Even as developers gloat all the way to the bank with their new projects continuing to fetch stratospheric prices, a little remarked fact is that it has led to an oxymoronic development in the industry — pricey new launches that are “affordable”.
Despite the fact that prices for many of these new projects are hitting 10-year highs such as the nearly $1,700 per square foot (psf) prices seen at the recent launch of The View @ Meyer by the Guocoland Group, experts say buyers are drawn to such projects because they are more “affordable” than older, resale projects.
“In contrast to the rush for new launches, the resale market is still lagging behind a lot so there is a dichotomy in the market,” said Mr Vasu Menon, chief editor of online bank FinatiQ.com
“Even though these new launches have higher prices per square foot, people are rushing to them because they are much more affordable as they don’t have to stump up the full amount like they have to in resale property transactions — they just need to put a small down payment,” he added.
Since the economy picked up two years ago, one of the first sectors to benefit has been the luxury segment of the residential property market where nearly every launch has seen most of the units being snapped up in weeks if not days.
Upmarket property launches such as City Development’s recently launched One Shenton are invariably accompanied by frenzied lines of consumers rushing to leverage on what they see as an opportunity to get into the market at prices that are still 30 per cent below that of other Asian capitals like Hong Kong.
Still, prices in the luxury segment have risen by 40 per cent on average, the result as much of a strong economy and positive consumer outlook as of media hype, say experts.
Earlier this week, property entrepreneur Simon Cheong made headlines when he was quoted as saying that units at his upcoming freehold project on Patterson Hill would be more expensive than his other projects in the Orchard Road area — The Ladyhill and Boulevard Residence. Units at the latter two, which were launched at $1,500 psf, have hit more than $2,000 psf.
While a little bit of “irrational exuberance” exacerbated by media hype may have contributed a little to the high-end property price hike, there are genuine reasons too such as low unemployment figures, a positive economic outlook, a strong equity market and stabilisation of interest rates.
“I don’t see the buying momentum being reined in just yet because the economy is doing well, interest rates have peaked and are unlikely to go up and there are fewer job losses,” said FinatiQ’s Mr Menon.
But, he said, the stock market bull run mainly benefited the fund managers not retail investors. Also, many people had stayed away from the property market as they were not sure how the market was turning. But now, with high-end prices having gone up so much people are “afraid of missing the boat and are leaping into the property market”.
But, he cautions, this may not be for the long term. “The short term still looks positive for the next six to nine months but beyond that it depends on how the US economy does and where our economy is going in the next two to three years,” said Mr Menon.
Source: TODAY, 20 January 2007