Singapore are unlikely to surge to 2007 levels, even with the current recovery.
Then, prices were boosted by global real estate funds that bought up homes here for investment. 'Since the economic crisis is still ongoing, I doubt that there will be that much interest from funds in the Singapore property market to drive prices up to 2007 levels this year,' Mr Foo said.
'We retain our cautious outlook for the Singapore residential market,' said Nomura analysts Tony Darwell and Min Chow Sai in a June 29 report.
'In our view, the directional trend in the market will be driven by the competing forces of inventory clearance and buyers motivated by current 'value' rather than expectations of a sustained recovery in asset prices.'
The analysts see the likelihood of a W-shaped recovery in asset prices, rather than their previous expectations of a U-shaped recovery, the note said.
Half of the 142 units previewed have been sold, at an average price of S$670 per square foot. 
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