Property Enquiry Form
Real Estate Singapore
- Home
- Selling Your Property
- Buying Your Property
- Renting Your Property
- Company Property Agent
- Real Estate Professionals
- About Hot Victory
- Career Opportunities
- Investors
- Investment In Singapore
- Our Services
- 10 Mistakes Seller Make
- 10 Mistakes Buyer Make
- 20 Mistake Investor Make
- Hire Buyer Representation
- Why Choose Me Seller
- Purchase Exclusive Realtor
- Calling All Expatriate
- Home Loan
- Home Finance
- Business Finance
- Financial Calculator
- Condominium Near MRT
- Condominium Directory
- District Guide Singapore
- Enbloc Team
- Refer To Friends
- Alert Mailing List
- Real Estate Market Review
- Hot Victory Spirit
- Realtor Tools
- Billy Chen Presentation
- Free List Your Property
- Affiliates
- Contact Me
Singapore Property Tips
Home | Real Estate Blog | Articles | Video | Forum | Success Goal | 中文
Where is the Market Heading January 2008
Where is the market heading January 08 Download this article
"Where is the Market Heading?"
The Myth, Reality and Awkwardness of 2008
Now, let me take you through the market performance in the past six months by way of answering the following questions and then do a projection of the real estate market in the next six months:
(A) How has the market performed? (B) How different is it this time than last? (C) What do all these mean to real estate agents in general? And where do we go from here?
A – How Has the Market fared?
(1) Private Home Prices Jump 31% in the whole of 2007
From October up to end of December 2007, Singapore private home prices rose 6.6%, compared to 8.3% in the third quarter. For the whole year, home prices climbed 31% over 2006. Take up rate for new homes hit a record 15,000 new homes in 2007. It is a 34.5% growth over the 11,147 new homes sold in 2006.
Here are the price movements of condos and apartments in the last quarter of 2007 (Oct – Dec):
In the Core Central Region, prices increased 7.0% (8.3% in the third quarter) on a quarterly basis in second quarter. This region comprises the traditional prime districts 9, 10 and 11 and Marina Bay and Sentosa.
-
In the Rest of Central Region, prices increased 7.3% (7.9% in the third quarter) on a quarterly basis in the second quarter. This region comprises locations like Queenstown, Bukit Merah, Outram, Bishan, Kallang and Marine Parade.
-
Outside Central Region, prices increased 7.5% (7.9% in the third quarter) in the same period. This region comprises locations like Woodlands, Jurong, Hougang, Ang Mo Kio, and all the outlaying areas.
Myth or Reality (1): For the whole of 2008, barring any miracles, the take-up rate of new homes should be less than 10,000 given current uncertainties in the global economy. With Singapore’s domestic economy continued to be strong (driven by the ongoing boom in the construction sector) and the allure of Singapore as a safe haven and a global financial hub for a bigger portion of private wealth, the upside is still good.
The booming domestic sector should continue to support the sale of mid-end and mass-market homes which are expected to experience a healthy growth of 10% to 15% price rise. For the luxury homes segment, prices and take-up rate are expected to moderate, having gone through a vintage year of fast growth.
Awkwardness (1) : Sale volume and prices may continue to grow in 2008 on the back of sustained inflow of foreign funds seeking safe haven outside the United State of America, but buying activities may be restricted to institutional and corporate type of portfolio investments, such as bulk purchases (e.g. overseas property funds acquiring a number of blocks in a project), swop deals (e.g. between developers) and marriage deals (e.g. local and overseas joint ventures buying back own projects for mid-term investment income). Such purchases usually occur in selected areas like the Core Central Region and the outskirt of Orchard Road areas.
(2) Condo / Apartment Sales and Foreign Ownership of Private Homes in 2007
Table 1 - FIRST HALF 2007 Total Sale of private apartments/condos (including sub-sales)
Price range |
1st Half PRIMARY Sale |
Foreigner |
% of Total |
1st Half SECONDARY Sale |
Foreigner |
% of Total |
$500k - $999k |
7,073 |
545 |
7.7% |
2,354 |
217 |
9.22% |
$1m - $1.99m |
3,588 |
594 |
16.56% |
1,575 |
310 |
19.68% |
$2m - $2.99m |
1,317 |
316 |
24.00% |
451 |
99 |
21.95% |
$3m – $3.99m |
636 |
184 |
28.93% |
217 |
63 |
29.03% |
$4m – $4.99m |
251 |
65 |
25.89% |
85 |
21 |
24.70% |
$5m – $5.99m |
215 |
58 |
26.98% |
55 |
16 |
29.09% |
$6m – $50m |
898 |
50 |
5.6% |
1,086 |
225 |
20.72% |
Total |
13,978 |
1,812 |
12.96% |
5,823 |
951 |
16.33% |
(FB = foreign buyers) Source of statistics SISV Realink
First half private property sales were 19,801 units. Foreigners accounted for 2,763 or 13.95% of total transactions.
