Prices of resale homes dipped 0.8% MoM in Feb

Even prices of small units, which saw huge demand in recent months, dropped by 0.9%.

Modest growth throughout 1H is expected in light of the recent property cooling measures, says RST Research.

The National University of Singapore (NUS) released the estimates of the price index of nonlanded completed private residential property for Feb 2012.

Prices of resale non-landed residential properties dropped by 0.8% m-o-m in Feb, with that in the Central region (excluding small units) fell m-o-m by 0.9%, while that in non-central region (exclude small units) dropped by 0.6% m-o-m. Prices of small units dropped by 0.9% m-o-m in February.

Here’s an analysis from R’ST Research director Ong Kah Seng

The continued marginal price fall of resale properties is within expectations, as sales activity and homebuyers interest for homes on the secondary market have been fairly lukewarm in the early part of the year.

The marginal price correction reflected limited relents by homeowners to lower prices to attract opportunistic buyers, and hence the stalemate between homebuyers and sellers in price expectations persist. It also reflected weakened buying interest for completed, including ageing properties, and owners, typically many who have long term property investment perspectives, are still holding on to their properties.

The weakened leasing market is also a major deterrence for home seekers, especially investors whose main property buying objective is to enjoy the benefits of a significant and encouraging immediate income stream. The weakened leasing market is due to companies which are increasingly cautious in overheads spending translating to a cut in expatriates’ housing allowance and centrally located homes are often the choicest for foreign working professionals due to the strategic location and many of whom do not have personal means of transport. Meanwhile, buyers of resale properties will have to assume property financing immediately. Compared to buyers of developer sales who have the option to go for progress payments and yet do not have to worry unnecessarily about finding a tenant(s) in the short term, resale properties especially those which have not seen substantial price reductions are temporarily less pursued.

 Prices of resale units which are not centrally located (exclude small units) also fell in February, by 0.6% m-o-m, after climbing marginally by 0.3% m-o-m in January.

The marginal fall in February, together will a slight increase in January, suggested that prices for suburban condominiums in the secondary market have more or less stabilized. The stability is backed by encouraging HDB upgraders’ interest for suburban homes yet there are many attractive options in the developer market, including ECs, which are good propositions for those who are not in a hurry to cash out from their HDB resale flat and
use it to financing their new private property purchase.

The fall in prices of centrally located homes, by 0.9%, in February, is due to the persistent lacklustre demand for it from both foreigners who have to pay the ABSD and locals are mitigating their risks in the economic uncertainty by opting for less costlier and hence less strategically located homes within their means. Companies’ reduction in expatriates’ housing budgets also signaled that it may be a challenge to find tenants for pricier homes, especially for new comers to property who will have to compete with seasoned and financially buffered property investors. 

The fall in prices of small apartments was partly due to first hand home owners who are more flexible in pricing amid the economic uncertainty and there are plenty of choices for home seekers in the primary market. These owners may have purchased in 2009 and 2010, when the small apartments started to be in vogue, and such buyers should have by now enjoyed the best of both – a capital appreciation of the years and without having to
pay sellers’ stamp duty.

Some of these first hand buyers may not have the intention of long term investments but were aiming for capital appreciation, hence it is an opportune  time to cash out and furthermore, their target buyers have the benefit of viewing the  completed small apartments and are unlikely to find the apartment too constraint for  their living requirements.