No need to rush for mass market homes

Source : Sunday Times – 2 Aug 2009

Property experts say there is no shortage of mass market homes for sale in Singapore, referring to properties under $1,000 per sq ft or slightly above it.

Apart from new launches coming up, there are also unsold units from existing launches.

These include the remaining phases of Far East Organization and Frasers Centrepoint’s site in Bedok Reservoir, and smaller projects by other developers, said CBRE.

Also, Hong Leong Group’s sites in Flora Road and Pasir Ris Drive 1 already comprise more than 3,000 new units.

There is also ample leasehold land available for redevelopment, though not all sites will be equally attractive.

Suburban plots purchased by developers include sites in Yishun, Khatib, Toa Payoh, West Coast and Optima in Tanah Merah, said CBRE executive director of residential Joseph Tan.

While the price outlook may be unclear, what is clear is that mass market prices are unlikely to go back to the previous lows, he said.

New suburban launches are unlikely to hit the market at levels of around $500 psf or slightly more, as land prices have gone up since then, he said. HDB prices have also risen.

‘Broadly, initial launch prices of mass market developments are now in the range of $600 psf to $700 psf,’ he said.

He added that those in a more attractive location will command a premium. For instance, he said the project he is marketing, Optima, started at $790 psf as it is right next to a Tanah Merah MRT station entrance and at the fringe of an HDB estate instead of inside one.

In general, the plentiful supply pipeline will keep suburban prices in check to a certain extent, experts said.

But first-time buyers must be aware that sentiment does at times get ahead of reality. The current market situation is a good example, said property veteran Nicholas Mak, formerly director of research and consultancy at Knight Frank.

The buying momentum is not sustainable past this year if foreign buyers continue to stay away, he said.

‘Some people think that they are buying at a ‘recession price’. They are wrong because developers always price at the level the market can bear,’ said Mr Mak.

Some suburban and city-fringe projects are being priced at levels near the previous peak or even at record levels, he cautioned.

A developer who declined to be named conceded: ‘Developers are businessmen. If I can sell at a higher price, why not?’

Said Mr Mak: ‘When the new launches are completed and the expected demand does not come, some investors will sell their units and prices could come down. Then some investors may be caught.’

In any case, there is a big pool of potential supply out there that can absorb any surge in demand, he said.

‘You can’t just look at the new suburban launches from developers. You also have to look at the supply in the resale market and also the HDB resale market,’ he said.

‘Usually, resale units tend to be cheaper and bigger than newly launched units.’

Second-quarter data from the Urban Redevelopment Authority (URA) shows that there are 38,482 units of unsold uncompleted homes.

Of this number, some 14,000 units are in the suburban areas or what the URA terms as outside the central region.

Considering developers have on average over the past five years sold 3,200 units of private suburban homes a year, this number provides enough supply for nearly 41/2 years, said Mr Mak.

So first-time buyers should not panic and rush into the market. They should take their time in finding their dream home. Do the necessary research, as National Development Minister Mah Bow Tan urged buyers last Wednesday.