Property 2012: New homes? Try completed projects!

The private housing market in Singapore scaled new heights in 2010 and 2011 as prices escalated past previous peaks, while the volume of new home sales hit fresh highs. Though attention was mostly focused on the primary market, the second market was also active with healthy price gains.

Secondary market transactions of private residential property totalled some 16,357 units last year. Although 27.7% lower than 22,608 units sold in 2010, secondary market transactions still made up more than half of all private home sales for 2011, at 50.7%.

Prices of private homes in the secondary market also strengthened. According to the National University of Singapore's Singapore Residential Price Index Series (SRPI), prices of such properties rose by 25% between end-2009 and end-2011. The SRPI tracks price changes in its basket of completed non-landed private homes.

This outperformed the 24.4% rise for all private residential property types and the 19.2% gain for non-landed private homes, going by the Urban Redevelopment Authority's (URA) price indices over the same period. These URA indices include completed and uncompleted homes.

In 2011, buyers who bought from completed non-landed private residential projects at least five years old were particularly keen on five districts. Ranked in terms of transaction volume, they were 15, 23, 16, 10 and 9. Based on caveat records in the URA's Real Estate Information System (Realis) on Jan 30 this year, these districts chalked up the highest transaction volume for secondary market non-landed homes.

Singaporeans accounted for more than 54% of all such transactions in each of these hotspot locations.

Buyers from China were most active in districts 23 (covering areas such as Hillview, Diary Farm, Bukit Panjang and Choa Chu Kang) and 19 (including Serangoon Gardens, Paya Lebar, Hougang and Punggol). They accounted for a significant 31.8% and 27.7% respectively of all foreign purchasers of resale non-landed residential properties in these locations last year.

Homebuyers from India favoured the eastern part of Singapore, where they formed the largest proportion of foreigners who picked up resale non-landed homes in districts 16 and 15 - at 31.7 and 26.7% respectively.

Indonesians were the largest group of foreign buyers in district 10, with 20.3% share.

Prospective buyers, however, need to be clear about the pros and cons of buying homes in the secondary market and assess if the available options meet their needs.

Those who buy such properties will have the advantage of occupying the property immediately or getting immediate rental returns. Another draw of buying into an older project is the availability of larger units compared with what's on offer at most new launches these days. In addition, buying a completed unit allows one to visually assess the unit as compared to buying an uncompleted unit off the plan. The downside, particularly with older units, is dealing with potential problems with electrical fittings and plumbing and general wear and tear. There may be a need for extensive renovations in some cases.

Some buyers may be put off by the higher initial monthly repayments required for resale homes compared with progress payments for uncompleted units. Another drawback could be teh more stringent rules for financing properties whose leases are running low. For such properties, there are limitations on the withdrawal of funds from the Central Provident Fund as well as for financing loans.

Source: The Business Times

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