Further declines predicted for private home prices and rents in 2015

PRICES of private condos could drop by another 5-10 per cent next year, consultants predict, as it looks unlikely that the measures designed to cool down the property market would be tweaked or lifted soon. However, the price tags on new sales could be “stickier” because developers have strengthened their holding power.

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DTZ South-east Asia chief operating officer Ong Choon Fah described 2015 as a buyers’ and tenants’ market. “Funds are looking for bargains, and more people are asking to be on the auction mail list,” she said.

But so far, developers have refrained from making major price cuts, preferring to sell the better units at higher margins while progressively adjusting prices down to clear the remaining stock over the course of the construction period.

Ong Teck Hui, the national research director at JLL, said that with the easing of cooling measures unlikely to happen anytime soon, developers may, however, review their pricing to improve sales next year.

In the first 10 months of this year, developers sold 7,449 units in private condos and executive condos – less than half the 18,927 sold last year, and the lowest since 2008’s 4,435, said the URA.

As at last Friday, Hong Leong Group had sold 1,370 residential units here worth more than S$1.4 billion; these were mainly in CoCo Palms, Jewel@Baungkok, The Venue Shoppes & Residences, Commonwealth Towers and Bartley Ridge.

Frasers Centrepoint Limited (FCL) sold 217 residential units worth S$270 million as at Dec 7, including its joint venture projects and a good-class bungalow; the figure pales in comparison to last year’s, when it sold 575 units worth S$556 million.

FCL chief executive Lim Ee Seng said that he expects residential prices and transactions to continue to moderate, given that the government is not expected to lift its cooling measures soon.

But it helps that FCL focuses on the mid to mass-market segments, the deepest segments of the private residential market here, he said. A high level of pre-sales has enabled FCL to fund most – if not all – its construction costs from progress payments, he added.

Knight Frank head of research and consultancy Alice Tan said that potential buyers, including aspiring HDB upgraders, waiting on the sidelines since the total debt servicing ratio (TDSR) kicked in last year, could be the source of “latent demand”.

Non-core central regions are likely to hold up better next year, she said.

New project launches in the pipeline include GuocoLand’s Sims Urban Oasis in Aljunied, CapitaLand’s Marine Blue in Marine Parade, Hoi Hup’s Sophia Hills in Dhoby Ghaut and EL Development’s Symphony Suites and North Park Residences in Yishun.

Savills Singapore research head Alan Cheong has projected the continuing stickiness of the prices of new sales on the grounds that the projects slated for launch in the first half of next year come from land parcels acquired during the H2 2013 and H1 2014 government land sales (GLS) programmes, among which some were highly priced.

Add to this the fact that developers have beefed up their earnings resilience over the years, having diversified beyond the residential segment and outside of Singapore.

FCL, for one, has taken steps over a decade to spread its growth across asset classes and geographies. Following its acquisition of Australand, the company now holds 60 per cent of its assets outside Singapore, said Mr Lim.

A Hong Leong spokesman said that the office and hotel sectors have emerged “shining stars” for the group, which is now pursuing its overseas platforms and developing funds management products as planned.

Meanwhile, the residential market “has to battle headwinds as sentiment remains subdued, with little signs of the property curbs being tweaked or removed in the near term”, he said. “Transaction volumes and prices have faced downward pressures as homebuyers have maintained a wait-and-see approach.”

Standard Chartered Bank analysts note that unsold units with pre-requisites for sale this year reached a 20-year peak of 23,000 units. Completed but unsold units reached 1,488, against an average of 800 units in the past seven years.

Noting that developers have bought land this year that could yield 10,500 residential units, the analysts said that developers could buy land enough for between 6,000 and 6,500 units through the GLS programme in H1 2015 – a level still deemed too high.

“We think this would be appropriate only if primary sales rose 25 per cent year-on-year to 10,500 units to absorb the excess land supply from 2014.”

In the meantime, developers may decide to rent out unsold units to ride out this period; some may choose to pay extension fees for qualifying certificates to extend their sales period or set up a separate company to buy the unsold units, Ms Ong of DTZ said.

A looming supply glut is also expected to hit the rental market hard, with older units likely to be worst-hit. Some market watchers have flagged a “supply shock” that would trigger higher vacancies and compress rental yields.

The leasing market in the core central region (CCR) and outside central region (OCR) could be more challenging next year, said Mr Ong of JLL. While tighter housing budgets of expatriates have put a cap on leasing demand for more expensive units in the CCR, the huge incoming supply in the OCR (where 59 per cent of 64,000 units are under construction) will heighten competition for tenants in that region.

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Further declines predicted for private home prices and rents in 2015

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