Property price benchmarks hit a five-year high amidst launching fever

New Futura's $3,200 psf price benchmark has not been seen since 2013.

New launches amidst Singapore’s property fever set new price benchmarks, such as the New Futura, which reached $3,000-$3,200 psf. This type of prices have not been seen for a long time since 2013, iCompareLoan said in an interview with Singapore Business Review.

iCompareLoan chief mortgage consultant Paul Ho noted examples like Fourth Avenue government land sales sold to Allgreen properties for $533m, or $1,540 psf ppr, which indicates an estimated breakeven price of $2,300 psf or an estimated launch price of $2,600 or more. “Dynasty lodge has also been sold en bloc. Bukit Timah private residential properties in District 10, one of Singapore's most sought-after district is starting to see action after being sluggish for a long time,” he added.

These won’t come as a surprise, as OCBC Investment Research said in a report that the Singapore residential market reached the lowest point in 2017, and is currently at a nascent stage of recovery which is sustainable, barring any unforeseen circumstances. “As a recap, the URA Private Residential Properties Price Index (PPI) reached an inflection point in Q3 2017, climbing 0.7% QoQ after 15 consecutive quarters of price decline, or a cumulative 11.6% dip from the last peak in Q3 2013. This momentum continued in Q4 2017, with the URA Private Residential PPI rising 0.8% QoQ, such that the year 2017 ended in positive territory (+1.1% from 2016),” said OCBC analyst Andy Wong Teck Ching.

Ho supported this and said market sentiment has become very bullish due to the en bloc activities that have seen a record amount of en bloc collective sales of older condominiums. “This has led the property sellers to ask for higher selling prices,” he added.

Ching concurred with iCompareLoan and cited further evidence that buying sentiments in the market have improved through a number of notable transactions in the high-end segment. "For example, City Developments Limited’s (CDL) freehold New Futura project at Leonie Hill Road saw 48 units sold (75% out of the 64 units launched) at an average selling price of over $3,200 psf (as of 22 Feb 2018). Gramercy Park, another freehold project in the Orchard Road vicinity (Grange Road), is now 97% sold with achieved ASP in excess of $2,800 psf," he said.

However, as government land sales (GLS) keep getting strong interest and en bloc keeps pushing up the base break-even property development cost, the cheaper estates or districts will have lesser branding for developers to do their markups, regardless of how much the developer bought the land for. “This means that if you want to build a 'Landmark' project, you pay a good price for the land, you will also need a similarly remarkable 'Brand-able' district in order to hype it up for a larger selling price,” Ho said.

This presents a problem for a traditionally non-luxury district which will not be able to command that kind of premium, Ho noted. “Hence I see certain segments of orchard road, River Valley, Commonwealth, Tanglin, Sixth Avenue to emerge. They are driven by selling prices of potential new launch."

Developers will still be able to set new price benchmarks as long as they have held power and can pay the property agencies top commissions, as buyers who hold out gradually give way and give in to the higher prices, the consultant said. "This will inflate the entire market around the vicinity.”

Ho also noted that landed properties are also starting to wake up, whilst much of the en bloc sales homeowners may downgrade or cash the money, some of them may upgrade as the smaller condominiums are beginning to sell at ridiculous prices.

According to OCBC Investment Research, in terms of sub-markets, landed home prices fell 0.5% in 2017, while prices of non-landed properties rebounded 1.3%.

"The value hunters will start to look at Landed Properties. As the sales proceeds start to come in from the En bloc sales completion from now till 2019, landed properties, especially the Inter-terrace segment will hot up," Ho said.