Singapore HDB upgraders on the move

Singapore HDB upgraders on the move

More are buying new private condo units as prices come down

By Joyce Teo

In normal times, HDB upgraders account for between 20 and 50 per cent of new home buyers, DTZ said.

SEVEN in 10 buyers of new private homes in the first three months of the year had Housing Board addresses, making HDB upgraders the hottest group in the property market so far for this year.
This is the second-highest proportion of HDB upgraders since the earliest available data in 1995, according to property consultancy DTZ’s preliminary analysis of caveats lodged in the first quarter. The record was 86 per cent, in the second quarter of 2002.

HDB upgraders refer to better-off residents of larger flats looking to move up the property ladder.

They typically buy into ‘mass market’ private developments - lower-priced condominiums in the suburbs, and preferably in the same town or region where they live.

In normal times, HDB upgraders account for between 20 and 50 per cent of new home buyers, DTZ said.

But experts reckon their numbers are now swelling during a rare ‘window period’ when the price gap between private homes and HDB resale flats is narrowing.

Supply has also played a key part in the surging interest, with mass market projects forming the bulk of recent launches, said DTZ’s senior director for research Chua Chor Hoon.

Property consultancy CB Richard Ellis thinks many HDB upgraders held back from buying during the recent property boom, particularly as prices skyrocketed in 2006 and 2007.

There were few ‘mass market’ condo launches then, as developers rushed to build high-end homes and investors scooped them up.

But now, private property prices are falling sharply at a time when HDB resale flat prices are still holding steady.

Official data shows that while fourth quarter private home prices fell 6.1 per cent, HDB resale prices actually rose 1.4 per cent.

So HDB upgraders are now keen to sell their flats and upgrade to bigger units at reasonable prices.

For example, a HDB five-room flat in Queenstown can still sell for around $600,000.

At recent property launches, suburban condo units were going for around $600 psf. This means a 1,200 sq ft three-bedroom private condo apartment costs $720,000.

At Mi Casa in Choa Chu Kang, upgraders accounted for 80 per cent of its 97 buyers so far. They also bought many units at The Caspian, beside Lakeside MRT station, Double Bay Residences in Simei and The Quartz in Buangkok.

Corporate communications and marketing manager Adam Tan and his wife Ng Bee Kay are among the HDB upgraders.

‘We looked at some properties in October but the prices were still a bit high. Then, my wife got pregnant in late November. So from January onwards, we started to search for a bigger place - with a vengeance,’ said Mr Tan, 32.

The family will be moving from their four-room flat in Bedok into a $760,000, 1,195 sq ft unit at Astoria Park, next to Kembangan MRT station.

To attract buyers, developers of some ongoing launches slashed prices in the first quarter. The average price at Waterfront Waves in Bedok was reduced from $800 psf to $600 psf, while at Kovan Residences near Kovan MRT station, prices were cut from $880 psf to $750 psf.

Experts expect the gap between private homes and HDB resale flats to continue narrowing this year, which means this is likely to be a strong year for the HDB upgraders segment.

Unlike the previous downturn in 1996, HDB prices are less likely this time around to fall quickly in tandem with private property prices.

One reason is that the supply of new HDB flats is more limited now.

‘Previously, HDB built public flats ahead of demand,’ noted DTZ’s Ms Chua. But it now builds only when there is demand via its build-to-order system.

With relaxed eligibility rules, there are also more buyers in the HDB resale market, including permanent residents and singles.

If current trends continue, the experts say, HDB resale prices should eventually fall by the end of the year in line with the bigger fall in private home prices.

Source : Business Times - 01 April 2009

Singapore Property - Buy, Sell, Rent, Invest

Mindy Yong

(+65)91002985

mindy@mindyyong.com

Q1 home price respite fails to impress

Q1 home price respite fails to impress

In rental market, luxury monthly condo rents slide 18.8%

By KALPANA RASHIWALA

(SINGAPORE) The prices of resale private apartments and condos fell at a slower clip in the first quarter compared with the decline in Q4 last year, according to latest figures from DTZ.

‘The signal must come from the economy because we’re still the tail and the dog is the economy, because that’s where the incomes are derived, and property is always the tail end of the value chain.’

- A major developer

However, the property consulting group is predicting price drops for the whole of this year to be just as sharp, if not sharper, than last year’s declines as the recession bites and more new homes are completed.

