Prices continue to rise

Transcription

1 PROPERTY INSIGHTS Singapore Quarter 2, 2011 Prices continue to rise Market Overview The Singapore economy expanded strongly in Q1 2011, driven by double-digit growth in the manufacturing, construction and financial sectors. The Ministry of Trade and Industry has upgraded the GDP growth forecast for 2011 to %, from the previous forecast of %. Buyer interest resumed since March after the initial pullback following the January cooling measures. Discounting the low effect in February, the monthly average primary home sales 1 in April and May was higher than that in Q Resale prices of private homes continued to increase across all segments, with asking prices trending upwards as sellers benchmarked against the prices of new launches. With more caution in the market and increased price resistance, we expect the pace of price increase to moderate for the rest of the year. Nevertheless, buyer interest is expected to be sustained by upcoming launches and the low interest rates, barring any government intervention which may dampen demand significantly. Trends & Updates Economic Overview According to the Ministry of Trade and Industry (MTI), the economy grew by 8.3% year-on-year (YOY) in Q1 2011, down from 12.0% in the previous quarter (Figure 1). On a quarter-on-quarter (QOQ) seasonally adjusted annualised basis, first quarter GDP growth regained its momentum to expand by 22.5% in Q1 2011, up from the 3.9% growth in Q Seasonally adjusted annualised QOQ growth for the manufacturing, construction and financial sectors went into double digits. The financial services powered to a 27.1% QOQ growth in Q Arising from the continued economic growth, the resident unemployment rate in Q fell to a threeyear low of 2.7% from 3.1% in Q (Figure 1). 21 % Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 YOY GDP growth Resident unemployment rate Source: MOM, MTI, DTZ Research 1 Primary sales refer to sold by developers, which is based on regular surveys carried out by the URA.

2 The 3-month interbank rate remained at a low 0.44% in Q which continues to drive investment in the property market (Figure 2). Due to concerns of some buyers overstretching themselves and therefore being unable to service their mortgage payments should interest rates rise in the future, the Monetary Authority of Singapore (MAS) is seeking public feedback on its proposal that financial institutions provide a fact sheet, in a standardized format, when marketing residential property loans to help consumers understand the implications of higher interest rates including how loan repayments may vary under different interest rate scenarios. The consumer price index (CPI) rose at a faster rate of 1.8% QOQ in Q1 2011, compared to the 0.9% increase in Q (Figure 2). Inflationary pressures are expected to wane in Q after prices rose 0.3% month-on-month (MOM) in April and 0.6% in May (Figure 2). 2.0 % Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 CPI change (%) (QOQ) 3-month SIBOR Source: MAS, DTZ Research After hitting record lows against the Singapore dollar in April, the US dollar stemmed its decline to hover at the $1.23 level in May and June (Figure 3).

3 Residential Overview Buyer interest resumed since March after the initial pullback following the January cooling measures. Primary home sales averaged 1,690 per month in April and May, more than the monthly average of 1,234 in Q Excluding the low effect in February, the monthly average in April and May was still higher than the monthly average sales of 1,298 in January and March (Figure 4). Similarly, secondary sales 2 averaged 1,605 per month in April and May, higher than the monthly average of 1,383 sold in Q However, this was lower than the monthly average of 1,700 sold if February is excluded. As secondary sales are based on caveats lodged, which is voluntary and can be delayed, the monthly average for April and May could be higher when more caveats are lodged later. The market was less active in June, due in part to the school holidays and also due to expectations of policy reviews that will affect the housing market following the General Election in May. Resale prices of private homes increased across all segments in Q2 2011, with asking prices trending upwards as sellers benchmarked against the prices of new launches (Table 1). Table 1 Selected new launches in Q Name of development Tenure Estimated no. of launched Median price in the month of launch ($ per sq ft) Hedges Park Condominium 99 yrs Eight Courtyards 99 yrs Terrasse 99 yrs Foresque Residences 99 yrs 200 1,108 The Mount Faber FH 141 1,919 Source: URA, DTZ Research The average resale price of leasehold condominiums in the suburban areas rose the fastest by 3.9% QOQ, while the average resale price of freehold condominiums in the prime districts of 9, 10 and 11 grew by 3.3% QOQ. 2 Secondary sales is based on caveats lodged with URA s REALIS on 21 June As lodging of caveats is voluntary, some transactions may not be recorded. As there is no time limit, caveats may not be lodged immediately after an option is exercised. Hence, the number of actually sold in the secondary market could be higher.

4 The average resale price of luxury condominiums rose the least by 1.7% QOQ and is the only segment with prices still below the 2007 peak by 4.5% (Figure 5). $ per sq ft 3,000 2,500 2,000 1,500 1, Q1 05 Q1 06 Q1 07 Q1 08 Q1 09 Q1 10 Q1 11 Luxury Prime freehold Non-prime leasehold Source: DTZ Research After the recent General Election magnified the strong concerns among locals regarding high housing prices and the influx of foreigners, buyers are now more cautious as they await a clearer direction on possible government measures. The government has already announced a review of some public housing policies, which include a review of the income ceiling for new Housing Development Board (HDB) flats and the Design, Build, and Sell (DBSS) scheme. Meanwhile, it has suspended the sale of DBSS sites. The government has also committed to increasing the supply of Build-to-Order (BTO) flats this year and has ensured there will be ample supply of residential with the continued bumper supply of land sites under the Government Land Sales (GLS) programme. With more caution in the market and increased price resistance, the pace of price increase is likely to moderate for the rest of the year. Nevertheless, buyer interest is expected to be sustained by upcoming launches and the low interest rates, barring any government intervention which may dampen demand significantly.

