Based on the UBS Investment Research, launch prices for newly built private houses has increased by 18 percent and 10 percent in mass and prime districts respectively during the first half of 2009.
As foreigners start to purchase and the interests continue to improve, analysts Michael Lim and Regina Lim are now anticipating that the prime prices will increase by 18 percent and will peak by the end of 2010. However, luxury prices are not likely to reach the $4,000 to $4,500 per square foot levels perceived in 2007. However, due to the locals’ zealous purchasing, mass prices have reached the 2007 peak, and there is a possibility that these prices will stagnate at present levels. According to the analysts’ report last Aug 24, “For mass market launch prices, we believe they could stagnate at current levels after rising around 20 per cent in 2009”.
The study conducted by UBS also showed that this year, the demands for private houses came from the local buyers. During the first seven months of 2009, the developers managed to sell more than 10,100 units, mainly in mass market condos, where purchasers were mostly Singaporeans.
The report states, “In H1 2009, we saw a sharp increase in buyers who currently live in public housing (HDB).” For the new sales, 54 percent of purchasers own HDB addresses compared in 2007 with only 24 percent. For resale transactions, 44 percent of purchasers own HDB addresses, in contrast to the 22 percent in 2007. Additionally, a huge portion of non-Singaporean purchasers are permanent residents.
Looking forward, UBS considers that the insistent demand for prime housing units will develop as interest increases among the foreigners. According to the report, there are signs of improvements for prime units in the second quarter of 2009, when prime districts’ resale transactions have increased more than five times to 230 per month, from 42 a month in the first quarter. Compared with the 30 percent in first quarter of 2007 and 16 percent in the first quarter of 2009, prime resale transactions now make up 24 percent of all resale transactions.
According to the analysts, the low completions supply will support the price increase that the UBS anticipates. UBS expects the total number of residences to be around 16,000 per year from 2009 to 2015.
However, there are also analysts who are less optimistic. According to Fera Wirawan, an analyst at RBS Singapore, the prices of residential properties can go down by 10 to 20 percent over the next 12 months on the back of falling rental yields, anti-speculative measures and escalating supply.
According Wirawan’s analysis, while prices of high-end and mid-tier homes are presently 22 percent and 8 percent off their peaks respectively, the mass-market residential prices are currently at peak 2007 levels.