Encouraging start to 2010

Singapore’s private property market continued to show resilience with nearly 4,000 private homes sold in the first quarter of 2010, according to CB Richard Ellis (CBRE).

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

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

In January, 1,480 new homes were sold, nearly one and a half times the previous quarter’s average monthly volume of 620 units.

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

The measures, which took the market by surprise, were announced on February 19 to remove speculators from the real estate market.

They include a stamp duty of 3.0 percent on residential properties sold within a year (applicable to properties purchased on or after February 20, 2010) and the reduction of the loan-to-value (LTV) limit of 90 percent at 80 percent.

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

“The government did not make any drastic moves to kill off the real estate market. They just introduced the stamp duty and the lowering of the LTV limit with the intention of preventing speculation. Therefore, the strong demand in the first quarter showed that the buyers they were not speculators but intended to hold onto their properties beyond a year. It also means that the real estate market is a bit more buoyant based on the fundamentals of the economic recovery. We are also seeing more foreign investors coming to buy properties.” says PropNex CEO Mohamed Ismail.

Slower growth rate in Q12010

In fact, the strong demand was also reflected in the preliminary estimates of the Urban Redevelopment Authority (URA) for the first quarter, which show that the price index has continued to increase.

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

However, the pace of growth was slower than the 7.4 percent rise from October to December last year, due to a new set of property restrictions the government put in place in February.

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

CBRE expects the fast pace to continue in March with between 1,200 and 1,400 new homes expected to sell.

Strong pickups for prime properties

URA data shows that demand for private homes in prime areas remains strong in the first quarter.

Homes in the Rest of the Midwest saw the largest price increase at 7.2 percent, followed by those in the Central Midwest and Outer Midwest at 4.5 percent and 3.9 percent. , respectively.

Analysts say prime properties enjoyed strong acceptance rates in the first quarter as there is increased confidence in the market among high net worth investors.

“Many of the major real estate investors last year stayed away from the market, hoping the market would clear because the economy was still stabilizing. These investors were wary of where the market was headed. As such, they were waiting for some form of indication. that the economy is back to normal, as it was last year. This has renewed investor confidence,” says Mohamed Ismail.

In fact, developers were also reading what the market wants when launching new high-end projects in the first quarter.

“In the first quarter of 2010, most of the projects launched were higher-end and located in the prime Sentosa Cove and Downtown Core districts,” says Joseph Tan, CEO 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 square foot.

Holland Residences saw 78 units sold out of 83 at a median price of $1,680 per square foot.

Meanwhile, The Laurels sold 212 units of 229 at a median price of $2,800 per square foot.

Two projects that launched in the Tanjong Pagar neighborhood, Altez and 76 @ Shenton Way, also enjoyed good acceptance rates.

Altez sold 150 units of 280 at the median price of $1,817 per square foot, while the 202 units were purchased at 76 @ Shenton at $1,600 per square foot to $2,600 per square foot.

CBRE said sales for both developments were dynamic due to their city location and small-format apartment makeup, comprising one- and two-bedroom units ranging from 500 square feet to 800 square feet each.

Minor HDB upgraders on the market

Unlike 2009, which was the year of HDB upgraders, the first quarter of this year saw lower proportions of such buyers in the market.

Based on warnings filed to date, private homeowners made up the largest share of buyers at 66.3 percent this quarter.

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

The remaining 33.7 percent of buyers in the first quarter of 2010 were those with HDB addresses.

By comparison, HDB upgraders accounted for 63.7 percent of the market share a year ago in the first quarter of 2009, after the pause in 2008.

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

The top three foreign buyers were Indonesian, Malaysian and Chinese.

small advantage

CBRE data shows that, overall, home prices in the first quarter reflected a small increase of 2 to 5 percent over the fourth quarter of 2009, supported primarily by resale transactions.

So far, developers have kept prices for new releases 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 $2,213 per square foot and $1,372 per square foot, respectively, up from the corresponding $2,101 per square foot and $1,346 per square foot in the fourth quarter of 2009.

In the luxury segment, units at Ardmore Park sold for $2,982 per square foot in the first quarter of this year compared to $2,936 per square foot previously.

Looking to the future

The real estate market looks promising in the second quarter with more new listings with serious investors in the market.

“Buyers can anticipate the launch of some 99-year-old lease projects at Chestnut Avenue, Dakota Crescent and Lorong Ah Soo and freehold projects at the Old Parisian, Pin Tjoe Court and 18 Anderson sites,” says Tan.

“Second quarter results will be equally strong, full of investors buying properties for the medium and long term,” says Mohamed Ismail.

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