Investors drive rush for homes

The Singapore property market is staging a spectacular recovery after years in the doldrums. According to some analysts, bullish investors may drive sales this year to a record high, while home prices and rents continue to rise. The rally is being fuelled by a surge in confidence from foreign investors and local buyers. According to CB Richard Ellis (CBRE), S$24.81billion (HK$128.39 billion) worth of investment-sale deals were sealed in the first six months of the year. These are significant as they provide a gauge of major property players' confidence levels in the mid to long term. Li Hiaw Ho, CBRE Research executive director, said if this trend continued for the rest of this year then Singapore could experience a record year. 'Looking to the final quarter of 2007, the residential market will remain active as the Singapore government's projected economic growth of 7 per cent to 8 per cent [for the whole year] remains on track,' Mr Li said. Some of the new launches expected to come on-stream are Hilltops, Ritz-Carlton Residences, 21 Anderson, the second phase of Marina Bay Financial Centre, Turquoise condominium in Sentosa Cove and the first phase of the Waterfront View redevelopment project. 'If the sales volume of new homes registers around 3,000 to 4,000 units, then the total number of new homes sold in 2007 will be a new record of 17,000 to 18,000 units,' Mr Li said. A Merrill Lynch report stated that demand for new homes would surpass supply by almost 50 per cent in the next few years. Developers could expect high profit margins of 40 to 60 per cent in the same period. In the residential sector, the Urban Redevelopment Authority's second quarter price index for private homes climbed 8.3 per cent from the first quarter and 21 per cent higher year-on-year. The latest official figures show the residential price recovery that began some two years ago in the high-end segment is driving the trend. According to Tay Huey Ying, director of research and consultancy at Colliers International, the luxury tier started recovering from the trough in 2004, but prices began to escalate at a phenomenal pace only from early last year. Ms Tay said during the same period, the average price of luxury apartments forged ahead 34 per cent last year compared with a 7 per cent gain in 2005. 'While the turnaround in the segment was fuelled by the rebound in Singapore's economy in 2004, the boom in the luxury segment in 2006 was the result of exceptionally strong demand from high-net-worth Singaporeans and foreigners,' she said. She said that their confidence in the mid-term prospects of Singapore's property market was brought to a new high on the back of the awarding of two integrated resorts with casinos and the start of many infrastructural programmes that were part of Singapore's massive makeover plans. 'The positive benefits that are expected from the development of the two integrated resorts will continue to fuel demand for luxury residential properties by high-net-worth Singaporeans and foreigners, and this will underpin continued growth in prices of luxury residential properties,' Ms Tay said. Prices in the non-landed housing segment, which bottomed in 2004, have shot up 35 per cent since then, compared with 22 per cent for landed homes. Ms Tay said this indicated stronger demand for apartments and condominiums. 'In the non-landed segment, demand for homes has filtered down to the lower tiers, those being the mid- and mass-market segments since the beginning of the year,' she said. 'This is a result of the steep price increase as well as a supply crunch seen for the high-end and above market segments.' Hot spots in the mid-tier segment include the East Coast, Marine Parade, Meyer Road, the Tiong Bahru and Alexandra areas and One-North at Buona Vista, while those doing well in the mass-market segment include the Tanah Merah and West Coast areas. A Colliers second quarter report stated that old developments with collective-sale potential such as Neptune Court, Ivory Heights, Laguna Park, Lakepoint Condominium, Clementi Park, Cashew Park and Ocean Park were among the top 20 non-landed developments, which chalked up the highest price growth of between 30 per cent and 60 per cent in the second quarter of this year. A recent Knight Frank analysis revealed developers launched an estimated 3,000 housing units in the first quarter of this year, building on the strong buying sentiments in the private residential market. Although this is a 19 per cent drop from the 3,696 units launched in the previous quarter, the number is still about 50 per cent higher than the quarterly average for the past 10 years. 'New projects launched in the first quarter of this year were still mainly concentrated in the Central region with selected mid- to mass-market developments such as Clementi Woods Condominium and Axis @ Siglap, which added to the variety of housing stock in the western part of Singapore,' Ms Tay said. The northern region continues to face a dearth of new non-landed private residential supply. 'Generally developments within close proximity to amenities and [train] stations are well sought after,' Ms Tay added. 'Additionally, completed properties are in high demand at this juncture due to the urgent need for replacement homes by owner-occupiers and tenants displaced by collective sales.' She said the rapid filtering down of demand from the upper tiers had contributed to the tightening of supply at the lower tiers, leading to sharp escalation in price and rents. 'However, this situation is expected to be temporary as the government of Singapore has stepped in to correct the demand and supply imbalance by injecting more land supply via the Government Land Sales Programme,' she said.