New private homes to be costlier than resale homes, reversing trends

New private homes typically cost 20 percent more than resale homes, but analysts say this price gap has since narrowed.

Entering into the fourth quarter, new private developments now command just a four percent premium over resale private units, according to data compiled by the Singapore Real Estate Exchange (SRX) which collates transactions by major property agencies accounting for 80 percent of the private sales market.

This premium is expected to increase as developers price in the higher cost of land in their new launches.

When it comes to new private homes, analysts say it’s a buyers’ market.

And that’s why developers have been pricing new private homes “competitively” with marginal increases.

As a result, prices of resale units started catching up earlier this year.

By the third quarter, the median prices of resale homes reached $1,163.45 psf, one percent higher than new homes.

According to experts, resale units are usually near well-established amenities because they are in well-established estates. They are also bigger, in better locations and possibly have ready rental income from existing tenants.

Going into the fourth quarter, some analysts say prices of new private homes have recorded a premium of 4 percent. This works out to a median price of $1,261.24 per square foot for new private homes, compared to a median price of resale homes at $1,204.50 psf.

Lee Sze Teck, Senior Research Manager at DWG, said: “The price gap is likely to widen. We think that the new home prices, perhaps the situation could be reversed. Now you can see a gap between new home prices and resale prices.”

Going into 2013, industry observers expect new private home prices to be some 5 to 20 per cent higher than resale units, as developers pass on higher costs.

Mohd Ismail, CEO of PropNex, said: “Based on the recent land bids, we have witnessed areas like Jurong and Tanah Merah – prices psf ppr by developer bidding exceeding $700. Which means that it will translate to sale prices next year, it will translate to $1,400 psf – minimum. Though today’s median’s prices are only about $1,200 for new launches. It is expected to move upwards.”

Still, higher prices of new homes are expected to boost the value of existing private developments in the same area. And while resale homes come with shorter land leases, the waiting time to move in is also shorter.

Source : Channel NewsAsia – 5 Nov 2012

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