Table 2 – SECOND HALF 2007 Total Sale of private apartments/condos (including sub-sales)
Price range |
2ND Half PRIMARY Sale |
Foreigner |
% of Total |
2ND Half SECONDARY Sale |
Foreigner |
% of Total |
$500k – $999k |
705 |
58 |
8.22% |
5,546 |
870 |
15.68% |
$1m – $1.99m |
958 |
113 |
11.8% |
2,219 |
490 |
22.08% |
$2m – $2.99m |
299 |
46 |
15.38% |
624 |
141 |
22.6% |
$3m – $3.99m |
133 |
34 |
25.56% |
196 |
54 |
27.55% |
$4m – $4.99m |
49 |
16 |
32.65% |
99 |
37 |
37.37% |
$5m - $5.99m |
62 |
22 |
35.48% |
61 |
13 |
21.31% |
$6m - $50m |
359 |
31 |
8.6% |
356 |
61 |
17.13% |
Total |
2,565 |
320 |
12.47% |
9,101 |
1,666 |
18.30% |
(FB = foreign buyers) Source of statistics SISV Realink
Second half private property sales were 11,666 units. Foreigners accounted for 1,986 or 17.02% of total transactions.
Table 2.2 – Comparison between FIRST and SECOND HALF 2007 non-landed properties transactions (including sub-sales)
|
Primary Sale |
Secondary Sale |
Total |
1st Half |
13,978 |
5,823 |
19,801 |
2nd Half |
2,565 |
9,101 |
11,666 |
Total |
16,540 |
14,924 |
31,467 |
In the second half of 2007, while primary sales dropped 81.65% to only 2,565 units sold, private secondary sales actually improved 56.23% to 9,101 units sold, on the strength of spectacular hikes in private rentals. For the whole year, the first half outperformed the second half by 8,135 transactions.
Table 3 – Percentage of foreign ownership of condos / apartment in First and Second half of 2007
Price range |
First Half transactions |
% of Total |
Second Half transactions |
% of Total |
$100k – $999k |
988 |
7.66% |
612 |
10.0% |
$1m – $1.99m |
1,121 |
16.11 % |
852 |
17.7% |
$2m – $2.99m |
504 |
24.01% |
278 |
21.27% |
$3m – $3.99m |
292 |
28.99% |
138 |
27.11% |
$4m – $50m |
301 |
25.55% |
222 |
27.58% |
Total |
3,205 |
13.49% |
2,102 |
15.51% |
In the second half, the absolute numbers of foreign purchasers of condo / apartments were down. However, the percentage of foreign purchasers actually went up 2.02 percentage point. It means that while the overall purchases were reduced due to one reason or another, the number of foreign purchasers did not change drastically. It was reduced by only 1,103 units (3,205 – 2,102) for the whole year.
Myth or Reality (2): Although the overall private home sales went down in the second half of 2007, foreign ownership of Singapore private homes gained in percentage term, especially for high-end homes. The Million Dollar Question now is: “Will the trend of ‘sustained foreign buying’ continue in the first half of 2008?” From the appearance of the statistics, the answer has to be a YES. This is because of the following reasons:
The threat of an economic recession in the US in 2008 looms larger each time a global financial institution made a revelation of massive write-down in relation to its exposure to the US sub-prime mortgages (e.g. UBS, Citigroup, and Merrill Lynch).
-
The value of US dollar will continue to weaken against Singapore dollar throughout the year, and Singapore will continue to be a safe haven for international funds.
-
The European economy is similarly under the weather due to its symbiotic relationship with the US market.
-
The Chinese real estate market has shown signs of over-heating and the risks of investing there have grown much larger.
Awkwardness (2) : With limited upside of less than 10% projected price growth, the buying activities may continue to thin, which means the percentage gain of foreign ownership will continue to rise amid smaller business volume for real estate agents.
(3) Landed Property Sales in 2007
(3.1) Good Class Bungalows (GCBs)
In 2007 so far, a total of 96 GCB were transacted amounting to $1.28 billion. The value is an all-time record and has surpassed slightly the $1.24 billion achieved for the whole of 2006.
However, in terms of transaction volume, GCB transactions from January to November this year still falls short of the 118 deals transacted for the whole of 2006. This could be due to the phenomenal rise in GCB prices and the restrictions placed on non-residing foreigners (only PRs are allowed to own GCB provided they obtained the approval from the land authority).
