Singapore residential property price hike loses steam

Sales volume seen to decrease as sellers maintain asking prices while buyers bid for lower prices.

The pace of price increase across all housing segments slowed in Q3 2010 compared to the previous period, according to estimates by DTZ Research.

Similar to the previous quarter, mass market homes led the way in the uptrend of prices this quarter. Resale prices of leasehold homes in the suburban areas increased by 2% quarter-on-quarter (QOQ) to $660 per sq ft. This is weaker than the growth of 4% in Q2 2010 as prices continued to set new record highs amid increasing buyers’ resistance, according to a DTZ Research report.

Luxury condominiums, being the only segment where prices are still hovering below previous peak prices, also saw a slower increase of 1.6% QOQ to $2,630 per sq ft. This is about 6% lower than the record of $2,800 per sq ft set in Q4 2007 for luxury condominiums in the secondary market.

Within the prime districts of 9, 10 and 11, the increase in average resale prices of freehold non-landed homes also slowed 1.4% QOQ to $1,513 per sq ft as well-heeled investors remained cautious over the growth of major economies in the west.

The landed segment, which has seen robust growth since Q2 2009, was not spared from the slowdown. Landed freehold units in the prime areas moved up 2% QOQ to $1,611 per sq ft, compared to the 3.3% growth in Q2 2010. Outside the prime districts, prices inched up 1.7% to $952 per sq ft, thereby surpassing the high of $943 per sq ft recorded during the 1996 boom for the first time.

The slow growth in prices is likely to come to a halt for the rest of the year following the recent implementation of a slew of government measures to cool the residential market. Sales volume is expected to be lower as sellers continue to maintain their asking prices while potential buyers hold out for lower prices.

Ms Chua Chor Hoon, Head of DTZ South-east Asia Research, noted that there would be a slight shift in demand from uncompleted units to completed ones as buyers try to time their sale and purchases. In addition, smaller or units of below $1 million would continue to be popular as cash tight buyers with existing housing loans reduce their budgets to avoid the lower loan-to-value ratio and increase in minimum cash payment.

Ms Margaret Thean, Executive Director (Residential), added, “Projects in good location and units with the right pricing should be able to achieve good sales as there are still buyers looking at property investments due to the low interest rates and strong economic growth.”