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News Release

Singapore

A Turn In Resale Prices In Second Quarter 2009


SINGAPORE, 24 June 2009 – The performance of the residential market in the second quarter of 2009 is turning to be an interesting talking point after the global financial crisis. Pent up demand has propped up new residential sales volume over the past few months and subsequently lifted secondary market.

In February 2009, new sales volume released by URA has shown an estimated ten fold increase from the preceding month with 1,323 units sold. Thereafter, the subsequent monthly sales continued to surpass the 1,000 units mark, which is a sharp rebound compared to the 2008 average monthly take up of only 330 units.

Though lagging slightly by almost a quarter, the positive sentiments in the new sales market have filtered to the secondary market with resale volume increasing in 2Q09. This unexpected spike has also motivated sellers in the resale market to become more aggressive in their asking prices.

Buyers are observed to be returning to the resale market for two main reasons:

  1. Transaction demand is largely for completed projects driven in part by the need for immediate occupation (HDB upgraders) and good rental yields.

    HDB upgraders have contributed to a substantial proportion of the total transaction volume over the past six months. As HDB prices have not declined as much, owners of public housing continue to upgrade to their first private home. As of 2Q09, preliminary estimates have shown that 46% of total transactions were bought by HDB upgraders, some 11 percent points higher than the 35% recorded over the same period a year ago. Similarly from the total quantum perspective, the number of HDB upgraders has increased from 603 to 673 or 11%, while private buyers have fallen from 28% from 1103 to 791.

    Table 1: Breakdown of Buyers’ Profile:
    Resale Market
    (Islandwide)
    HDB
    Upgraders
    Private Buyers
    Total
    % HDB Upgraders
    1Q08 474 1170
    1644
    29%
    2Q08
    603
    1103
    1706
    35%
    3Q08
    633
    903
    1536
    41%
    4Q08
    301
    407
    708
    43%
    1Q09    
    425
    431
    856
    50%
    2Q09    
    673
    791
    1464
    46%

    Source: URA/ Jones Lang LaSalle Research (19 June 2009)
  2. Optimism remains in the market despite marginal increases as the current price level is still well below the peak of 2008.

    Table 2: Price Trend:
    Price Change
    Luxury Capital Value
    Typical Prime Capital Value
    Mass Capital Value
    1Q09
    7.8% (q-o-q chg)
    7.4% (q-o-q chg)
    9.4% (q-o-q chg)
    2008
    -17.4% (ytd chg)
    -7.2% (ytd chg)
    -7.9% (ytd chg)
    From last trough
    53% (1Q05)
    53% (1Q05)
    49% (2Q05)
    From last peak
    -34% (1Q08) -24% (1Q08)
    -17% (1Q08)
     
    Source: Jones Lang LaSalle Research

    Affordable pricing remains the main factor in attracting demand. Despite a larger percentage increase in prices, the mass market projects are still affordable. Some of these projects include Northvale where its prices increased by 16% q-o-q to $485 per sq ft, The Tropica with an increase of 14% to $560 per sq ft, Bishan Point by 12% to $600 per sq ft and Castle Green by 11% to $580 per sq ft.

    The average resale capital value in the mass market as tracked by Jones Lang LaSalle has reported the highest rebound across the other submarkets at 9.4% q-o-q to $580 per sq ft in 2Q09. However this is still some 17% below the 1Q08 peak and remains highly affordable to most HDB upgraders.

    Buying sentiments has also turned more positive in the luxury prime market and that has brought buyers back into this market. The average resale capital value as tracked by Jones Lang LaSalle showed an increase of 7.8% q-o-q to $1,800 per sq ft. Following the overall decline of 45% in prices from 2Q08 to 1Q09, some buyers are increasingly more willingly to commit as they believed this discount is sufficient despite prices being 53% above the last trough.  Ardmore Park is one such residential project which saw several transactions in 2Q09 concluded at the average selling price of $2,146 per sq ft, as compared to the sole transaction done in 1Q09 at $1,976 per sq ft.

    Following a similar trend, the average resale price for typical prime properties has also shown a 7.4% q-o-q growth to $1,020 per sq ft in this quarter. Buyers were also lured back into this with the massive price correction that the market experienced over the past year since 3Q08. The average price for the prime market in 2Q09 is still some 24% off its peak in 1Q08. Despite this quarter’s increase, the prices of the properties in this market is still considered as reasonably priced when compared to levels achieved in 2008.

    Chart 1: Average Resale Selling Price

    Source: Jones Lang LaSalle Research

Dr Chua Yang Liang, Head of Research, South East Asia at Jones Lang LaSalle says, “The recent surge in residential activity is buoyed largely by latent demand, which I do not reckon is sustainable. Similar trends have also been observed in the volume of housing deposits in the US although developers there remain more conservative in outlook. I do not reckon the current activity in the market is likely to remain if prices continue to rise unsupported by GDP growth. While it is too soon to call a turn just based on one quarter’s performance, the total decline by end-2009 could be a tad lower than the earlier forecast.”

It should be noted that the buying sentiments of the market are currently buoyed by short term factors like the pent up demand, discounted pricing and attractive mortgage packages. The sustainability of any market recovery lies beyond these drivers but the longer term factors such as growth in demand and economic production.