(3.2) Upside of Landed Home Prices Good
There are a number of compelling reasons for landed home prices to rise further:
Limited stock - Currently, there are 68,360 landed houses in Singapore, making up only 29% of the total 233,143 private property stock.
-
Limited new supply - In the next five year, supply of landed homes will remain subdued with only 1,872 landed units under construction and another 2,579 landed units being planned, accounting for only 6.6% of all new supply expected from the second half of 2007 to 2011.
High rental return - Rents of landed homes have outpaced its capital values, according to URA's rental indices for all the landed property types. In the first half of the year, rents of detached houses increased by 13%, semi-detached houses by 11.4% and terrace houses 17.3% hike in rents.
Table 4 - Sale of Landed Properties in First-half of 2007
|
Terrace hses |
Semi-d |
Bungalow |
GCB |
ALL TYPES |
Q1 |
579 |
336 |
170 |
26 |
3,108 |
Q2 |
1,106 |
571 |
287 |
33 |
|
Total |
1,685 |
907 |
457 |
59 |
Source of statistics SISV Realink
Table 5 - Sale of Landed Properties in Second-half of 2007
|
Terrace hses |
Semi-d |
Bungalow |
GCB |
ALL TYPES |
Q3 |
749 |
331 |
197 |
14 |
1,974 |
Q4 |
410 |
174 |
93 |
6 |
|
Total |
1,159 |
505 |
290 |
20 |
Source of statistics SISV Realink
Table 6 – Sale of Landed Properties in 3 Years starting 2005
|
Terrace hses |
Semi-d |
Bungalow |
GCB |
ALL TYPES |
2008 |
? |
? |
? |
? |
? |
2007 |
2,844 |
1,412 |
747 |
79 |
5,079 |
2006 |
1,650 |
929 |
503 |
151 |
3,233 |
2005 |
1,329 |
775 |
393 |
101 |
2,598 |
Myth or Reality (3): The increase in demand for landed properties continues to go up from 2005 onwards. However, the fundamentals on landed properties are different from non-landed properties. The former hinges on continued good performance of locals; while the latter the continued confidence in Singapore by foreigners. The following factors may lead to more locals having to dispose of their landed properties and down grade to smaller homes in 2008 and 2009:
the domestic economy relies only on the construction and services sector,
-
the traditional economic drivers such as electronics and pharmaceuticals continue their slump especially the electronics sector which has gone through 15 quarters without growth,
-
the threat of our trading partners, i.e. the EU and the US going into recession this year.
Awkwardness (3) : With more positives than negatives in the domestic economy in 2008 and a general expectation that 2009 will be an even better year, sellers in general will factor in the completed casinos, the F1 Circuit, the Gardens at the Marina (which has nothing to do with their landed property prices) when putting their homes on the market. With such a rosy economic backdrop, it will be tough for inexperienced agents to ‘talk down’ the asking price.
(4) Sub-sales of private homes – volume down but value hit 10-year high
The number of sub-sale transactions fell to 1,374 (or a quarter-to-quarter decline of 23%) in the third quarter of 2007. There were 1,184 or 13.9% of sub-sales in the second quarter and 6.3% in the first quarter of 2007.
Sub-sale value of apartments transacted in the first three quarters of 2007 was at an all-time annual high of $6.7 billion. However, in terms of volume, it is about half of what it was in 1995.
Sub-sales deals made up 19% of the volume, up from 16% in the second quarter. Median sub-sale prices are at a new record high of $1,246 psf. Quarter-to-quarter, the increase is 13.6% and a year-on-year increase of 25%.
The value per transaction of sub-sale apartments is also at a record high this year at $1.71 million per transaction. However, some prestigious projects have already shown sign of fatigues such as The Sail in Marina Bay which, according to caveats lodged, only saw six (6) transactions in December 2007. The sub-sale prices of many units have drastically dropped – suggesting forced sales.
Table 7 – Sub-sale activities over the past 3 years
Quarter |
No of sub-sales |
% of total sales |
|
Quarter |
No of sub-sales |
% of total sales |
1Q05 |
87 |
2.9% |
|
3Q06 |
303 |
5.0% |
2Q05 |
114 |
2.5% |
|
4Q06 |
581 |
6.4% |
3Q05 |
130 |
2.5% |
|
1Q07 |
581 |
6.3% |
4Q05 |
216 |
4.2% |
|
2Q07 |
1,184 |
13.9% |
1Q06 |
121 |
2.6% |
|
3Q07 |
1,374 |
19% |
2Q06 |
151 |
2.5% |
|
|
|
|
Myth or Reality (4): In 2008, the developers will price their new launch projects at a 15% to 20% premium to factor in higher inflation risks and to protect the value of redevelopment sites where construction have not started. It will take longer time for developers to offload leftover units due to higher asking prices and ample supply of new condos and hybrid HDB flats in the next one to two years. By 2010, there will be an additional 43,000 new condos and apartments available either for occupation or launches in many parts of Singapore.
