The boom times are back

Singapore’s private property market is on the rise after years in the doldrums.

It looks like the boom times are back for real estate, given strong demand from locals and expatriates alike.

There is talk that it is just speculation behind the frothy market, with reports of investors flipping purchases for hefty profits and anecdotal evidence of wealthy expatriates snapping up a half dozen or so luxury apartments at property launches.

Sellers have not been complaining, with prices of non-landed private properties in the heart of Singapore’s prime area up by 17 per cent last year, while prices outside that area are up between 3 per cent and 4.2 per cent.

New property launches are also giving their older neighbours a boost, with reports that the asking prices of existing developments have jumped by between 10 per cent and 50 per cent in the space of weeks.

Secondary market prices for the Caribbean at Keppel Bay were pegged at around $1,000 per square feet (psf) early this year.

But when the neighbouring Reflections at Keppel Bay launched at $1,900 psf, it sent the asking prices for the Caribbean up to the $1,200 to $1,500 psf range.

The bulk of the price increases have been in the luxury segment, but that is expected to filter down to the rest of the market, with some analysts tipping as much as a 20-per-cent increase in prices this year.

While there may be a speculative element to these price gains, data also suggest there is strong underlying demand for property — and that demand is set to grow in the next few years.

According to the 2003 master plan from the Urban Redevelopment Authority, the country’s land-use planning agency, there are 324,000 homes in what it defines as Central Singapore.

Stripping out public-housing flats from the Housing Development Board in the region — about 196,000 — leaves about 128,000 private condominiums and houses in the Central region.

That is not very many, when you consider there are 55,000 high-net-worth individuals — those with net assets of at least $1.5 million, excluding their primary residence — in Singapore, according to the 2006 Merrill Lynch/Capgemini report.

The current supply of properties looks even smaller given there are about 140,000 households with monthly incomes of above $10,000, according to the Government’s 2005 household survey.

At the very least, this suggests the current supply of private property in the central area should be met by demand.

But there is also demand coming from people who have participated in en bloc sales, from those pocketing windfalls from the booming stock market amid relatively low mortgage rates, and from foreign investors in the property market.

Even more demand can be expected given Singapore’s plans for an eventual population of 6.5 million, from about 4.5 million now. The total population grew about 142,000 or 3 per cent last year, helped by the Government’s efforts to woo skilled foreign workers.

Expatriate workers have already helped push rentals to their highest levels since 1999. Demand from this group will increase — last year Singapore’s non-resident workforce grew about 10 per cent, and there were about 90,000 skilled workers and professionals among them.

Savills Singapore says rents for private homes were up 18.5 per cent in the past year. Citigroup thinks rental rates could rise 30 per cent to 40 per cent this year as occupancy hits record highs.

Recent data show a shortage of supply looming with the number of private residential units due for completion at just 5,000 this year and 7,000 in 2008, according to Citigroup.

Last year, there was demand for 9,000 units, while 10-year average demand is at 8,000.

All told, local and foreign demand for private property in Singapore is set to grow, which, coupled with shortages in supply, put the real estate market on a path for red-hot growth over the next few years.

Source: Weekend Today, 21 April 2007

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