atans1

Property prices: Valuations are irrelevant/ It’s all about credit

In Financial competency, Property on 29/04/2014 at 5:00 am

The availability of credit, or is the case, now, the non-availability of credit.

And it’s not Heart Truths screaming this out loud; Roy Ngerng sadly prefers to teach anti-PAP S’poreans to suck eggs in ever more complicated ways.. It’s the constructive, nation-building local media that are screaming it out loud that it’s credit that matters.

Private home price decline accelerates as curbs bite (Today 26 April)

... in the first three months of the year, with finalised data from the Urban Redevelopment Authority (URA) confirming that the price decline had picked up pace amid persistently weak sentiment.

Private home prices slipped 1.3 per cent in the first quarter of the year from the previous three months, unchanged from the preliminary estimate released earlier this month and accelerating from the 0.9 per cent fall in the fourth quarter of last year, the URA said yesterday,

 Analysts said the multiple sets of property market cooling measures introduced by the Government, especially the Total Debt Servicing Ratio (TDSR) framework imposed last June, have been effective in curbing demand and runaway prices.

They expect the measures to remain for now, suppressing demand and probably leading to further weakness in home prices in the following quarters.

“Market exuberance for private homes was very much tempered by the existing property cooling measures and the TDSR … The various government measures have effectively curtailed demand from most groups of home buyers,” said PropNex Realty’s chief executive Mohamed Ismail.*

Shophouse deals continue to languish (14 April)

Shophouse transaction volumes continued to languish for the third consecutive quarter, as demand took a hit following the introduction of the Total Debt Servicing Ratio (TDSR) framework in late-June last year. However, prices have continued to hold – due to a limited supply of shophouses and most owners taking a longer-term horizon and having holding power.

CBRE’s analysis of caveats data shows that 26 shophouses changed hands for a total $118.4 million in the first quarter of this year, down from $149.3 million in Q4 last year and $197.2 milion in the preceding Q3. In Q1 and Q2 last year the figures were $463.7 million and $458 million respectively, reflecting the buoyant market pre-TDSR. CBRE’s analysis covered only shophouses on sites zoned for commercial use.

Shophouse transactions weakened to $346.5 million in the second half of last year from $921.7 million in the first half – resulting in a full-year figure of $1.27 billon, down from $1.38 billion in 2012.

Besides TDSR, which has tightened lending for property purchases across the board, another key reason for the sharp slowdown in shophouse transaction volumes is that prices have risen in the past few years to levels beyond the affordability of most potential buyers, said Knight Frank executive director Mary Sai.

It’s all about the Total Debt Servicing Ratio (TDSR) introduced last June.

Why did it take so long to introduce this measure? Heart Truths should be asking this question

So now you know why

Some are giving big discounts, while others are going on marketing blitzes — property developers are pulling out all the stops to boost sales which have been hit by cooling measures.

Statistics from the Urban Redevelopment Authority (URA) on Friday showed a 1.3 per cent decline in prices in the first quarter of this year. It is the largest drop since the second quarter of 2009, when prices fell by 4.7 per cent.

The Interlace condominium was launched in 2009 and some residents have since moved in.

However, the project by CapitaLand still has 183 unsold units as of March 2014.

Over at Whampoa East Road, the Eight Riversuites condominium has 205 unsold units. However, the 862-unit project was one of the top sellers last month, when it sold 44 units.

It was the project’s highest sales volume in a single month since June 2013, when the government tightened property loan rules. Under the Total Debt Servicing Ratio framework, home buyers can only loan up to 60 per cent of his or her income.

The units were sold at a median price of about S$1,100 psf — almost 20 per cent lower compared to when the project was first launched some two years back, when it was sold at S$1,340 psf.

Property watchers … said developers may be under pressure to cut prices in order to boost sales.

Nicholas Mak, executive director at SLP International Property Consultants, said: “If a certain residential project has been launched for quite some time and still has substantial unsold units, and this project is quite near to its completion date, the developers may be under some pressure to increase sales.

“Because if let’s say the development is completed and there is still quite a number of unsold units, they (the developers) could also be facing competition from other developments that could be newly-launched in the vicinity.”