Awkwardness (4) : With a short-lived bull-run, investors and speculators alike will be left with high-priced properties that they have bought in 2007 before the en bloc craze came to a sudden halt. With Deferred Payment Scheme scrapped and banks tightening credit, sellers and agents will be hit be a double whammy of high inflationary pressure on holding / marketing costs while new supply of similar condos continue to rise.
(5) En bloc deals at all time high
For the whole of 2007, a total of 109 en bloc sale deals worth $13.3 billion were done. But, en bloc sales will be a passing phenomenon this year due to a combination of negative factors against en bloc sales such as:
Massive Government Land Sale Programme (since January 2007)
-
Withdrawal of Stamp Duty postponement (from January 2007)
-
Withdrawal of Deferred Payment Scheme (from September 2007)
-
Increase of Development Charge percentage from 50% to 70% of market value (from July 2007)
-
Change in the Collective Sale Law (from Oct 2007)
Table 8 – Past 10-year en bloc sale record
Year |
Volume ($ mil) |
No. of transactions |
|
Year |
Volume ($ mil) |
No. of transactions |
1996 |
1,984.4 |
38 |
|
2002 |
161.6 |
6 |
1997 |
1,264.1 |
22 |
|
2003 |
557.7 |
10 |
1998 |
17.9 |
1 |
|
2004 |
685.9 |
14 |
1999 |
2,407.7 |
42 |
|
2005 |
2,054.3 |
37 |
2000 |
1,464.2 |
19 |
|
2006 |
8,200 |
79 |
2001 |
83.5 |
3 |
|
2007 |
13,300 |
109 |
Myth or Reality (5): The slew of collective sales in the whole year of 2007 yielded $13.3 billion in total collective sale proceeds. The huge cash windfalls would be arriving for thousands of en bloc sellers who would need replacement properties. Most of the amount is due to come in between mid 2008 all the way to 2010, and this will prompt a pickup in market activity. Assuming 50% of the sellers affected by en bloc sales already have a second home, there will be at least $5 billion about to be ploughed back into the market from 2008 through to 2011.
Many owners of old condos and apartments, such Bayshore Park and some privatised HUDC projects, are hoping that the Government will increase the plot ratio in the new Master Plan to be promulgated this year, and this will allow them to sell their apartments collectively for a huge windfall.
Awkwardness (5) : A minority of en bloc sellers already flexed their muscles at the HDB resale flat market pumping up prices to unrealistically high level. Almost all flat sellers are now hoping to sell their flats to en bloc sellers and they will be willing to pass over a chance to sell at the market price and prefer to wait for their ‘Prince charming’.
(6) Investment sales hit historic high at $51 billion in 2007
Total investment sales of property registered an all-time historic record of $50.8 billion in 2007. It is a 66% jump from 2006’s $30.57 billion. Incidentally, the aggregate investment sales figure for eight long years of recession - from 1996 to 2003 - was only $54.9 billion.
Investment sales refer to major investment transactions like office buildings and shopping centres, as well as sites bought for development including collective sale deals, Government Land Sale (GLS) programme and strata-titled units of at least $5 million. They do not cover purchases of single property units by individuals.
Investment sales are considered a barometer of developers' and big investors' mid-to-long-term confidence in the market.
Table 9
Year |
Total Investment Transactions |
|
Year |
Total Investment Transactions |
2000 |
$6.89 billion |
|
2004 |
$7.92 billion |
2001 |
$5.46 billion |
|
2005 |
$14.19 billion |
2002 |
$4.92 billion |
|
2006 |
$30.57 billion |
2003 |
$4.16 billion |
|
2007 |
$50.78 billion |
With the passing of the new collective sales law and hefty increase in Development Charge percentage and DC rate, en bloc sales are expected to dwindle.
Residential deals halved from $20.3 billion in first half of the year (due mainly to robust collective sales) to $10.3 billion in the second, due to the sudden and drastic slowdown in collective sales.
Myth or Reality (6): 2008’s overall investment sales of property are likely to be lower and hover around $30 billion. This is based on the assumption that foreign funds are still keen on Singapore’s commercial buildings and developers are still bullish about the Government Land Sale Programme. However, the situation will pan out depending very much on the resilience of the US economy against recession.
Awkwardness (6) : Sale of big ticket properties continue to shore up official numbers while individual agents are struggling to attract enquiries about their resale residential listings.