5 Feature Story Singapore residential demand Q Introduction Transactions 3 of private homes in the quarter, proxied by caveats, amounted to 6,368. The caveats comprised 66% of the 3,595 sold by developers and 4,001 secondary sales (Figure 6). 12% of the caveats (762) lodged in the quarter were for landed homes. The number of caveats lodged in Q is 25% lower than the 8,455 recorded in Q The most significant fall was for secondary sales in February with 745 caveats compared to 1,664 in January 2011 and 1,890 in December This is due to the government measures implemented on 14 January to ensure a stable and sustainable property market coupled with the fact that February is a shorter month with the Lunar New Year holiday. Nevertheless, the secondary sales volume rebounded to 1,592 caveats in March, close to the January level, as the knee-jerk reaction to the cooling measures appeared to wear off. The primary market showed less adverse effects from the cooling measures. Developers sold 1,210 new in January, just slightly below the 1,332 sold in December February s new sales volume defied expectations with about 1,100 sold. The new sales number then recovered by March to record close to 1,400 as the sustained level of launches and liquidity in the market continued to drive demand. 6 Transactional overview The proportion of transactions in the prime districts of 9, 10 and 11 in Q reverted to the Q level at 16% after increasing to 18% in Q The prime districts continued to see slower sales activity due to the low levels of launches and their higher prices (Figure 7). 3 Caveats lodged are used as a proxy for sales transactions, thus the terms transactions and caveats are used interchangeably in this report.

6 Similar to the trend in 2010, close to 40% of purchases in Q were under $1m while those above $3m made up circa 10% share. The remaining 50% were transactions costing between $1m to $3m (Figure 8). The strong take-up for small in developments of smaller niche developers in 2010 has prompted even the larger market players to incorporate a higher percentage of such in their new launches. This has continued to sway the pattern of purchases towards smaller than 1,000 sq ft in Q (Figure 9). 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% % of private transactions <500 sq ft 500-1,000 sq 1,000-1,500 1,500-2,000 2,000-2,500 >2,500 sq ft ft sq ft sq ft sq ft Source: URA, DTZ Research Q Q Q Purchasers with public housing addresses A higher proportion of purchasers with HDB addresses bought below 1,000 sq ft, compared to those with private addresses, as they are generally more price conscious and have a smaller budget. The proportion among buyers with HDB addresses who bought below 1,000 sq ft increased from 41% in 2010 to 46% in Q Among buyers with private addresses, the proportion who bought small increased from 27% for 2010 to 29% in Q (Figure 10). 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 4,157 3,943 5,174 6,326 1,065 1, Q % of under 1,000 sq ft purchases among HDB addressees % of under 1,000 sq ft purchases among Private addressees Source: URA, DTZ Research

7 Non-Singaporean purchasers Buyers from the top four countries, namely Malaysia, Indonesia, China and India, made up 75% of total transactions by foreigners and PRs in Q Compared to a quarter ago, the proportion of Indian nationals grew the fastest from 10% in Q to 14% in the quarter (Figure 11). The proportion of mainland Chinese buyers among non-singaporeans, reached a new record high of 24% in Q It is the first quarter that they have become the top foreign purchasers of residential properties in Singapore. The Malaysians share amongst non-singaporeans dipped from 24% in the previous quarter to 21% in Q as it lost the top spot to the mainland Chinese. This was a position that the Malaysians have held since Q % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% % of private residential transactions by foreigners and Singapore PRs 42% 40% 34% 33% 27% 23% 26% 29% 28% 29% 26% 27% 25% 14% 12% 12% 11% 10% 13% 9% 16% 19% 22% 24% 26% 14% 12% 12% 13% 13% 11% 14% 10% 14% 11% 20% 15% 14% 15% 18% 17% 20% 23% 24% 29% 27% 25% 23% 23% 21% 24% 21% 18% 18% 20% 23% 14% 21% 20% 18% 19% 20% 20% 16% 16% Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Indonesia Malaysia China India Others Source: URA, DTZ Research Outlook The residential market has so far taken the January 2011 cooling measures in its stride. Demand is still healthy due to the strong economic performance and low interest rate environment. Small-unit format is likely to continue to be popular among purchasers, especially Singaporeans, due to the affordable amount and the increasing trend of singles moving out to stay and foreigners on non-expatriate packages. However, investors who are looking to rent out these can expect stiff competition in a few years time when there will be a sharp increase in the number of small that will be completed. This research report has been prepared by DTZ Research specially for distribution to Citibank customers.

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