Residential property prices could rise 10-13% in 2007

Singapore‘s high-end home market is looking at a potential capital appreciation of between 10 and 13 percent next year due to strong demand by corporations and new overseas buyers.

This is according to the latest outlook by property consultant Jones Lang LaSalle.

It says while there are some pockets of speculative buying, the situation is not getting out of hand. Private residential property in Singapore is seeing strong demand with buyers coming from China and India, and most recently, even corporations.Chua Yang Liang, Head of Research Singapore, Jones Lang LaSalle, says: “The corporate buyers were quite high in the 1990’s. Since the Asian crisis, it has actually dropped. But just this quarter, it started showing signs of stronger growth. And we forecast it’ll continue to increase.

“Corporate buyers are buying for corporate needs – to house their CEOs, their top executives. But there’s also an emerging class in terms of downtown living concept. It’s still relatively new in Singapore. The likes of Manhattan living is still not quite seen here except The Sail, The Marina Bay Residences. So with such niche projects, especially those in Sentosa, you’re seeing a lot more latent demand.”

Analysts say Singapore’s growing foreign direct investment is heading directly into the real estate market, propping up demand for the city’s office and high-end residential market.

On average, private home prices rose 7 percent on year in the third quarter.

Some very niche projects in the Marina Bay and Sentosa areas even saw prices doubling.

But observers say indicators of speculative buying such as subsales, or sales transacted before the properties are fit for occupation, have been limited.

“Analysts define property bubble as a widespread kind of speculation behaviour across all sectors. And then of course, you have to look at subsales. In Singapore’s context, we’re looking at flip sales, how fast it is, what’s the volume. What we’re seeing right now is very isolated, isolated particularly to certain districts. So I wouldn’t call it a bubble,” says Mr Chua.

But analysts say there could be some speculative behaviour in the central districts of 1, 2, 3 and 4, which includes Sentosa and the Raffles Place area.

They say for the first 9 months of this year, they are seeing the number of subsale transactions amounting to as much as 20 percent of the total transactions within these districts, compared to only 4.2 percent islandwide.

Even in the prime districts of 9, 10, and 11, subsales in the same period made up only 4.1 percent of the total transactions within the districts.

Still, analysts say niche waterfront and downtown living projects are new in Singapore and so there is no clear benchmark as to what the potential capital upside could be.

According to Urban Redevelopment Authority’s residential property price index, home prices saw a 2.5 percent increase in the third quarter this year – the largest quarterly increase in more than six years.

Source: Channel NewsAsia, 13 December 2006 

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