(7) HDB Resale Flat Prices Grew 17.4% in 2007
HDB resale flats price index registered a 5.6% increase in the fourth quarter of 2007. The quarter-on-quarter increases of HDB resale flats are as follows:
Table 10 – Price growth of HDB resale flats quarter-on-quarter
Q1 |
1.3% |
Q3 |
6.6% |
Q2 |
2.9% |
Q4 |
5.6% |
For the whole year, prices of HDB resale flats grew by 17.4% in 2007. The whole year resale transaction volume was 26,215 (excluding resale flats sold by HDB itself) and the majority of resale flats were transacted at high cash-over-valuation (COV) towards the second half of the year.
(7.1) More and more resale flat buyers need to fork out higher cash
Spurred on by the upward trend, flat sellers are now asking for prices that are significantly higher than valuations. And since July 2007, Cash-over-Valuation (COV) has become a norm for HDB resale flats and about 80% of HDB resale transactions attracted cash above valuation.
According to HDB figures, the median price for four- and five-room flats are $18,000 above valuation. For two- and three-room flats, the median amount was $15,000. The highest amount paid above valuation for a five-room flat was $150,000. The figures were $57,500 for a four-room flat and $40,000 for a three-room flat.
HDB statistics show that the median COV for executive flats in Bukit Timah rose to $137,500 in the third quarter of 2007. In Marine Parade, the COV for five-room flats hit $84,000 in the same quarter.
(7.2) Interests in HDB Resale Flats Up since July 2007
The table below shows the transaction volume of HDB resale flats for the whole of 2007.
Table 11 – Increasing volume of HDB resale flats transactions Month-on-Month
Months in 2007 |
Transactions |
Months in 2007 |
Transactions |
January |
2,313 |
July |
2,385 |
February |
1,958 |
August |
2,553 |
March |
1,217 |
September |
2,385 |
April |
2,089 |
October |
2,463 |
May |
2,184 |
November |
2,464 |
June |
2,250 |
December |
1,954 |
Total: 26,215 |
The tables below show that the 10 largest Housing estates have the highest number of flats sold; while the 3 smallest housing estates enjoy the highest transacted prices, due to rarity and good location.
Table 12 – The 10 largest HDB Estates sell the highest number of flats
Estate |
Total Number of Flats |
Flats Sold in Nov 07 |
Flats Sold in Dec 07 |
(1) Jurong West |
66,133 |
163 (2nd in volume) |
121 (4th in volume) |
(2) Tampines |
61,109 |
139 (5th in volume) |
127 (3rd in volume) |
(3) Woodlands |
56,221 |
224 (top in volume) |
197 (top in volume) |
(4) Bedok |
55,293 |
153 (3rd in volume) |
106 |
(5) Hougang |
47,227 |
128 (7th in volume) |
118 (5th in volume) |
(6) Yishun |
46,205 |
141 (4th in volume) |
147 (2nd in volume) |
(7) Ang Mo Kio |
43,768 |
108 (9th in volume) |
94 |
(8) Bt Merah |
40,054 |
103 (10th in volume) |
87 |
(9) SengKang |
39,534 |
131 (6th in volume) |
97 |
(10) Choa Chu Kang |
38,933 |
114 (8th in volume) |
86 |
Table 13 – The highest transaction prices always come from smaller HDB Estates
Estate |
Total Number of Flats |
Bt Batok |
31,522 |
Toa Payoh |
30,755 |
Bt Panjang |
29,498 |
Kallang/ Whampoa |
28,203 |
Pasir Ris |
27,504 |
Geylang |
26,560 |
Queenstown |
25,975 (High resale prices) |
Clementi |
23,460 |
Jurong East |
21,903 |
Serangoon |
21,204 |
Bishan |
18,971 (High resale prices) |
Sembawang |
17,664 |
Punggol |
15,727 |
Central |
7,651 (Top in resale price) |
Marine Parade |
6,535 (High resale prices) |
Bt Timah |
2,423 (High resale prices) |
(7.3) HDB Resale Prices are Trending Upwards since July 2007
In December 2007, newer Design-and-Build 5-room flats at the precincts around Blocks 687 (A-D) and 690 (A-F) of Woodlands were transacted at between $320,000 and $347,000 depending on different attributes such as floor levels and facing. Other 5-room flats at older precincts have been transacted at the price range of between $270,000 and $300,000.
Six months earlier in June 2007, similar Design-and-Build 5-room flats at the same Woodlands precincts were transacted at between $270,000 and $315,000. That is a difference of 18.5% and 10% growth in transacted prices over a 6-month period.
Likewise, in December 2007, newer Design-and-Build 5-room flats at the precincts of Blocks 680 (A-E) to 683 (A-E) of Jurong West were transacted at between $307,000 and $370,000 depending on different attributes such as floor levels and facing. Other 5-room flats at older precincts have been transacted at the price range of between $205,000 and $287,000.
