Prices of new private homes could rise by 5-10% in H2: analysts

Source : Channel NewsAsia – 29 Jun 2009

Market watchers said prices of private residential properties could climb by between five and 10 per cent on average in the second half of 2009.

Strong sales in recent months have driven prices up despite the economic slowdown. Concerns are being raised over a potential property bubble.

Close to 6,000 units of new private homes have been sold so far in 2009. This has surpassed the over 4,200 deals done for the whole of last year.

Observers said the pick-up in the market is partly due to price corrections, the recent stock market rally and signs of an economic turnaround.

Market watchers said pent-up demand also drove sales up in the last four months and they expect the trend to continue until the end of the year, barring any major setback to economic recovery.

But some analysts said this could be a cause for concern if it is unsupported by sound fundamentals.

Tay Huey Ying, director, Research & Advisory, Colliers International, said: “A lot of this is highly dependent on prices remaining affordable because people are coming in on price weakness, and in the absence of sustained economic expansion, that could generate growth in employment as well as personal income. Then we could be looking at an imminent formation of a property bubble.”

Going forward, experts said developers are likely to test the market with gradual price increases. And home prices in the mass market segment could creep up by about five per cent.

Joseph Tan, executive director, Residential, CB Richard Ellis, said: “It’s fairly safe to say that that mass market has actually bottomed out because if you look at transactions in the last two months, prices have increased by 10 to 15 per cent, compared to first quarter.

“We have seen the return of high and mid-tier markets in terms of transactions. We’ve seen fairly good demand for properties priced between S$1,500 per square foot up to S$2,000 per square foot.”

With rising interest in more expensive properties, analysts said the number of upgraders from public housing flats to private apartments will dwindle. These buyers accounted for about 50 per cent of total home sales in January, but just over 30 per cent in May.

Overall, observers said Singaporeans will still form the bulk of home buyers. But the opening of the two integrated resorts next year could see renewed interest from foreign investors.