Singapore's housing sector set new price records

1Q 2010 resale price index estimates expected to increase 2.7% to 154.9 as demand flourishes.

The flash estimates for 1Q10, as released by URA and HDB, reveal a growing investor confidence in the private property market coupled with a continued healthy demand for public housing.

Although the number of resale flats dropped from 4Q09’s 8,926 to 8,500 in 1Q10, and despite the continued release of BTO flats by HDB, the resale price index (RPI) should inch up another 2.7% to another new high of 154.9, reflecting the ongoing demand for resale flats by the masses.

The main reason for this would be the sustained median Cash-Over-Valuation (COV) levels at around $25,000. “This figure is very similar to the median COV in our 1Q10 transactions, which is around $25,000 too,” says PropNex CEO Mr Ismail. PropNex holds a major share in the HDB resale market of about 35%.

“As long as COV levels, fuelled by strong demand, remain high,” states Mr Ismail, “the RPI will continue to go up. The latest figure would be in line with our forecast of an overall 5–8% growth in the RPI for 2010,” says Mr Mohamed Ismail. The HDB RPI went up 8.0% for 2009.

He also points out that the first quarter is traditionally the quietest quarter for property sales and that a dip in sales volume was to be expected. In fact, he feels that the dip was relatively small and was another reflection of the public housing demand.

Mr Ismail notes that the price index for private property is maintaining its steady growth from 4Q09 into 1Q10, with an overall increase of 5.1% to 174.2. “While this figure still falls short of the all-time peak of 181.4 in 2Q96,” he says, “I am confident that the private property price index will best that by the end of 2010. And this will be easily achieved with our projected overall growth of about 4–5% per quarter for the rest of 2010.”

Upon examination of the prices in the three geographical regions, the trend continues from 4Q09, with the Rest of Central Region (RCR) leading the pack at 7.2%. Next is the Core Central Region (CCR) with 4.5%, followed closely by the Outside Central Region (OCR) with 3.9%.

“These figures reveal the return of both local and foreign investors to the property scene in Singapore,” explains Mr Ismail. “That is why I expect the CCR and RCR prices to continue to lead the private property price growth in 2010.

“Looking at private properties sold in the first two months of 2010,” he continues, “65.9% of all the properties had a median sale price of $1,000psf or more. This shows the very healthy demand for properties in the Core and Rest of Central Regions.” In contrast, only 29.2% of all private properties sold in the same period last year had a median sale price exceeding $1,000psf.

However, he does point out that this vast difference is by virtue of the fact that of all the private property units launched in January and February this year, 72.6% had median price tags of at least $1,000psf, while the percentage for January and February in 2009 was only 23.8%.

“The developers then were more cautious,” explains Mr Ismail, “with the economy coming out of a recession then. However, we have been seeing positive signs in both the economy as well as the property market, so developers are releasing more units in the central areas.”