In June 2007, similar Design-and-Build 5-room flats at the same Jurong West precincts were transacted between $290,000 and $318,000. That is a price growth of around 15% for the similar resale flats.
(7.4) Case study on Tampinese Executive Flats
A study was done on the capital appreciation of Executive flats in Tampines during the past 12 months.
The parameter of the study is to compare prices of two categories of E flats – one group with poor attributes (therefore lower sale prices) and the other with good attributes (therefore higher sale prices) - and track the price mobility. The study yielded the following results:
Table 14
PRICE |
October 2006 |
January 2007 |
May 2007 |
Nov 2007 |
Dec 2007 |
Lowest |
$318,000 |
$345,000 |
$315,000 |
$365,000 |
$378,000 |
Highest |
$436,000 |
$466,000 |
$448,000 |
$565,000 |
$555,000 |
* LF = Low Floor / MF = Mid-Floor / HF = High Floor
The price growth year-on-year (October 06 and Nov 07) between Executive flats with same attributes:
Price increase of Lowest priced E flat = $47,000 (14.7% increase in price)
Price increase of Highest priced E flat = $119,000 (27.3% increase in price)
Compare First half-year growth (Oct 06 and May 07) between Executive flats with same attributes:
Price increase of Lowest priced E flat = - ($3,000) (price actually dropped)
Price increase of Highest priced E flat = $12,000 (2.8% increase in price)
Compare Second half-year growth (May 07 and Nov 07) between Executive flats with same attributes:
Price increase of Lowest priced E flat = $50,000 (15.7% increase in price)
Price increase of Highest priced E flat = $107,000 (24.5% increase in price)
The following conclusions are drawn from the study:
The comparative data shows that the price increase occurred only in the second half of 2007. This means that the HDB resale market is beginning to experience the effect of a better economy and the heightened activities may continue for a few years.
-
Price surge in E flat occurred after prices for private homes had reached a new historic height. It also showed that many middle-income group purchasers have been squeezed out of the private home market.
-
Resale flats with good attributes, such as high floor level, younger in age (newer in flat design) and closer to amenities like MRT station and shopping mall, achieve higher and faster appreciation in capital value.
Myth or Reality (7): HDB resale activities have returned to the forth after the past 8 years of doldrums. While the psf prices of private condominiums have increased by leaps and bounds, the unit floor area costs of HDB flats in the heartlands remain affordable. With more and more middle income earners being squeezed out of the private property market, resale HDB flats have regained their favour among the higher income earners – hence the increases in transaction volumes as well as resale prices of larger HDB flats such as 5-room and executive flats.
Sellers of HDB flats that attracted high COVs may upgrade to mass market private homes with spare cash from the high COVs and thereby pumping up market activities. However, the high COVs for HDB resale flats may cause mass market property prices to climb and once again put private homes out of reach of HDB upgraders.
Awkwardness (6) : More and more sellers of mass market private homes are increasing their asking prices with the logical thinking that if HDB flats could fetch more than $700,000, a four-room private condo should command at least $1 million. Before more new condos come on stream, the tug-of-war between the sellers’ asking prices and the realistic prices buyers are willing to pay may cause the market to go through a three- or four-month drought.
B – How different is this time?
The second half real estate market told a very different story from the first half. The global situation has worsened since last August with the revelation of the sub-prime mortgage problems in the US effectively sidelining the majority of buyers. While the whole year records look impressive, the detailed numbers of the second half results were worrying, to say the least.
(1) The world may go into recession following the cues from the US
The huge losses experienced on the first day of Wall Street augur ill for the entire global economy. Year 2008 will be a volatile and difficult year for the US – the world’s largest economy. The US domestic economy will slow down due to the financial market woes.
The housing crisis in the US is far from over and the credit markets and still saddled with bad debts. With write-offs of over US$40 billion by banks looking to clear their books of sub-prime loans and investments, 2008 looks set to be more of the same story.
This will certainly drag down the entire economy and put pressure on corporate earnings. The crisis is affecting everybody, not just the financial sector.
The threat of recession, inflation and even stagflation cannot be dismissed. It appears that 2008 will be amongst the most challenging market environments facing the US and the rest of the world in many years.
(2) Massive inflation causing entire market to be jittery about 2008
As houses become more expensive and prices of food and petrol continue to climb, Singapore inflation rate could hit a high of 6% in the first three months of 2008.
With an 18% to 25% upward revision, the increase in annual values of properties is significantly higher this year and the quantum of the recent taxi fare hike, food price and oil price increases are all much higher than earlier expected. As such, the inflation rate this year will exceed the Monetary Authority of Singapore’s forecast of 3.5 to 4.5 per cent for 2008.
