Suburban condo prices poised to fly

FOR more than a year, most private home owners sat out the property boom, watching only the luxury segment soar while the rest of the market stayed flat.

Now, finally, it is their turn to cheer.

Entry-level condominiums in suburban areas - known in the industry as "mass market" homes and which form the backbone of private non-landed housing - are tipped to be hot property next year.

Prices in this segment could rise by up to 50 per cent, according to one consultant's prediction.

"Next year is when the mass market will grow wings and fly," declared Mr Ku Swee Yong, director of marketing and business development at Savills Singapore.

So far this year, suburban condo prices have already gone up by 13.8 per cent. But he thinks they could shoot up a further 30 per cent to 50 per cent next year.

He said this is due to wage growth, job stability and confidence in the economy - factors that matter most to this group of homebuyers, many of whom are upgrading from HDB flats or making their first home purchase.

The current average price of mass market condos is about $700 per sq ft (psf), but this could move up to $1,000 psf next year, Mr Ku added.

A possible lack of new supply in this price bracket may also push up values as the number of vacant units falls, likely to about 3 per cent next year, he said.

Mr Ku also noted that because prices in this segment have lagged behind for so long, they are now growing from a low base. This means that next year, prices are likely to rise faster in this category than in the pricier sectors of the market.

Jones Lang LaSalle's head of Singapore research Chua Yang Liang agreed, saying that suburban homes "used to be largely a HDB upgrader's market" but are now appealing to private home owners looking for cheaper options.

In 2003, private home owners made up less than 30 per cent of all buyers of new entry-level homes. But so far this year, they have accounted for almost 70 per cent.

"The comparatively lower prices in suburban areas and their growing attractiveness to private buyers suggest that the growth of this sector is likely to maintain if not increase over the short term," concluded Dr Chua.

But home seekers need not be too alarmed yet. Other property experts are forecasting a far smaller price increase, saying that buyers at the lower end of the market have smaller budgets and are generally more resistant to large jumps in price.

"While prices are expected to continue to trend north, the rate of growth is unlikely to surpass those in the higher tiers," said Ms Tay Huey Ying, director of research and consultancy at Colliers International.

She predicted that prices will rise by an average of 4 to 5 per cent per quarter next year, or 16 to 20 per cent for the whole year.

This is also partly because the Government tends to watch price movements in entry-level private homes "very closely" and "will likely intervene to prevent runaway prices," said Ms Tay.

Already, the Government has withdrawn the deferred payment scheme for homebuyers in a surprise move last month. Now, homebuyers must make regular payments on their homes instead of being allowed to postpone the bulk of the payouts.

This was seen as an act to discourage property speculation, which is starting to spread to the lower tiers of the market. But some property watchers say it may also have been a signal that the Government is ever-ready to step in should prices spiral out of control.

Hot spots

EVEN in the suburban region, location is everything.Areas that will probably see the biggest price increases next year are those nearest the prime districts of Marine Parade, Bukit Timah and the Central Business District (CBD), said property consultants.

The stretch from Katong to Upper East Coast and Bayshore Road will be in the spotlight, as will the West Coast pocket around Pasir Panjang and the National University of Singapore, Ms Tay predicted. The latter covers developments such as Varsity Park, The Stellar, Blue Horizon and Clementi Woods.

Of all the suburban areas, these two are located closest to the CBD and the upcoming integrated resorts, said Ms Tay. They are likely to benefit the most from spillover demand from the prime districts.

Buyers should also look out for prices of homes in the Upper Bukit Timah and Hillview/Hume Road area, said Mr Ku.

Values in these locations are still at around $700 to $800 psf, "even though these are near to the best schools in Singapore and within two to four km of the $2,000 psf levels achieved in Bukit Timah Road".

Further boosting prices in Upper Bukit Timah is the upcoming Bukit Timah MRT line. Once details are announced, homes from the Old Jurong Road junction to Bukit Panjang are expected to jump in demand, Ms Tay said.

Already, investors have made "speculative buys" amid "rife speculation about the locations of the future MRT stations", she noted.

Homebuyers seeking out the cheapest private homes should look to Yishun and Sembawang.

The median price in these areas is the lowest among all suburban regions, at $473 psf, said Ms Tay. Popular projects include Seletaris, Euphony Gardens, Yishun Emerald and Orchid Park Condominium.

Also in the north, Ang Mo Kio is a likely target for new benchmark prices, said Mr Nicholas Mak, director of research and consultancy at Knight Frank.

This is due to the recent sale of a land parcel to Far East Organization at a record price, which could lead to the project being sold at almost $1,000 psf.

Mr Mak also pointed out that resale executive condominium (EC) units are among the most undervalued mass market properties.

These are targeted at the awkward group of homebuyers who earn too much to qualify for HDB flats but too little to afford private housing. Their budget constraints lead them to bargain down prices, said Mr Mak.

He added that another reason could be that foreigners are not eligible to buy resale ECs that are less than 10 years old.

Because of this lack of foreign demand, resellers price in a "too generous" discount for their flats, assuming the locals have a smaller budget, said Mr Mak.

But actually, ECs are "similar to 99-year leasehold condos" in terms of quality, he pointed out. "In fact, few foreigners buy homes in suburban areas anyway, so resellers should not give this restriction too much weight and price in such a big discount."

Source : Sunday Times - 18 Nov 2007