Are residential property prices poised to rebound?

 

If you are looking to upgrade to a private property, perhaps this post may interest you. I am not a property expert by any measure by I’ve collated some information about the market trend.

It has been well reported that the private property prices have been on the decline since mid-2013. Global interest rates will rise eventually and can pose a risk to mortgage borrowers. There has been serious fear of oversupply of housing estates. The supply numbers look huge and Bedok itself, as shown in this OrangeTee research, has a massive supply of private houses of 30,000! Couple this with a bleak rental market, most property experts have suggested prices will come down an additional 10-20% in the next few years.

Declining property price index. Where is the bottom?

But… new bullish sentiment??

However, sentiments seem to have changed quite recently. I believe it all started with the FTSE ST Real Estate Holding and Development Index gaining 30% since the start of the year. Prices of property counters like Bukit Sembawang who has developments mainly in Singapore rose from $4.50 to $6.50. There is common saying on the streets that equity prices front run property prices.

 

 

How are recent property sales?

Aggressive landbanking by property developers

In May 2017, Chinese group Logan Property Holdings (a newcomer hailing from China’s Guangdong province) bid more than $1B for a Queenstown plot of land which was unprecedented. The bullish bid works out to be S$1,050.70 per square foot per plot ratio (psf ppr) on gross floor area. Property developers have been shying off for the last few years and they must have some confidence on bullish price trends to make land bids.

In Aug 2017, as stated in this Straits Times link, CapitaLand CEO Mr Lim Ming Yan mentioned that his firm wants to be more aggressive in acquiring land. He detects signs that the city’s residential property market is “bottoming out” after a run of price declines. Capitaland is one of the developers who been passive in the recent years.

 

 

Strong recent property sales for launches

In Aug17, Martin Modern condominium sold better than initially forecasted with prices between $2k-$2.5k pdf from reports. It is a project in river valley (district 9), considered to be prime land. I remembered seeing reports in Jun2016 that their bid of $1,239psf for the land was too high and that it would be difficult to sell. In fact, Guocoland (the project developer) intends to stop sales of this project in anticipation of a potential higher selling price in the coming years.

Image from Straits Times

 

 

Revival of En bloc/ Collective sale

Successful en blocs bring optimism to the property market. Every time some deal is made, the surrounding developments pick up in price and interest. For year 2017, there have already been six residential developments and an industrial complex sold en bloc. This figure far exceeds the three deals done in 2016. As shown below, Park West and Normanton Park are now newly up for sale. As mentioned previously, property developers are an astute bunch and bullish bids for land do not come out of the blue.

 

Image from Business Times.

 

 

Last words

There are signs of resurgence in market confidence in general. The key question is whether this resurgence is sustainable or a short term rebound that just fades off once interest rates rise drastically. While many international investors are seeing Singapore as attractive when compared with Hong Kong, London or Australian cities, analysts caution that it is still premature to say that the property market has conclusively turned around.

 

The Astute Parent

A parent who has a sharp acumen on sieving through 'alien' financial jargon to dish out bite size financial tips from a parent's perspective.