The consumer price index (CPI) surged 4.2% in November 2007 year on year, a 25-year high. And housing value has a significant weight in the CPI.
However, the irony facing Singapore is that a likely US recession this year could ease inflationary pressure with demand for essential goods and oil going lower as a result.
(3) Inflation but a falling real estate rate
With the cheapening of US dollars, more foreign investors are bringing their funds into the Singapore system in bid to salvage the value of the money they are holding. This has resulted in two developments: firstly, an asset price inflation, and secondly a falling interest rate.
The two phenomena do not usually occur together. When they happen, that is, rising asset prices despite a falling Sibor (Singapore Interbank Offered Rate), asset price inflation will escalate.
The three-month rate has fallen from 3.44% a year ago to 2.13% in the second week of January 2008. This is a negative real interest rate as the bank’s interest rate is lower than the inflation rate.
The challenge this year for Singapore economy is how to stave off the possibility recession in the US. There will be a second round of gradual appreciation of Sing dollar against the US dollar. It is expected that Sing dollar will appreciate against the US unit from 1.43 at the end of the first quarter to 1.39 in the same period in 2009.
(4) Foreigners account for a quarter of total residential sales
Foreigners and permanent residents (PRs) chalked up 7,902 sales from January to November, which accounted for 24.9% of total residential sales so far.
The sales figures are the highest in 13 years, due to a robust regional economy and increasing arrivals of expatriates in Singapore.
Institutional investors also entered the market in a big way, picking up anything from several units to whole condo blocks and even development sites. They include Macquarie Global Property Advisors, Goldman Sachs and United States-based Wachovia Development.
The buying momentum propelled high-end condo prices pass the $4,000 psf mark and surged past the $5,000 psf mark for the very first time in local history. A 53rd floor 5,048 sq ft penthouse unit at The Orchard Residences went for $5,600 per sq ft in October, or slightly more than $28 million.
All thanks to participation of foreign buyers, other developments that have registered sales of above $4,000 psf include Hilltops, Ritz-Carlton Residences and Scotts Square.
In the meantime, MAS data shows deposits by non-residents totalled $29.8 billion in October 2007. Compared to 2002, the deposits were only $10.6 billion. Foreigners not residing in Singapore are not allowed to open bank accounts here in Singapore but the rule does not apply to individuals who intend to invest in real estate in Singapore.
(5) Foreign investment funds are top buyers of Singapore real estate
The total investment sales volume so far this year is $50.78 billion. Likewise, foreign funds are responsible for the majority of the purchases of investment properties. These foreign funds include names like Macquarie Global Property Advisors (MGPA), US-based Goldman Sachs, US-based Wachovia Development Corporation, German SEB and Dubai World Group – with MGPA topping the chart with $4.3 billion of purchases.
(6) One million foreigners making Singapore home
Singapore’s population is 4.68 million. This number has been contributed by qualified foreigners coming to Singapore in drove – to be exact 1,005,500. This is the highest number of immigrants in more than twenty years and the first time Singapore receives over a million new immigrants.
In terms of percentage rise, this year’s increase is 14.9% compared with last year which also achieved an impressive growth at 9.7%. The number of Singaporeans and permanent residents here also grew 1.8%, the same as the previous year.
In terms of population increase, the one-million-addition makes up a 4.4% rise over the previous year. The last time Singapore enjoyed a higher increase in population was in 1982 where population grew by 4.5%.
(7) Sales in the second half of 2007 were not as brisk the first
Despite strong overall sale figures for the whole year, the actual situation on the ground (especially towards the end of the year) was harsher than it appeared on paper. Let’s look at two aspects of the general market: (a) transaction figures; and, (b) marketing period (as such per listing’s holding costs).
