Busting the myth of a hot property market

Busting the myth of a hot property market

When you read about units being snapped up at a record pace, you might think that the property market is sizzling.
But buried beneath the headline numbers, two distinct trends appear to puncture this myth.

Not only is the average unit size sold by developers much smaller now, compared to the pre-global crisis peak year of 2007, but islandwide the average price per square foot is also much lower. That's because more units are being sold in the suburbs instead of the Core Central Region (CCR), where properties are costlier.

In fact, the state of the property market looks very different when viewed from the perspective of total square footage and total dollar quantum of apartments/condos sold by developers, rather than the number of units.
Although developers sold more non-landed private housing units last year and in 2012 (on an annualised basis) than in 2007, the total area of these units and their dollar value were lower than 2007's levels.

The total area of 13.43 million sq ft in the non-landed units developers sold last year was also about 19.2 per cent lower than the 16.62 million sq ft they sold in 2007.

The average size of private apartments and condos sold by developers in CCR - which includes the traditional prime districts 9, 10 and 11, the financial district and Sentosa Cove - has declined by 30.2 per cent from 1,639 sq ft in 2007 to 1,144 sq ft last year. It dipped further to 1,052 sq ft in H1 2012.

In the Rest of Central Region (RCR), the average size of units sold has shrunk almost a third from 1,338 sq ft in 2007 to 898 sq ft last year before contracting further to 831 sq ft in H1 2012.

In the Outside Central Region (OCR) - home to mass-market condos in suburban locations - the figure slipped 25.3 per cent from 1,292 sq ft in 2007 to 965 sq ft last year. In H1 2012, the figure was 876 sq ft.
Taken individually, the average psf primary market prices achieved in each of the three regions last year and in H1 2012 surpassed those in 2007. But the total islandwide dollar value of the units sold by developers in 2011 and 2012 (annualised), at $16.9 billion and $16.3 billion respectively, are shy of 2007's $22.7 billion.

Commenting on the shrinking average home size, Roxy-Pacific Holdings executive chairman Teo Hong Lim observes this is due not just to a proliferation of shoebox units but a general contraction of unit size across the board - two, three, four bedders - as developers try to keep lump sum investment sums affordable to buyers.

He also highlights that since the 2009 rule change to include bay windows and planter boxes as part of gross floor area, the saleable area of an apartment has shrunk by about 5-6 per cent even if it has a similar internal layout as before.

Source: Business Times – 3 August 2012