Resistance to price growth in mass market homes

Homebuyers are demonstrating growing resistance towards further price growth in the mass market segment, turning instead to completed higher-tier properties in the secondary market.

According to the latest flash estimates by the Urban Redevelopment Authority (URA), the price index for non-landed private homes in the Core Central Region (CCR) rose 0.6 per cent, following a comparable drop the previous quarter. The price index for Outside Central Region (OCR) - where mass market condos are located - on the other hand saw prices increase at a slower pace of 0.4 per cent for Q2, compared with an increase of 1.1 per cent the previous quarter. Rest of Central Region (RCR) saw no change in prices.
Resale transactions have shot up by 33.1 per cent in Q2, compared with a 9.9 per cent fall in new sale transactions.

Separately, the high-end segment saw more sales activity in Q2 compared with the previous quarter.

The narrowing price gap between new mass-market homes and completed higher-tier properties in the secondary market has enhanced the attractiveness of the latter segment.

Looking ahead, there is a pipeline of major project launches, which include Riversails (920 units), Parc Olympia (486 units), projects at Jalan Lempeng (892 units), and Alexandra Road (560 units). In the CBD, V On Shenton (510 units), and a project in Marina Bay will be launched.

With the forth-coming supply, new homes sales may number 3,000-4,000 units per quarter.

However, even as high liquidity and favourable interest rates remain supportive of home-buying demand, it remains to be seen if the strong sales momentum can be sustained for the second half of this year.

Increasing price resistance and the onslaught of the upcoming supply of residential land through the H2 2012 GLS Programme may work to ease demand.

Source: Business Times – 3 July 2012