Softer home prices pave way for a buyer's market

Softer home prices pave way for a buyer's market

Buyers waiting on the sidelines may have more to smile about in the coming months as prices of private completed homes continued to fall across the board in February.

According to flash estimates released by the National University of Singapore for its Singapore Residential Price Index (SRPI), prices of completed properties softened by 0.8 per cent compared with the previous month. In particular, small apartments island wide (up to 506 square feet) and the Central Region (excluding small units) - comprising districts 1 to 4 and the prime residential districts of 9, 10 and 11 - saw the greatest decline, down 0.9 per cent month-on-month.

The sub-index for Non-Central (excluding small apartments) also finally caved in to negative sentiment, falling 0.6 per cent on a monthly basis.

The downtrend in secondary market prices is a sign of slowing demand, which could potentially lead to the evolution of a buyer's market over the next few months.

A more conducive environment for buyers to price negotiate going forward but it remains to be seen whether secondary market prices will eventually soften enough for buyers to realise that they may get better buys in the secondary than primary market.

In January, only the Non-Central (excluding small apartments) sub-index posted a monthly gain of 0.3 per cent whereas the sub-indices for the larger units in the Central region and small apartments slipped 2.4 per cent and 2.1 per cent respectively, dragging January's overall SRPI index down by 1 per cent month-on-month.

Most consultants expect the SRPI to continue trending downwards on the back of faltering secondary market sales, though some said that buyers might be lured back once prices fall below a certain threshold.

If a significant re-pricing of centrally located homes continue on the back of persistent demand contraction in the second half of 2012, narrowing the price gap of centrally located and sub-urban condominiums, some opportunistic local investors who are ready to finance a property may dive in, making joint purchases in selected centrally located homes as they tend to have strong property investment fundamentals, translating to better leasing interest from foreigners.

The SRPI basket tracks the prices of 370 private residential projects (excluding executive condominiums) located across 25 postal districts here that were completed between October 2001 and September 2011.

Source: Business Times – 29 March 2012