Meanwhile, property consultants estimate that developers sold between 2,000 and 2,400 private homes in Q1 2009, the best showing since Q3 2007, when the US sub-prime crisis struck.

CB Richard Ellis (CBRE) said the top-selling projects in the primary market in Q1 were Caspian (550 units), Alexis (293 units), Double Bay Residences (250 units) and The Quartz (178 units).

It predicts developers will sell some 5,000 to 6,000 units for the whole of 2009, while DTZ puts the figure a tad higher, at between 5,500 and 6,500 units. Either way, it would be an improvement from last year’s dismal showing of 4,264 units.

CBRE reckons that its predicted 10 to 15 per cent slide in private home prices across the board this year may encourage developer sales in the primary market.

DTZ said yesterday that the average price for luxury freehold condos and apartments in prime districts 9, 10 and 11 slipped 3.6 per cent quarter-on-quarter to $1,880 psf in Q1 2009, much milder than the 22 per cent q-on-q decrease in Q4 2008.

DTZ’s senior director (research) Chua Chor Hoon is predicting a 25 to 35 per cent full-year drop, similar to last year’s price fall of 30.4 per cent.

In the mass-market segment, the average price for 99-year leasehold condos/ apartments outside the prime districts eased 2.6 per cent to $555 psf in Q1, roughly half the 5.8 per cent depreciation in Q4 2008.

Ms Chua projects a full- year slide of 10 to 15 per cent, steeper than the 7.3 per cent decline last year.

Landed home prices were more resilient, with average price drops of 1.5 to 2.2 per cent in Q1, compared with declines of 3.8 to 5.8 per cent in Q4 2008.

‘The leasing market bore the brunt of corporate downsizing and increased supply from new completions. 2008 saw the completion of 10,122 private residential units, 17 per cent more than the past 10-year average of 8,671 units.

‘ Some investors have resorted to renting out their units for the time being, hoping to sell when the market recovers,’ DTZ said.

Average monthly rents for luxury condos and apartments in prime districts fell 18.8 per cent quarter-on- quarter to $5.20 psf in Q1 2009, a level last seen in Q3 2006.

Ms Chua is predicting full-year 2009 decline will come in at about 25 to 30 per cent, steeper than last year’s 15.8 per cent fall.

Based on DTZ’s figures, which are based on resale prices, the average freehold luxury condo and apartment price of $1,880 psf in Q1 this year represents a drop of about one- third from the peak of $2,800 psf in late 2007/early 2008.

In contrast, the average price of 99-year leasehold non-landed properties outside prime districts, at $555 psf in Q1 2009, has barely slipped 10 per cent in that period.

That’s not surprising since luxury home prices rose much faster than mass-market homes during the run-up. As DTZ’s Ms Chua points out, in 2007 alone, luxury home prices increased by 66 per cent, while mass-market home prices rose a more moderate 27 per cent.

DTZ says that falling construction costs will provide some leeway for developers to re-price their projects.

Says the firm’s executive director (residential) Margaret Thean: ‘Mass market and mid-tier launches will continue to dominate the primary market in 2009.’

Knight Frank managing director Tan Tiong Cheng observes that with the bigger slide in luxury home prices compared with other segments, the price gap has narrowed between high- end and mid-tier properties.

‘Eventually, this will provide some support to the high-end-market. Once developers start launching luxury projects and somebody sets a price benchmark at attractive prices, buying should return to this segment,’ Mr Tan says.

While foreigners and speculators who fuelled the run-up in luxury home prices have vanished, those who sold their homes in en bloc sales and who are still sitting on cash may be in a position to buy, he added.

DTZ’s Ms Thean cautioned that despite the recent pick-up in developer sales, weak economic fundamentals will weigh down hopes of a sustained recovery in activity.

Those agreeing with this view say that the HDB resale market - which feeds the entry-level private residential market - is expected to slow down as unemployment worsens.

ERA Asia-Pacific associate director Eugene Lim predicts that the HDB Resale Price Index will probably rise just 3 to 5 per cent for the whole of this year, after a 14.5 per cent gain last year.

Still, most observers reckon that any eventual recovery in the private housing market will be bottom- up - emanating from the mass-market segment and fuelled by income-driven buyers - rather than a top-down effect from a surge in high-end prices generated by wealth-driven buyers as seen during the 2006-2008 bull run.

