Private property prices set to keep rising in 2013: Report

And the party continues!

The Straits Times
www.straitstimes.com
Published on Dec 12, 2012
Private property prices set to keep rising in 2013: Report

By Esther Teo Property Reporter

SHARPLY rising land costs, strong developer balance sheets and low interest rates should all combine to make 2013 another halcyon year for the property industry, an expert said.

Overall private home prices are likely to keep climbing on the back of rising land costs, increasing by up to 10 per cent next year, Savills Singapore research head Alan Cheong said in a report released yesterday.

Non-landed mass market homes are expected to see the steepest rise of 10 to 15 per cent, while the luxury market may also enjoy a 3 to 5 per cent price gain, surpassing its previous peak in 2007.

This is because astute buyers will continue to seek good buys in the luxury segment, as prices here are still lower than in Hong Kong, Mr Cheong added.

The property market has enjoyed a banner year, with a record-breaking 19,792 new homes sold in the first 10 months of the year, surpassing the previous high of 16,292 for the whole of 2010.

Executive condominiums (ECs) have also enjoyed a spectacular run, with more than 4,000 units expected to be sold by the end of the year - another record.

Only 3,935 EC units were sold in 2010 and last year combined.

"Due to a significant run-up in private condo prices, ECs will remain an attractive long-term investment asset, with demand probably surpassing that of 2012," the report noted.

But tiny shoebox homes of 500 sq ft or less seem to have fallen out of favour with home buyers.

The proportion of shoebox homes sold, out of all new condo sales, has fallen from a three-year peak of 21 per cent in the third quarter of last year to a low of just 7 per cent in the fourth quarter of this year.

This is also well down from the three-year average of 14 per cent, Savills' noted.

"The downtrend could be due to fewer shoebox units being built. There has also been an increase in demand for larger-sized units in tandem with the growth in wealth here," the report said.

But the overall property market remains resilient and now has "too strong a momentum to stop", Mr Cheong added.

Quantitative easing in the United States should see liquidity flowing into Asian economies like Singapore in search of a safe haven and currency appreciation.

Coupled with rock-bottom interest rates that are likely to remain low next year, some fresh external demand could be anticipated, he said.

However, this may be offset by local buying fatigue from the many new launches over the past years and increasing home completions.

Barring further property measures, total primary sales may hover between 16,000 and 18,000 units next year, less than this year's likely record of 23,000 to 24,000 units, the report noted.

esthert@sph.com.sg

(13-12-2012, 08:14 AM)Musicwhiz Wrote: And the party continues!

With the strong flow of articles on property in the media, it indicating that the peak of a cyclical period is around the corner.

(13-12-2012, 11:04 AM)CityFarmer Wrote: With the strong flow of articles on property in the media, it indicating that the peak of a cyclical period is around the corner.

I don't really agree. Even in 2010 and 2011 there were many such bullish articles, yet prices continued to rise in 2012 despite cooling measures.

It seems like if interest rates stay low and if there is no big global calamity, people will still continue to dance in this property party. Afterall, who doesnt like an asset class that seems to only rise?

(13-12-2012, 11:08 AM)Musicwhiz Wrote:

(13-12-2012, 11:04 AM)CityFarmer Wrote: With the strong flow of articles on property in the media, it indicating that the peak of a cyclical period is around the corner.

I don't really agree. Even in 2010 and 2011 there were many such bullish articles, yet prices continued to rise in 2012 despite cooling measures.

I agree with you. I and a group of friends were just talking over lunch about people were already expecting loan interests to go up, and property prices to fall since 2010. Till now, loan interest still continue to go down, and property prices continue to go up. Our conclusion over lunch is price will continue to trend upwards until 2016, then maybe will see some adjustments from then.

As long as interest rates remain low, the party goes on..

(13-12-2012, 09:59 PM)Hongwei Wrote: As long as interest rates remain low, the party goes on..

Agree. As long as UNCLE SAM QE continues, nothing change.

A bit surprised that Fed has set benchmarks for unemployment (6.5%) and inflation (2.5%). So what happens if these levels ae breached? Potential raising of interest rates earlier than anticipated?

Well i do not want to bet on that. They can move their benchmark anytime as needed.
I remember years back 2% inflation is a concern by Fed.

(14-12-2012, 01:02 PM)corydorus Wrote: Well i do not want to bet on that. They can move their benchmark anytime as needed.
I remember years back 2% inflation is a concern by Fed.

That's true, but my point here is that since they can change their tune so suddenly, what makes everyone so sure that interest rates will be kept low until at least 2014-2015?