Private property prices expected to rise 5%-12%

Private residential property prices are expected to rise between five and 12 per cent next year.

Analysts expect high-end properties to lead the price increase. They say prices in that segment still have room to grow because of the positive economic outlook for 2011.

Robust economic growth forecast of between four and six per cent next year and abundant liquidity are making analysts upbeat.

Karamjit Singh, managing director, Credo Real Estate, said: “The residential market is generally looking very strong, very bright. Having said that, within the various categories, we believe that the mid-prime and prime would do slightly better than the suburban market.

“We see more capital upside in mid-prime, prime. It’s also that segment of the market that has not fully recovered from the all-time peak in 2007, where the suburban market has surpassed and we’re now at historical highs.

“2010 can be considered as a recovery year, where we’re recovering from an economic slump, from a very low base. So the pace of rise of values tends to be faster, quicker. I don’t think it’ll be repeated in 2011, unless there’s an entirely new phenomena that re-prices the property values in general.

“So here we’re talking about a more moderated pace of growth, backed by an overall sense of confidence.”

Industry watchers expect prices in the luxury market to easily push past the S$2,500 per square foot mark.

Donald Han, vice chairman, Cushman & Wakefield, said: “I think the main reason is that Singapore continues to be a very attractive hub for a lot of wealth management centres.

“A lot of the investment banks are beginning to focus in bringing a lot of high net worth investors to park their money here. And as a result, I think some of these amounts will continue to trickle into real estate, and predominantly residential is usually the first stop for some of these investors.

“In addition to that, I think the market has started to see rental increases over in 2010 – rents have gone up by as much as 13 per cent on a per annum basis – and by virtue of the lack of new supply completed in 2011.

“In fact, the number is close to about 6,700 units in 2011, versus an average last 10-year trend-line of 9,700, that is, 30 per cent short of completion. We’ll see a continued increase for rental apartments, and this should be able to push up rentals by at least another 10-15 per cent in 2011.”

Observers expect between 10,000 and 13,000 new private home units to be sold in 2011. In the first 10 months of 2010, over 13,100 private units were sold.

Another segment to watch in 2011 is the enbloc sales market. In 2010, small and mid-sized collective sales, priced below S$50 million, proved to be most successful.

Mr Han said: “I think the momentum will carry on… The borders … will start to be tested. We’re beginning to test now and launching projects which are more than $200 million to as much as half a billion.

“And a lot depends on the state of the market for the residential project marketing. I think moving forward, the market for project marketing will continue to do well. As a result, developers will start to … want to land-bank into the private land supply.

“One of the supplies would be through collective enbloc sales, so continued good performance for collective enbloc. In 2010, we’d probably hit close to $1.5 billion in terms of total sales. We expect this number to double nearer to about $3 billion for 2011.”

For now, observers generally do not expect the government to introduce any additional property cooling measures, at least within the first half of 2011.

But if there is any indication of prices becoming unsustainable, it will be seen either in February or March. Industry watchers say some of the risk factors that could affect the positive private property sector performance here include increased interest rates and higher inflation.

Source : Channel NewsAsia – 13 Dec 2010

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