‘The signal must come from the economy because we’re still the tail and the dog is the economy, because that’s where the incomes are derived, and property is always the tail end of the value chain,’ as a major developer puts it.

Source : Business Times - 01 April 2009

Singapore Property - Buy, Sell, Rent, Invest

Mindy Yong

(+65)91002985

mindy@mindyyong.com

Global economy stares at first contraction on record

Global economy stares at first contraction on record

World Bank says even a modest recovery is uncertain for next year

By ANTHONY ROWLEY
IN TOKYO

GLOBAL gross domestic product is likely to shrink 1.7 per cent this year - the first fall on record - and even a modest recovery in 2010 is uncertain, the World Bank said in a report released yesterday.

Coming on the eve of the G-20 summit in London, the report will add to pressure on leaders of advanced and emerging economies to maximise efforts to counter the deepening recession.

But in its latest Global Economic Prospects report, the World Bank warned that stimulus packages will strain government finances for years to come.

In a separate assessment of prospects, the Asian Development Bank (ADB) said yesterday the outlook for developing Asia is bleak - and predicted Singapore’s economy will shrink 5 per cent this year. Asia needs to ‘re-balance its growth to endure the global downturn’, the ADB said.

The World Bank has joined the International Monetary Fund and the OECD in sharply downgrading its economic forecast.

‘What began six months ago with a massive de-leveraging in financial markets has turned into one of the sharpest global economic contractions in modern history,’ it said.

High-income countries are in ‘deep recession’, with OECD economies likely to contract 3 per cent this year. And GDP growth among developing economies as a whole will fall to just 2.1 per cent, from 5.8 per cent in 2008.

The bank said its update - in which it has more than halved prospects for developing economies - reflects a ‘rapid deterioration in financial and economic conditions and increasingly negative interaction between weakening economies and fragile financial systems’.

At opposite ends of the spectrum, the bank predicts 6.5 per cent growth for China this year followed by 7.5 per cent in 2010. For Japan, it predicts a 5.3 per cent contraction this year followed by anaemic 1.5 per cent growth in 2010.

It sees the US economy shrinking 2.4 per cent in 2009 before growing 2 per cent next year, and the Euro area declining 2.7 per cent this year before growing a mere 0.9 per cent in 2010.

India’s economy is seen growing 4 per cent in 2009 and 7 per cent next year.

None of the projections for even modest recovery in economic output next year can be taken for granted, the bank emphasised: ‘The outlook for 2010 is surrounded by extreme uncertainty across a wide range of policy and other variables.’

Monetary and fiscal stimulus in many countries, along with some upturn in private investment, could produce a degree of recovery in 2010, it said. But ‘continued banking problems and even new waves of tension in financial markets could lead even to stagnation or even another year of decline’.

The volume of world trade in goods and services is likely to slump 6 per cent this year, with trade in manufactured goods bearing the brunt, the bank said. Economies that specialise in producing capital goods - such as Japan, Germany, China, Taiwan and the US - have been hard hit by the collapse of corporate investment linked to exports.

‘The declines are especially dramatic in Asia,’ the bank said, noting that goods exports in January slumped 40 per cent year on year in Japan, 30 per cent in Taiwan and 25 per cent in Singapore.

Developing economies are being pummelled not only by a collapse in export demand but also by a ‘reversal of capital flows, a collapse in stock markets and in general the deterioration in financing conditions that has brought investment growth in developing countries to a halt’.

All developing countries ‘face the prospect of substantial deterioration in fiscal balances as tax revenues fall, borrowing costs skyrocket and transfers to social safety nets burgeon’, the bank said. ‘Stimulus packages and other measures to mitigate mounting stress in the private sector are bound to lead to further deterioration in fiscal positions in coming years.’

The ADB suggested in its report that economic growth across developing Asia will slide to ‘just 3.4 per cent in 2009, down from 6.3 per cent last year and 9.5 per cent in 2007′. It said that if the global economy experiences a mild recovery in 2010, emerging Asia as a whole could regain growth of 6 per cent that year.

But the ADB added in its latest Asian Development Outlook that ‘there are significant downside risks to the global outlook, which could further impact the already gloomy regional outlook. It is not clear that the US, the EU and Japan will recover as soon as next year’.

Source : Business Times - 01 April 2009

Singapore Property - Buy, Sell, Rent, Invest

Mindy Yong

(+65)91002985

mindy@mindyyong.com