Core Central Region price falls could be worse than estimates

Don't be surprised if actual property price declines exceed expectations, says Savills Singapore.

Given the meager transactions in 1Q12 -- only 277 property transactions were recorded for the CCR region in the period or just more than a third of the 746 deals made in 4Q11 -- prices could turn out to be weaker-than-expected compared to the flash estimates released by the Urban Redevelopment Authority over the weekend.

“On a regional basis, it had already been expected that prices in the Core Central Region (CCR) would fall. The q-on-q 0.9% decline in the index concurred with anecdotal feedback from sales representatives who felt that this segment of the market had been soft since 4Q2011. It could have been the resale and sub-sale prices that dragged down the overall index for the CCR. However, it must be added that as transactions for the CCR were significantly lower in the quarter (277 for Q1/2012 vs 746 for Q4/2011), the price statistic may be less robust," said Alan Cheong, Director, Research & Consultancy, at Savills Singapore.

"For the Rest of Central Region (RCR), both resale and sub-sale prices were similarly soft in Q1/2012 and were probably instrumental in causing this sub-regional index to decline by 0.7%. As with the CCR’s case, a significantly lower number of transactions in Q1/2012 (714 for Q1/2012 vs 1,652 in Q4/2011) implies that the price statistics may be less robust," he said.

"Owing to the significant drop in number of transactions for the CCR and RCR and since we are not privy to the raw data that URA used, we would probably have to wait one more quarter i.e. Q2/2012, to come to any objective conclusion as to whether Q1/2012 represented the point of inflexion for CCR and RCR prices. Nevertheless, from a intuitive perspective, the price declines for CCR and RCR were definitely within expectations," he added.

"For Outside Central Region (OCR), the price increase of 1.2% for non-landed properties was most likely attributable developers raising their gross prices and then offered rebates. The number of caveats lodged, though significantly lower than those in Q4/2011, were still reasonably large. (2,184 in Q1/2012 vs 3,690 for Q4/2011). Therefore, we believe that the PPI for OCR may be robust," he said.

"In the final analysis, from an intuitive stance, the PPI changes were within expectations. Moving forward, the same pattern may repeat itself for Q2/2012 with the bright spark being the OCR. When OCR (mass market) projects launched in mid-March 2012 have their caveats logged in Q2/2012, we may see further upside bias for this regional sub-index," he said further.