Boom in resale homes
By Joyce Teo
(Taken from the Straits Times on 25th June 2009)THE mini boom that started in the sale of new flats has now spread to the resale homes market, with transactions rocketing 71 per cent in the second quarter.
Sellers have quickly become attuned to the unexpected resurgence in demand and are jacking up asking prices, according to consultants Jones Lang LaSalle.
Much of the demand is coming from HDB upgraders who are still able to get reasonable prices for their flats, allowing them to move up the housing ladder.
The activity in the resale market follows strong sales of new private homes. Levels have exceeded 1,000 units every month since February compared with a monthly average of 330 units last year. Prices are also showing resilience amid the downturn, with resale prices beginning to rise in all categories.
The property sector rallies seem to contradict prevailing economic realities, industry experts acknowledge. DTZ's head of Southeast Asia research, Ms Chua Chor Hoon, told a property seminar yesterday that it is too early to tell if the Singapore market is on its way to recovery: 'Unlike Hong Kong, we don't have a China behind us.'
Jones Lang LaSalle's head of research for Southeast Asia, Dr Chua Yang Liang, told The Straits Times: 'My concern is that the price rise in the resale market is not supported by economic growth or personal income growth.' It is instead largely backed by money earned in the previous bull run, which is not sustainable, he said.
Resale demand, said Jones Lang LaSalle, is largely for finished projects, driven by the need for immediate occupation and good rental yields. Prelimary second-quarter estimates show HDB upgraders accounted for 46 per cent of resale deals, up 11 percentage points from a year ago.
HDB prices have not fallen much, so owners can still sell at attractive prices and upgrade to a private home. The demand has pushed up resale prices, even though affordability remains key.
While prices of freehold units were down 14.6 per cent on a per square foot (psf) basis in the second quarter, new mass market home prices were up nearly 7 per cent, said a CBRE Research statement yesterday. Subsale prices of 99-year leasehold apartments rose by 22 per cent in the second quarter.
When compared with prime market sectors, the mass market segment shows the highest rebound, said Jones Lang LaSalle. Average resale prices were up 9.4 per cent to $580 psf in the second quarter compared with the first quarter.
They are now 49 per cent above the low point of the second quarter of 2005 but remain about 17 per cent below the first quarter peak last year.
Average resale prices of prime luxury homes rose 7.8 per cent from the first quarter to $1,800 psf in the second quarter. But this is a fall of 45 per cent from the second quarter of 2008.
Some buyers are increasingly more willing to commit as they believe this discount is sufficient, said Jones Lang LaSalle. For instance, resale deals at Ardmore Park were done at an average of $2,146 psf in the second quarter compared with one deal at $1,976 psf in the first quarter.
Some analysts warn of too much exuberance given the ample supply and falling rents but others are more positive. A recent Credit Suisse report said that while new homes sales may slow, the resale market is likely to pick up the slack. An earlier UBS Investment Research report highlighted the rise in resale deals as evidence of sustainable recovery in the physical property market.
Saturday, June 27
Boom in resale homes
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Kay
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Saturday, June 27, 2009
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Hi Kay,
ReplyDeleteI posted the following in a forum:-
"I note that the "Me & My Money" section in the Sunday Times every week tends to show "successful" people who have gotten rich through property investing. This week's column featuring Ms. Jean Tan of Prudential is no different. Almost every week without fail, we learn of people who got rich or made superb profits through properties. I remember a column recently about a couple who bought 3 properties and hope to clear off the mortgage in 8 years time.
So from all this, Singaporeans get the innate impression that property investing is a sure-win or a sure-fire way of quick profits (and good ones as well). If one notices as well, most of the investment mistakes made by the interviewed people relate to EQUITIES, and so this seems to reinforce the mindset that equities are riskier and cannot enable one to make money, while properties are seemingly more attractive.
I am quite against the portrayal of this illusion. Rental yields for property sometimes are much lower than dividend yields on shares. Additionally, no one ever mentions the high leverage factor for properties, while for equities one can take ownership of the shares. In periods where home equity is falling, tons of people actually end up LOSING money from their property investments, which is also seldom highlighted in the mainstream media."
Just to add that I am one of those ultra-conservative who believes we should be clearing our home loans, taking shorter tenures if possible, and not leveraging unless we are sure of our ability to finance such payments. It is possible I may fall behind in future from those who "dare to take risks" to upgrade from their HDB to a spanking new condo, but at least I feel that I can sleep better every night ! :)
Cheers,
Musicwhiz
This comment has been removed by the author.
ReplyDeleteHi Musicwhiz,
ReplyDeleteThat's my exact sentiments when it comes to that section in the Sunday Times. It seems like the majority of the people who are being interviewed made profits through properties but lost money when it comes to equities.
I do think that property investing is another way too. It is just that there are disadvantages associated with properties such as high transaction costs, relatively inefficient market as compared to the stock market and lack of liquidity. But it is a popular way because you can use leverage to finance the purchase of properties. In this way, the return on equity will be very decent indeed. The same idea can also be applied to stocks by buying and holding equities on margin but I don't think it's a popular idea here.
Besides, many of us sees that properties are tangible, i.e. you can actually see a condominium or a house sitting on a plot of land and it can't disappear overnight but you can't really say the same for stocks.
Kay