Thursday, September 29, 2011

Will we see $1,000psf average price for mass-market homes soon?

Even as ongoing concerns for the EU and US economies have affected sentiments for high-end properties, prices for mass-market homes are fast approaching the psychological barrier of $1,000psf.

It is against a mise-en-scene of falling sales volumes – Knight Frank expects primary market sales volume, excluding executive condominiums (ECs), to fall by some 7%, quarter-on-quarter (q-o-q) – that Outside Central Region (OCR) bucks the trend, projecting sales numbers of approximately 2,868 for Q3 2011, a 5.9% increase from Q2 2011.

Accounting for approximately 70% of new sales transactions, these mass-market homes are expected to remain the main focus this quarter.

With an average transacted price of $941psf in Q3 2011, prices of suburban home (non-landed private residential properties, excluding ECs) have increased 2.5% q-o-q, higher than the 1.7% rise in the OCR property price index in Q2 2011.

Notably, prices of mass-market homes are fast approaching the psychological $1,000psf barrier, while average prices exceeded the $1 million level in Q2 2011, Knight Frank says.

Within the Core Central Region (CCR), which includes the prime districts, CBD and Sentosa Cove, sales volume is expected to decrease by 45.4% to an estimated 287 units in Q3 2011, compared to 526 units the previous quarter.

Prices of these properties fell by 3.6% q-o-q, transacting at an average of $1,800psf in Q3 2011.

Meanwhile, Rest of Central Region (RCR) is expected to see sales drop by 10.2% q-o-q, from 1,090 units to an estimated 979 units in Q3 2011. Transacting at an average of $1,300psf, prices of homes in RCR increased 1.6% q-o-q in Q3 2011, compared to 1.1% in Q2 2011.

Overall, Knight Frank estimates that 4,134 units – excluding ECs – will be sold in the primary market in Q3 2011, a decrease in sales volume of some 7% q-o-q.

On the rental front, high-end and mass-market segments saw rental increases of 1.9% and 0.4% q-o-q respectively, compared with 6.5% and -1.4% q-o-q in Q2 2011.

Rent in the mid-market segment, represented by properties in East Coast and Lower Bukit Timah areas, increased 2.3%, as contrasted to -3.3% in Q2 2011.

Slowdown in property price appreciation and tightened immigration policies may moderate residential rental growth, notes Knight Frank. In conjunction with more newly completed residential homes being pushed out, the company postulates that average residential rental will remain flat, or increase by less than 2% for the rest of the year.

For Q4 2011, Knight Frank expects new sales (excluding ECs) to hit at least 16,000 units, with mass-market homes continuing to see strong sales, and high-end homes continuing to see selective buying. Overall volume is not likely to spike substantially.

“If the economic performance turns unexpectedly for the worse by a large magnitude, private home prices are expected to moderate albeit any corrections are expected to be marginal and not more than 5% yearly. Otherwise, private home prices in general should hold or increase marginally at less than two to three per cent q-o-q in Q4 2011,” it said.
Source: The Business Times

So prices of private homes are still expected to increase (at a smaller %) despite an anticipated decrease in sales volume, attributed largely by the perceived continual strong demand for mass-market homes.

Does this necessarily mean that the government need to roll-out even more public housing before we can stamp the rise in private home prices, since the bulk of demand is in the mass-market sector?



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