Foreign homebuyers show different price preference

Source : Business Times – 21 Jan 2010

Westerners choose units in $1.5-5m band; most Asians prefer $500,000-1m

Among the top foreign buyers of private homes last year, Asians (excluding Indonesians) primarily bought units in the $500,000 to $1 million range, while most Western buyers (Australians, UK and US citizens) picked up homes mostly in the $1.5-5 million range.

Indonesians were in the same category as the Western buyers, with the $1.5-5 million range being their most favoured price band. In fact, 47 per cent of the 1,219 caveats for private homes lodged by Indonesians last year were in this band, shows Jones Lang LaSalle’s analysis of URA Realis caveats.

On the other hand, Malaysians, mainland Chinese, Indians, Koreans and Burmese were more likely to have bought a private home last year in the $500,000 to $1 million category.

DTZ executive director (consulting) Ong Choon Fah argues that Indonesians tend to buy a property here as a home away from home, often as a residence for their children studying here, and as a safe haven to park their wealth in a nearby country. Hence they are prepared to invest more for a property in Singapore.

Generally, though, Asians may set aside smaller budgets for their property investments in Singapore because they also compare property prices here relative to their home markets, Mrs Ong suggests.

JLL’s South-east Asia research head Chua Yang Liang observes that while there is no noticeable difference in the location (district) preference between Asian and Western foreign buyers, there is a more prominent difference in terms of their price range. He suggests that this could be because the majority of Western foreign buyers are probably here on expatriate terms, while Asian buyers are likely to be working here under local terms or are just investors.

Mrs Ong suggests that Asians may be more ‘adventurous’ and prepared to shop for a property in Singapore’s suburban locations, where deals below $1 million can still be found, whereas Western buyers may be more comfortable sticking to their traditional investment locations such as Districts 9 and 10 where expats have traditionally lived and property is pricier.

However, property market watchers point to a stronger presence by mainland Chinese in the higher-end property market in Singapore. JLL’s analysis shows that they picked up 22 properties exceeding $5 million apiece last year. Most of their purchases in this price band were in Districts 10 and 4. District 4 includes Sentosa Cove, while District 10 is one of Singapore’s traditional prime districts covering such locations as Ardmore Park, Cuscaden Road and the Nassim area.

Some 41 Indonesians, 28 Malaysians, 18 British Virgin Islanders and 16 UK citizens each bought properties costing over $5 million apiece in Singapore last year.

JLL’s caveats analysis showed that foreigners’ share of private home purchases increased to 27 per cent in Q4 last year, from a low of 15 per cent in Q1 2009, when the property market was still eschewed by foreign investors who had gone into hibernation in the aftermath of the global financial crisis. Foreigners lodged 20 and 23 per cent of caveats in Q2 and Q3 last year.

Their relatively low share in the first two quarters of last year dragged down their full-year share to 21.8 per cent from 24.1 per cent in 2008. However, in absolute numbers, the number of private residences bought by foreigners doubled from 3,176 in 2008 to 6,472 last year, amid the spectacular overall recovery in private home sales following price cuts by developers in the earlier part of last year. As well, investors soon developed a preference towards investing in property as an asset class after the global financial slump when billions vaporised overnight in investments in financial instruments.

Dr Chua forecasts that foreigners will continue to be active in the local property scene this year as the regional economies improve.

Resales eat into developers’ share of Q4 deals

Source : Business Times – 21 Jan 2010

A higher proportion of private home buyers turned to the resale market in Q4 2009 to pick up their dream homes instead of visiting a developer’s showflat. Fewer launches by developers in Q4 and the removal of the interest absorption scheme in September last year probably contributed to this shift.

Jones Lang LaSalle (JLL)’s analysis of private housing transactions shows that the number of caveats lodged fell in all categories – primary market (or developer sales), resale and subsale markets – in Q4 2009 compared with the preceding quarter.

However, in percentage terms, the decline was bigger for developer sales at 68.8 per cent, compared with drops of 53.1 per cent for subsales and 39.3 per cent for resales.

As a result, the resale market accounted for 62 per cent of private residential caveats lodged in Q4, up from a 49 per cent share in Q3. Conversely, developers saw their share of total private home sales slide from 40 per cent in Q3 to 26 per cent in Q4.

Subsales’ share of total transactions remained unchanged at 11 per cent. Subsales and resales are secondary market transactions; subsales involve projects that have yet to receive Certificate of Statutory Completion (CSC), while resales refer to developments with CSC.

The most popular projects that changed hands in the resale market in Q4 were The Sail @ Marina Bay (51 caveats at a median $1,901 psf), followed by Caribbean at Keppel Bay (49 deals at a $1,355 psf median price). Landed homes in Serangoon Gardens Estate were also much sought after, with 44 caveats lodged at a median price of $592 psf of land area. Melville Park in Simei saw 35 transactions at a median $529 psf in Q4, according to JLL’s analysis of caveats captured in the URA Realis system.

In the subsale market, the top seller was Ferraria Park Condo in the Upper Changi area (32 units at $734 psf median price). Other popular subsale projects in Q4 include The Centris next to Boon Lay MRT Station, Casa Merah near Tanah Merah MRT Station, Botannia in the West Coast area and One Amber.

When it came to buying directly from developers, buyers’ top picks in Q4 were Hundred Trees (310 units at median price of $941 psf), The Interlace (148 units at $1,049 psf median price), Suites @ Guillemard, Cyan and Elliot at the East Coast.

‘The proportion of resale has edged up at the expense of new sales. One reason for this shift is the government’s termination of interest absorption scheme (IAS) and interest only loans (IOL) in September 2009, which had been offered for primary market sales,’ says JLL’s head of research (SE Asia) Chua Yang Liang.

‘Speculators who had been depending on this form of financial leveraging – they only needed to pay 10-20 per cent of the purchase price upfront and could defer paying the rest of the price till the project’s completion – have effectively been removed from the market.’

For more genuine owner occupiers and investors too, the removal of IAS and IOL has cut their incentive to pick up a home from a developer vis-a-vis the secondary market, Dr Chua says.

Also contributing to the rise in resale proportion in Q4 was the completion of 3,930 private homes in Q3 2009, one of the highest quarterly completions since 2000. ‘A corresponding increase in resale transaction volume is to be expected as more buyers are motivated to put their money down for a completed asset,’ Dr Chua says.

Agreeing, DTZ executive director (consulting) Ong Choon Fah, says: ‘Generally, you can pick up a home for relatively less in the resale market than in the primary market, and you can live in it or rent it out straight away.’

Also, developers launched fewer homes in Q4 than in the preceding two quarters, so house hunters had much less choice in the primary market, she adds.

Dr Chua says that he expects the proportion of resale activity to retreat by year-end given the lower projected completion of private homes this year.

Knight Frank managing director (residential services) Peter Ow also points out that as property launches revive this year, the absolute number of homes sold in the primary market, as well as their share of total private housing deals, will pick up.