Residential Market News Extract - 3 July 2012

Resistance to price growth in mass market homes

Homebuyers are demonstrating growing resistance towards further price growth in the mass market segment, turning instead to completed higher-tier properties in the secondary market.

According to the latest flash estimates by the Urban Redevelopment Authority (URA), the price index for non-landed private homes in the Core Central Region (CCR) rose 0.6 per cent, following a comparable drop the previous quarter. The price index for Outside Central Region (OCR) - where mass market condos are located - on the other hand saw prices increase at a slower pace of 0.4 per cent for Q2, compared with an increase of 1.1 per cent the previous quarter. Rest of Central Region (RCR) saw no change in prices.

Resale transactions have shot up by 33.1 per cent in Q2, compared with a 9.9 per cent fall in new sale transactions.

Separately, the high-end segment saw more sales activity in Q2 compared with the previous quarter.

The narrowing price gap between new mass-market homes and completed higher-tier properties in the secondary market has enhanced the attractiveness of the latter segment.

Looking ahead, there is a pipeline of major project launches, which include Riversails (920 units), Parc Olympia (486 units), projects at Jalan Lempeng (892 units), and Alexandra Road (560 units). In the CBD, V On Shenton (510 units), and a project in Marina Bay will be launched.

With the forth-coming supply, new homes sales may number 3,000-4,000 units per quarter.

However, even as high liquidity and favourable interest rates remain supportive of home-buying demand, it remains to be seen if the strong sales momentum can be sustained for the second half of this year.

Increasing price resistance and the onslaught of the upcoming supply of residential land through the H2 2012 GLS Programme may work to ease demand.

Source: Business Times – 3 July 2012

 

Lower COV spurs resale flat demand

Resale HDB flats are fast regaining interest among buyers, following several months of declining cash-over-valuation (COV) figures.

Notably, after falling more than 20 per cent in the first quarter, COV paid for HDB resale flats are starting to show signs of stabilising, enticing buyers back into the market, say consultants.

Prices for flats were higher during the second quarter with HDB's flash estimate of the resale price index (RPI) up 1.3 per cent quarter-on-quarter at a high of 194, from 191.6 in the period before.

Said Eugene Lim, key executive officer of ERA Realty Network: "The stronger price growth exhibited could be a result of decreasing COVs and increasing valuations in the market. Valuations are catching up with selling prices and median COVs have been reduced to $25,000 in June 2012. Reduction in COVs encourages buyers to commit to flat purchases resulting in rising resale prices."

Aside from prices, transaction volumes also clawed higher during the quarter, rising 8 per cent from 5,126 in Q1 to 5,549 in Q2, according to data from ERA and SRX.

Industry watchers attribute the jump to a growing number of second-timers opting for a resale unit as opposed to waiting for a BTO (build-to-order) flat as COVs have softened and become comparable to the resale levy that second-timers have to pay when purchasing the latter.

In particular, estates such as Woodlands (median resale price $415,000), Jurong West (median resale price $449,000) and Yishun (median resale price $377,000) saw the greatest number of resale transactions during the period, according to ERA research.

Still, some consultants have argued that the current escalation of prices is not sustainable and that prices of resale flats are close to a peak with little room left to grow in coming quarters.

Source: Business Times – 3 July 2012