(7.1) Transaction figures
Table 15 – Transaction figures with statistics on foreign purchasers
District 9 Projects |
First half Transactions |
Second half Transactions |
||
Project Name |
Units sold |
Foreign purchasers |
Units sold |
Foreign purchasers |
Cairnhill Residences |
36 |
10 |
8 (-77%) |
2 (-80%) |
Aspen Height |
52 |
14 |
31 (-40%) |
5 (-64%) |
Leonie Garden |
46 |
7 |
4 (-91%) |
1 (-85%) |
Leonie Parc View |
14 |
7 |
5 (-64%) |
0 |
Orchard Scotts |
9 |
6 |
3 (-66%) |
1 (-83%) |
Richmond Park |
17 |
8 |
4 (-76%) |
1 (-87%) |
Rivergate |
108 |
46 |
43 (-60%) |
20 (-56%) |
Scotts Highpark |
35 |
10 |
8 (-77%) |
1 (-90%) |
ST Thomas Suites |
142 |
35 |
11 (-92%) |
5 (-85%) |
The Trillium |
151 |
67 |
24 (-84%) |
16 (-76%) |
Tribeca |
58 |
23 |
34 (-41%) |
15 (-35%) |
District 1 Projects |
First half Transactions |
Second half Transactions |
||
Project Name |
Units sold |
Foreign purchasers |
Units sold |
Foreign purchasers |
Marina Bay Res |
154 |
24 |
66 (-57%) |
18 (-25%) |
ONE Shenton |
132 |
17 |
18 (-86%) |
8 (-52%) |
The Clift |
58 |
20 |
44 (-24%) |
24 (+20%) |
The Sail |
257 |
32 |
120 (-53%) |
22 (-32%) |
District 2 Projects |
First half Transactions |
Second half Transactions |
||
Project Name |
Units sold |
Foreign purchasers |
Units sold |
Foreign purchasers |
Icon |
224 |
28 |
168 (-25%) |
67 (+240%) |
The Beacon |
34 |
4 |
39 (+115%) |
0 |
The Arris |
10 |
3 |
4 (-60%) |
1 (-66%) |
Lumiere |
39 |
2 |
7 (-82%) |
3 (+34%) |
District 4 Projects |
First half Transactions |
Second half Transactions |
||
Project Name |
Units sold |
Foreign purchasers |
Units sold |
Foreign purchasers |
Reflections |
204 |
44 |
181 (-11%) |
45 (+2.5%) |
Caribbean |
114 |
28 |
89 (22%) |
25 (-11%) |
Oceanfront |
36 |
5 |
78 (+115%) |
6 (+20%) |
The Berth |
58 |
14 |
21 (-63%) |
2 (-85%) |
The allure of oceanfront living at Sentosa Cove and Keppel Bay can be seen in the second half of 2007. Despite a general weakness of the market, District 4 continues to attract strong demands from foreign buyers.
(7.2) Marketing period and holding costs
Listings took longer marketing period to sell, if they are sold at all. Below shows the statistics of marketing period (therefore holding costs) for every listing sold.
District 10 Projects |
First half Transactions |
Second half Transactions |
|||||
Project Name |
Unit Sold |
No. of Ads |
Hit Rate |
Unit Sold |
No. of Ads |
Hit Rate |
|
Belmond Green |
17 |
37 |
46% |
8 |
172 |
4.65% |
|
Draycott Eight |
41 |
108 |
38% |
52 |
169 |
30.77% |
|
ST Regis Residences |
49 |
88 |
55.7% |
14 |
381 |
3.7% |
|
The Orchard Residences |
68 |
13 |
520% |
24 |
181 |
13.26% |
District 11 Projects |
First half Transactions |
Second half Transactions |
|||||
Project Name |
Unit Sold |
No. of Ads |
Hit Rate |
Unit Sold |
No. of Ads |
Hit Rate |
|
Pavilion 11 |
130 |
137 |
95% |
31 |
363 |
8.54% |
|
Residences@Evelyn |
68 |
153 |
44.4% |
27 |
647 |
4.2% |
|
Sky@Eleven |
307 |
417 |
73.6% |
66 |
399 |
16.6% |
District 15 Projects |
First half Transactions |
Second half Transactions |
|||||
Project Name |
Unit Sold |
No. of Ads |
Hit Rate |
Unit Sold |
No. of Ads |
Hit Rate |
|
One Amber |
69 |
426 |
16.2% |
92 |
1,210 |
7.6% |
|
The Sea View |
79 |
334 |
23.65% |
75 |
1,065 |
7.0% |
|
The Seafront on Meyer |
128 |
131 |
98% |
62 |
265 |
23.4% |
|
Cote D’Azur |
20 |
244 |
8.2% |
47 |
763 |
6.2% |
Buy, Sell, Rent, Invest, In Singapore
Billy Chen
CEA Registration Number : R029372I
Tel: (+65) 88689999
Fax: (+65) 64021826
billy@billychen71.com
KF Property Network Pte Ltd
CEA Licence Number : L3008430D
Buy Sell Rent Contact
Property Search
Featured Properties
Landed House
Condominium Apartment
Commercial / Industrial
International Property
Project Property Search
New Project Launch
Singapore Resources
Welcome to Singapore
Explore Singapore
Singapore PR
Singapore Rental Guide
Foreign Embassies
SIR Tenant Check
International School
Expats Relocation
Government Singapore
Foreigner Home Buyers
Financing Other Expense
Guide Property Taxation
Guide Foreign ownership
Banks in Singapore
HDB Information
Public Transport
Useful Resources
Singapore Maps Search
Hotels In Singapore
Free Stuff Giveaway
Online Shopping