(B.3) Residential rental growth to ease later part of the year

The constraint in demand-supply of residential properties may push residential rents up by 5% to 15% this year until higher supply of new units materialises from late 2008 onwards. This is against a backdrop of a robust rental growth of 40% year-on-year in 2007.

In other words, while demand to rent residential properties may continue to be strong, the rent amount may not increase by much due to supply of ready units.

Resistance from tenants and companies to higher rents has been evident recently with landlords taking longer time to find tenants. Moreover, housing allowances for many foreign tenants have been capped and as such the frenzy seen last year in the rental market is unlikely to repeat itself.

About 8,400 new private homes will be completed this year. But the number will expand dramatically in the three years from 2009 to 2011, with an estimated 16,000 to 17,000 units completed each year.

(B.4) Landed property transactions went down but prices stay firm

As of last year, there were only 650 units of new landed homes released into the primary market. This is the prime reason why despite all the quietness in the private resale market, landed homes are still selling well and sale prices generally held firm.

Another important reason is because most landed home buyers are owner-occupiers. Below shows the detail transaction records of landed property in the first quarter of the year.

There were 474 landed property transactions between Jan 2008 and March 2008. Out of which 57 were bungalows; 121 semi-detached houses; and 296 Terrace houses.

Table [6] Performance of Secondary Landed home sale in 1st Quarter of 2008

Source of data: URA website

Compared with the 4th quarter of 2007, there was a 48% drop in the landed property transaction in the first quarter of 2008 over the last quarter. Buyer’s sentiments have definitely been dented by the lingering global financial market worries. However, a closer look at the transacted prices and median prices show that the underlying demands are still strong, pending a clearer picture of the market situation.

Analysis of Detached houses transactions in Q1

Table [7] Across the whole island – Detached house sale price analysis

From the above table, it is not difficult to see that the median psf land price for detached houses [across the whole island] actually rose despite the thinner sale volume recently. It could mean that underlying demand is still strong amidst strong economic fundamentals. The demand/supply situation continues to favours landed property sellers.

Table [8] District 10 - Detached house sale price analysis

Though the detached house transactions in District 10 have gradually declined over the last three months, the sale prices are holding up well. Unit land prices are likewise stable. Let’s look at detached houses in District 15 which is the second most popular location for home buyers.

Table [9] District 15 - Detached house sale price analysis

It’s the same story over at District 15 with the steady price trend and reduced sale volume.

Table [10] Across the whole island –  Semi-detached house sale price analysis

For semi-detached houses, the median sale price has inched up throughout the island from $1.97m to $2.25m, though the median unit land price has dropped from $650 psf to $586 psf. This could be due to more semi-detached house transactions in Districts 10 and 15 (five houses in each district) and more transactions involving houses above 3,500 sq ft (16 of them) and fewer smaller semi-detached houses. [Larger land size tends to produce a lower unit land price].

Table [11] District 10 – Semi-detached house sale price analysis

The number of transactions of semi-detached houses declined over the first three months of the year. However, in general, prices remained strong with the median prices hovering above $4 million a house and median land price at above $1,000 psf.
Table [12] District 15 – Semi-detached house sale price analysis

Likewise, the price trend in District 15 mirrors that of District 10.

Table [13] Across the whole island –  Terrace house sale price analysis

The price trend for terrace houses across the island is consistent with those of detached houses and semi-detached houses. While the transaction volume has declined over the three months, the prices remain stable with median prices hovering above $1.3m for a terrace house and median land price progressing from $669 psf to $704 psf.

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