Jones Lang LaSalle’s national director of research and consultancy Ong Teck Hui said: “Since the TDSR was introduced in June 2013, the number of unsold units in launched private residential projects has increased significantly by 19 per cent from 5,243 units in Q2 2013 to 6,247 units in Q1 2014.

“This is reflective of the slower take-up of units at new sales launches, resulting in the build-up of unsold units.”

Besides cutting prices, developers are also trying other tactics.

Sales for the Sky Habitat project at Bishan Street 15 picked up in April, after a marketing blitz. In a statement issued on Friday on its first quarter earnings, developer CapitaLand said 106 units were sold in April — after more than six months of single-digit sales volume, according to URA’s figures.

“Another strategy that some developers may embark on is to increase the sales commission for agents,” Mr Mak added.

“For example, a one percentage point reduction may not be that attractive to buyers. However, if developers were to raise the commission by one percentage point of the price, that absolute amount will give a lot more incentive to the property agents to work harder in attracting buyers.”

The competition is expected to intensify with close to 15,000 units, including executive condominiums, to be completed for the rest of the year. This brings the total number of units to be completed in 2014 to almost 20,000 — higher than the some 14,400 units in 2013. (CNA 28th April)

——-

* More: Both the primary and secondary markets suffered sharp slowdowns in buying activity. Developers launched 1,964 new private homes from January to March and sold 1,744 units, fewer than the 2,631 launched and 2,568 sold in the previous three months. In the resale segment, transactions dropped from 1,206 units to 899 homes, the URA said.

Prices fell across all segments of the private housing market in the first quarter, with condominiums in the Rest of Central Region (RCR), or city fringes, leading the decline at 3.3 per cent. Those in the Core Central Region (CCR), or city centre, dipped 1.1 per cent, while the Outside Central Region (OCR), or suburbs, registered a slight 0.1 per cent fall.

Ms Christine Li, head of research and consultancy at property agency OrangeTee said the bigger declines in the CCR and RCR could be due to developers focusing on trying to sell houses from previous launches.

“Most of the homes sold in the first quarter are from existing property launches, where prices could be more attractive as developers have dangled more incentives and discounts to move sales in a slow market,” she said.

Ms Li added that prices in the RCR could see some support in the second quarter as more “attractively located” projects are expected to be launched during this period.

“Three of the highly anticipated projects — Commonwealth Towers, The Crest and Highline Residences — are expected to be launched in the current quarter. These projects are also expected to fetch a higher median price than what’s been achieved in the first quarter.”

And while prices of mass market homes are likely to stay relatively stable, the odds seemed to be stacked against the high-end CCR segment, analysts said.

Ms Chia Siew Chuin, director for research and advisory at real estate consultancy Colliers International, said: “Domestic demand has been weakened by the loan curbs while interest from foreigners, who traditionally form a large demand base for high-end properties, has diminished in view of more favourable investment options in the recovering foreign markets.

“On the supply side, developers of high-end properties may feel the heat to meet the Qualifying Certificate deadline.”

The analysts estimated that overall prices could fall between 4 and 8 per cent by the end of this year, as the property measures are likely to remain.

“As long as borrowing costs stay low, the Government is unlikely to reverse the earlier anti-speculation measures … Under such an environment, we expect price weakness to persist,” said Mr Ismail.

 

  1. Besides the easy credit, consider also the confidence in continued employment. Cash flow is important to pay debt.. even if it is low interest rates. The economy here is full steam ahead and people who buy ( regardless FT or PR ) are very confident in cash flow.

    So, what is this about ‘lower’ growth? or headwinds and blah, blah, blah. The market indicates otherwise…with ST index inching higher each week. COE does not count since supply is extremely curtailed… there will be someone willingly to pay 100K for the paper.

  2. No worries lah. As long you can tahan who cares. I still have my 2 investment condos. I also don’t give a shit. I expect prices to drop 10% this year, followed by 20% in 2015. The final capitulation crash will be in 2016. In total from now till end-2016, property prices will drop by -40% to -50%. I bet you won’t have the guts to buy then.

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