Rise in sales transactions, stabilising prices are encouraging signs
Home seekers who have taken a wait-and-see attitude may be more encouraged to dip their toes in the property market this year.
The sector is experiencing an upturn in sentiment, thanks to private home prices declining at a slower pace and increased sales.
HIGHER SALES OF NEW PRIVATE HOMES
DBS Bank's executive director of secured lending Tok Geok Peng is seeing more buyers returning to the market in the light of more property launches and prices normalising.
Developers sold 11,971 units - private homes and executive condominiums - last year, up 20 per cent from 2015, she notes.
The total included 7,972 private homes, up 7.2 per cent from the 7,440 units sold in 2015 - the best showing in three years.
Ms Christine Li, director of research at Cushman & Wakefield, said developers gravitated around the sweet spot of $500,000 to $1 million on pricing to achieve sales volumes.
Developers hope to boost the sales momentum further by launching at least six projects in the first half of this year.
These include Clement Canopy in Clementi Park (its showflat opened yesterday), Grandeur Park Residences in Tanah Merah, Park Place Residences at Paya Lebar Quarter and Seaside Residences in Siglap.
HIGHER SALES OF NEW AND RESALE HOMES
Mr Nicholas Mak, research head at SLP International Property Consultants, noted that the private residential sales market appears to be recovering with resilient underlying demand.
Ms Alice Tan, director and head of consultancy and research at Knight Frank Singapore, said that, despite property cooling measures, overall buying activity of private homes has picked up over the last two years since the total debt servicing ratio (TDSR) was introduced in 2013.
Property experts noted that total transactions of private homes - in both the new and resale markets - rose by 10 per cent in 2015 over 2014.
There was another 16 per cent uptick to 16,378 units last year from 14,117 units the year before. Ms Li said that this is particularly evident in the high-end segment.
Improvement in transactional activity is the highest in the Core Central Region, which is the prime or high-end segment at 49 per cent, followed by the city fringe region or mid-tier segment at 27 per cent, and the suburbs or mass market segment at 4 per cent, said Ms Li.
"The sentiment has improved since the beginning of this year with the risk of technical recession coming off. But the slow economy and the potential US Federal Reserve rate hike could dampen some demand for housing," Ms Li added.
"However, with a slew of attractive projects (mostly near current and future MRT stations) in the pipeline, we believe buyers are quite ready to jump in at the moment once the project is priced reasonably. Hence, the buying interest in the first half of the year could be sustained."
DBS Bank's Ms Tok has seen more buyers returning to the market. She notes developers sold 20 per cent more units from 2015.
Cushman & Wakefield's Ms Li observes that improvement in transactional activity is the highest in the Core Central Region.
SLP's Mr Mak says the overall private residential price index is tipped to fall between 1 per cent and 3 per cent this year over 2016.
Knight Frank's Ms Tan says private home prices showed signs of stabilising in the second half of last year.
Chesterton Singapore's Mr Han says 2017 presents a unique opportunity for selective buying.
SIGNS OF PRICES STABILISING
Ms Tan of Knight Frank said private home prices showed signs of stabilising in the second half of last year after the three years of decline.
"With the market exhibiting general acceptance of current price levels for private homes, the 'wait- and-see' attitude that was present among some buyers for the past three years is now gradually switching to 'time-to-buy' decisions," she added.
HAVE PRICES REACHED ROCK BOTTOM?
Chesterton Singapore managing director Donald Han said prices seemed to have reached rock bottom, having fallen nearly 12 per cent from September 2013.
At the same time, demand for new launches and from the secondary sales market has increased. He finds the rise in transaction activity encouraging as it is a sign of a bottoming trend.
"Buyers are enticed to re-enter the market when prices start to stabilise, especially so when there's a propensity for prices to rise," noteed Mr Han.
"The prime 9, 10 and 11 districts are likely to see improvement in prices this year, and the smart money has already started to trickle in.
"Recent en bloc freehold residential sales involving 3 Hullet Road, 120 Grange Road, 3 Cuscaden Road and The Nassim for more than $600 million collectively, saw investors' confidence seeping into the prime residential market."
He added that the "smart money" - defined as high-net-worth investors and investment holding companies - is starting to accumulate prime residential property and will continue to do so this year, leading to a potential rise in transaction volumes in the core central region.
"Transaction volume is a prelude to a rise in prices. There cannot be a rise in prices without an uptick in volume," said Mr Han.
Still, Mr Han warns that prices in the city fringe and suburban areas are more susceptible to market vagaries like economic and employment growth, which are likely to remain key concerns this year. Furthermore, there is a fairly substantial 20,000 unsold stock, with the bulk being outside the prime residential segment.
However, homes near places like MRT stations and malls will outperform the rest. Overall, Mr Han expects total sales this year to mirror that of last year.
"Everyone wants to buy at rock-bottom prices but the irony is that we won't know when the "bottom" price is, until we've gone past it. I think 2017 presents a unique opportunity for selective buying, especially those who have been sitting on the fence. Buying at today's price level, you have already taken care of the downside. The upside will look after itself," added Mr Han.
OUTLOOK FOR 2017
Mr Mak expects private house price indexes to continue to decline at a slow pace in the first six months of this year.
"The downward pressure is mainly attributed to the slowing economy, existing cooling measures, rising interest rates and uncertainty in the employment market," he noted.
He said the overall private residential price index is tipped to fall between 1 per cent and 3 per cent this year over 2016 while rents could slip at twice the rate - 3.5 per cent to 4.5 per cent.
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