End of the private property "bull run"? (Part 2)

Price declines could be exacerbated by the secondary market, where volumes have slowed down more sharply than in the primary market (that is, developer sales). The number of units (excluding executive condos, or ECs) sold by developers fell 2.4% from 16,292 units in 2010 to 15,904 units in 2011. However, the number of homes sold in the secondary market (resales and subsales combined) slipped 27.6%, from 22,608 in 2010 to 16,357 in 2011.

Developers are wooing buyers with nice showflats and appealing ad pitches. The ease of stretching out progress payments over a few years - compared with having to pay the full price upfront when buying a completed home in the secondary market - is another reason to buy a home directly from a developer.

DTZ's Asia Pacific research head Chua Chor Hoon said: "When secondary volumes come down, eventually it will affect prices. If demand slows down and sellers find it hard to sell after a few months hanging on to their prices, some owners will start to reduce prices. There will be more bargaining power for buyers as well as occupiers as rent start to ease."

URA stats also show that developers completed 12,469 private homes (excluding ECs), up 19.9% from the 10,399 in 2010. This has begun to weigh on residential rents, which are rising at a slower rate.

Savills Singapore expects a "mild correction" of 5% in rentals this year as more new apartments come on stream in the months ahead. It also expects the number of private residential leasing deals (excluding ECs) to hover around 45,000 in 2012, after hitting an all-time high of 45,062 leases last year. The figure for 2010 was 41,573.

"The strong 2011 showing may be attributed to Singapore becoming the preferred location among MNCs for their regional HQs. This has also attracted more senior and top executives to relocate here," said Savills' residential leasing head Patrick Lai.

DTZ's Ms Chua said rental pressure is greater in Core Central Region but this is likely to shift to Outside Central Region in three to four years due to expected completion of projects in suburban areas arising from the ramp-up in Government Land sales since the second half of 2010.

Source: The Business Times

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