Experts say sellers may be raising prices too optimistically amid uncertain times

THE euphoria in the private home market is tipped to start tapering off in the wake of the weaker stock market, although no one expects sales to plunge to the dismal levels seen late last year.

Recent sales data suggests the market has touched bottom and is climbing its way back up, spurred by developers cutting prices and offering incentives as well as a feeling among buyers that they had better move fast before the bargains go.

New private home sales have crossed the 1,000 unit mark every month since February with 1,668 transactions last month, the highest since August 2007, according to data from the Urban Redevelopment Authority yesterday.

Deals done in April and last month show that home prices have generally risen from their first-quarter lows, said CBRE Research.

Knight Frank chairman Tan Tiong Cheng points to a lift in confidence: 'There's a bit of euphoria out there, brought about by the recovery of stock markets around the world since March, and many who have made money in the stock market would have ploughed it back into the property market.'

Developers have begun testing the market by pushing prices up by, say, 2 per cent to 3 per cent a week, consultants said.

And some buyers have been rushing to showflats and putting down deposits - much like the boom days, even though Singapore remains in a recession.

However, the increased activity remains confined to the residential market, said Mr Desmond Sim, Jones Lang LaSalle's associate director of research.

'This, in our regard, is largely fuelled by softer prices and strong latent demand, which alone will not be sufficient to sustain an overall recovery in the market,' he said.

Unless the overall economy improves, it may still take 'quite some time' before the super-luxury launches come back.

'Singaporean buyers tend to be very kiasu and overzealous. One buys, the rest all go out to buy,' said a market watcher who declined to be named.

Thanks to these buyers, sellers have raised their asking prices - sometimes rather dramatically. The result will possibly be slower sales for this month.

'Individual sellers are shifting their goal posts and taking their properties out of the secondary market,' said Mr David Neubronner, executive director, residential at Credo Real Estate. For instance, high-end condo Ardmore II was selling for below $2,000 psf earlier this year but sellers now want as much as $2,500.

But that sort of rise is far too optimistic in today's market, say experts.

Home prices have dropped by about 30 per cent from January last year. Although prices in the past three months have generally gone up by 10 per cent, they are overall still about 20 per cent off the peak, said Mr Neubronner.

The two key underlying concerns - falling rents and a supply glut - will moderate any rise in home prices, he said.

'The more conservative people will see a 'W' shaped recovery but I see prices plateauing for over a year or 18 months,' he said, adding that demand from foreigners in the region and upgraders will keep the market steady.

A market watcher said home prices may continue to run a bit more before they lose steam so now is an opportune period for developers to launch projects, he said.

As Citigroup put it in its recent report, this is a window in a weak market, rather than the start of a cyclical upturn.

Developers with land bought at levels before the peak of 2007 will want to rush the launch of their projects, experts said.

But that excludes luxury-end developers, who are staring at a likely worst-case scenario of further price drops.

Top-end home prices are expected to fall nearly as much as they have risen - rises that at times were not backed by fundamentals, experts said.

There is still the risk of deferred payment defaults in the high-end segment, which could add to developers' supply.

'People believe that the worst is over but no one knows for sure,' said a market observer. The great fear among developers and speculators now is a repeat of what happened around the start of the decade.

'The property market then recovered from the 1997 crisis. En bloc sales also came back. There was a rush but it lasted less than a year before the dot.com bust came,' said the observer.

'And then it was quiet for a few years before the slow recovery came.'

Prime district home sales almost double; analysts say recent stock market rally is fuelling interest in property

SALES of private residential properties surged to their highest level in nearly two years in May. According to the latest data by the Urban Redevelopment Authority released yesterday, overall home sales totalled 1,668 units last month, the highest monthly figure since the all-time record of 1,723 units was set in August 2007.

Purchases of private homes in the prime districts, which include Holland Road, River Valley and Newton, nearly doubled in May with 617 units sold, compared with 322 in April.

Market watchers said the spike in transaction volumes was due to the recent stock market rally, coupled with optimistic consumer confidence and liquidity.

Said Mr Donald Han, managing director of Cushman and Wakefield: “Back in late March and April, the regional stock markets went up by about one-third. This fuelled a lot of the liquidity that is coming back into the (property) market.”

CBRE Research’s executive director, Mr Li Hiaw Ho, said there was a significant amount of interest in high-end properties last month. “Five units of The Orange Grove were sold at the median price of $2,320 per square foot (psf), while one unit each of Boulevard Vue and St Regis Residences was sold at $2,602 psf and $2,200 psf respectively,” said Mr Li.

Mrs Ong Choon Fah, head of consulting at DTZ Debenham Tie Leung, said the May figures suggest that the bullish sentiment in the mass market projects has started to filter up to the luxury segment. “The momentum has certainly picked up. A few projects have seen very brisk sales,” she said.

According to URA data, the most popular developments were Martin Place Residences, The Wharf Residence, The Arte and The Mezzo. These four projects, located in the prime districts of 9, 10 and 11, as well as the city fringe areas, made up more than 30 per cent of the sales. The median prices of units there ranged from $903 to $1,423 psf.

Mr Desmond Sim, associate director of Research at Jones Lang LaSalle, said discounts given by the property developers and strong latent demand helped to boost sales.

Looking ahead, DTZ’s Mrs Ong said prices in the prime districts are likely to go up when more investors comes back into the market, prompting developers to launch the high-end properties in their inventories.

But analysts also warned that the current rebound in the property market may not be sustained. “Activity remains confined within the residential market. This, in our view, is largely fuelled by softer prices and strong latent demand which alone will not be sufficient to sustain an overall recovery in the market,” said Mr Sim.

“Unless there are improvements in the overall economy, it may still take quite some time before we see the return of ‘super-luxury launches’ which may fetch an average $5,000 psf as affordability still remains the main factor to entice buyers.”