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Roaring Start to the Year of the Tiger

Roaring Start to the Year of the Tiger
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Encouraging start to 2010
Singapore’s private property market continued to show resilience with close to 4,000 private homes sold in the first quarter of 2010, according to CB Richard Ellis (CBRE).

The first quarter’s performance was more than double the 1,860 units sold in the previous quarter.

This is despite the government’s added measures to cool the property market in February.

In January, 1,480 new homes were sold which is nearly one-and-a-half time the average monthly volume of 620 units in the previous quarter.

In February, new home sales were still encouraging with 1,196 units sold.

The measures, which caught the market off guard, were announced on 19 February to weed out speculators from the property market.

They include a 3.0 percent stamp duty on residential properties sold within one year (applicable to properties bought on or after 20 Feb 2010) and the lowering of the loan-to-value (LTV) limit from 90 percent to 80 percent.

Analysts say the strong demand can be attributed to genuine homebuyers who are buying properties for the long-term.

“The government did not make any drastic moves to kill the property market. They only introduced stamp duty and the lowering of the LTV limit with the intention to avoid speculation. Therefore, the first quarter’s strong demand demonstrated that the buyers were not speculators but have intentions to hold their properties beyond one year. It also means that the property market is a little bit more buoyant based on the fundamentals of the economic recovery. We are also seeing more foreign investors coming in to buy properties,” says PropNex chief executive officer Mohamed Ismail.

Pace of growth slower in Q12010
Indeed, the strong demand was also reflected in the Urban Redevelopment Authority’s (URA) flash estimates for the first quarter which shows that the price index has continued climbing further.

It rose from 165.7 points in the fourth quarter of 2009 to 174.2 points in the first quarter of 2010, reflecting a 5.1 percent increase.

However, the pace of growth was slower than the 7.4 percent increase in October to December last year, due to the new set of property curbs that the government implemented in February.

Compared to the boom times in previous years, the index remained at 2 percent and 4 percent below the mid-2008’s and 1996’s peak levels respectively.

CBRE expects the brisk pace to continue in March with 1,200 to 1,400 new homes expected to be sold.

Strong take-ups for prime properties
URA’s data shows that demand for private homes in prime area continues to be strong in the first quarter.

Homes in the rest of central region saw the biggest increase in price at 7.2 percent followed by those in the core central region and outside central region at 4.5 percent and 3.9 percent respectively.

Analysts say prime properties enjoyed strong take-up rates in the first quarter as there are increasing market confidence among high net worth investors.

“Many of the prime property investor last year stayed away from the market, waiting for the market to clear because the economy was still straightening itself out. These investors were wary of where the market was heading. As such, they were waiting for some form of indication that the economy is back on track which happened last year. This has given investors renewed confidence,” says Mohamed Ismail.

Indeed, developers were also reading what the market wants by launching new high-end projects in the first quarter.

“In the first quarter of 2010, most of the projects launched were more up-market and are located in the prime districts of Sentosa Cove and in the Downtown Core,” says Joseph Tan, executive director of CBRE Residential.

New projects in these areas that did well included Cube 8, Holland Residences and The Laurels.

Cube 8 witnessed 175 units sold out of 177 at a median price of S$1, 350 per sq ft.

Holland Residences saw 78 units sold out of 83 at the median price of $1,680 per sq ft.

Meanwhile, The Laurels sold 212 units out of 229 at the median price of $2,800 per sq ft.

Two projects that were launched in the Tanjong Pagar vicinity, Altez and 76 @ Shenton Way, also enjoyed good take up rates.

Altez sold 150 unit out of 280 at the median price of $1,817 per sq ft while all 202 unit were snapped up at 76 @ Shenton at $1, 600 per sq ft to $2,600 per sq ft.

CBRE said sales for both developments was brisk because of their city locations and composition of small-format apartments, comprising one and two-bedroom units from 500 sq ft to 800 sq ft each.

Lesser HDB upgraders in the market
Unlike 2009, which was the year for HDB upgraders, the first quarter of this year had lesser proportions of such buyers in the market.

Based on caveats lodged to date, private homeowners made up the bulk of the buyers at 66.3 percent this quarter.

“Unlike last year when mass market was doing well, prime properties are enjoying greater demand because more foreign investors are coming in,” reiterates Mohamed Ismail.

The remaining 33.7 per cent of the buyers in the first quarter of 2010 were those with HDB addressees.

In comparison, HDB upgraders made up 63.7 percent of the market share a year ago in the first quarter of 2009, after the lull in 2008.

Foreigners bought around 23.5 percent of the new homes in the first quarter.

The top three foreign buyers were Indonesians, Malaysians and Chinese.

Small upside
CBRE’s data shows that on the whole, home prices in the first quarter reflected a small upside of 2 percent to 5 percent over the fourth quarter of 2009, supported mainly by resale transactions.

Developers have so far, maintained prices of new launches in the same locations at last quarter’s levels.

Citing recent resale transactions at The Sail @ Marina Bay and Caribbean At Keppel Bay, CBRE notes that both developments averaged at $2,213 per sq ft and $1,372 per sq ft respectively, up from the corresponding $2,101 per sq ft and $1,346 per sq ft in the fourth quarter of 2009.

In the luxury segment, units in Ardmore Park were sold at $2,982 per sq ft in the first quarter this year compared to $2,936 per sq ft previously.

Looking ahead
The property market looks promising in the second quarter with more new launches coming up with serious investors in the market.

“Buyers can look ahead to the launch of a few 99-year leasehold projects at Chestnut Avenue, Dakota Crescent and Lorong Ah Soo and prime freehold projects on the sites of former Parisian, Pin Tjoe Court and Anderson 18,” says Tan.

“The second quarter results will be equally strong, filled by investors buying properties for the mid to long term view,” says Mohamed Ismail.