Overall price growth for private homes in Q4 2010, particularly luxury homes

As reported in the BT today, a surge of interest in high-end and luxury homes pushed prices in the segment, which has underperformed the rest of the market over the last two years, to a fresh all time high in Q4 2010.


But in the rest of the market, prices of private homes as well as HDB resale flats grew more slowly in the fourth quarter compared to the first three quarters of last year.

Flash estimates released by the Urban Redevelopment Authority (URA) yesterday show that overall private housing prices edged up 2.7% in Q4 to a fresh record high.

Private home prices in Singapore first surpassed the former all-time peak achieved in 1996 in Q2 2010, and then continued to inch upwards in Q3 and Q4. For the whole of 2010, prices climbed 17.6%.

But the gain in fourth-quarter prices was the smallest in six quarters, URA’s data shows.

The high-end market was a notable exception. Non-landed home prices in the Core Central Region (CCR) micro-market, which includes the prime districts Marina Bay and Sentosa Cove, rose 2.3% in Q4, faster than the 1.6% growth seen in Q3.

This pushed luxury home prices to a new all-time high, outstripping the previous peak in Q1 2008.

By contrast, the price index for Rest of Central Region (RCR) rose by 1.7% in Q4, down from 2.3% in Q3. And in the Outside Central Region or OCR (where suburban condos are located), prices climbed 1.6% in Q4 after increasing 2.2% in Q3.

Analysts attributed the slowdown in price growth in the RCR and OCR areas to resistance from buyers from increasingly expensive projects.

Price growth in the CCR region, by contrast, rose on the back of the prevailing strong economy and low interest rates, which once again enticed foreign investors to pick up luxury homes in Singapore.

“In 2010, much of the activity was focused on the mass and mid-market segments,” said Joseph Tan, CBRE’s executive director for residential. “Foreigners stayed away, thinking that the lack of transaction activity in the high-end segment would lead to a fall in prices and allow them to buy the properties for less.”

But since most high-end home owners proved to have “holding power”, the anticipated fall in luxury home prices did not occur and foreign buyers are slowly returning to the luxury market, Mr Tan said.

The number of foreign home buyers rose by 14% in 2010 compared to 2009, said Knight Frank’s head of consultancy & research Png Poh Soon.

“The tightened regulations in Hong Kong and aggressive anti-speculation rules in China caused some investors to shy away from those markets and directed them to Singapore,” Mr Png said. “High net worth foreign buyers would definitely consider the Singapore property market to park their money.”

Analysts also noted that while the latest round of cooling measures introduced by the government on Aug 30 have not dampened transaction volumes, they appear to have at least moderated price growth. A record 15,500 – 16,500 new private homes are estimated to have been sold in 2010, despite demand-side and supply-side measures introduced periodically throughout the year.

CBRE’s Mr Tan said that transaction volumes were still high in 2010 as many potential buyers are still out looking for units.

But the price growth has slowed as these buyers – especially those house-hunting in the mass-market segment – are sticking to a budget.

Looking ahead, growth in private home prices may slow to anywhere between 3% and 10% in 2011, analysts predicted.

But most are more bullish on luxury home prices, which some said could climb by up to 15% this year.

In the mass-market segment, the ample supply of new homes coming on-stream from the beefed-up 2010 Government Land sales programme should help to keep price growth to less than 5%, analysts said.

.