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Crazy prices and weak fundamentals should keep savvy investors away from property market

Crazy prices and weak fundamentals should keep savvy investors away from property market said the chief mortgage consultant of The Urban Redevelopment Authority (URA) revealed in its flash estimate for 1st Quarter 2018 that private residential property saw the highest quarterly increase in 8 years.  Overall, the private residential property index increased 4.3 points from 138.7 points in 4th Quarter 2017 to 143.0 points in 1st Quarter 2018. This represents an increase of 3.1%, compared to the 0.8% increase in the previous quarter.

Prices of non-landed private residential properties in the property market increased by 5.0% in Core Central Region (CCR), compared to the 1.4% increase in the previous quarter. Core Central Region comprises Postal Districts 9, 10, 11, Downtown Core Planning Area and Sentosa.

Prices in the Rest of Central Region (RCR) increased by 1.1%, after registering an increase of 0.4% in the previous quarter. Prices in Outside Central Region (OCR) increased by 3.8%, after registering a 0.8% increase in the previous quarter.

The flash estimates are compiled based on transaction prices given in contracts submitted for stamp duty payment and data on units sold by developers up till mid-March. URA said that its statistics will be updated on 27 April when it releases its full set of real estate statistics for 1st Quarter 2018.

property market
Image credit: URA

Head of research and consultancy and Orange Tee & Tie, Christine Sun, commented on the private property price increase saying: “Prices of resale homes in CCR have risen more possibly due to pent-demand from savvy investors who are in search of value buys in the luxury segment, given that the price gap of private homes between CCR and RCR is still narrow.”

Paul Ho, chief mortgage consultant at, commenting on the crazy price increase in certain property market segments explained that the luxury segment is split into two portion – the luxury segment and the super luxury segment.

“The luxury segment is actually quite wide, generally any properties pricing above $2,000 per square feet would fall into this classification. In a vague sense, landed properties also fall under luxury segment if we classify them based on housing type,” Mr Ho explained.

He added: “if we based luxury segment based on district, I will go for properties that are more than 10 years old, well maintained and selling at below $1800 per square feet for size segment of around 800 square feet to 1200 square feet. The price quantum is acceptable while there may be potential upside if the prices start to move up.”

All these will ultimately have an impact on home prices and the property market in Singapore.
Mr Ho notes that “CCR has risen less compared to RCR for many years now”, and that the “price differential is narrowing”.

“Either RCR is overpriced or CCR is underpriced. For investors who are looking at superlatives, definitely the best of the best will do. Savvy investors (those who already have more than 1 property) will stay away from the market as the prices are crazy and the fundamentals are weak and there is huge supply in the pipeline.

“Current investors, such as those that bought the New Futura comprise mainly of foreigners. I doubt how they will recover their investment given the low rental yields, rising interest costs.

“I got a sense that it is more a portfolio diversification play given that they feel bullish about the Singapore Property market – given that the malaise of over supply has been digested for many years.

“The situation is nowhere as dire. So, this is more about the confidence and the sentiments. The fundamentals of the Singapore property market remains weak.”

Mr Ho believes that value buys in the property market right now are are landed inter-terrace houses which’s per square feet price on the built-up area is usually less than $1000.

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Written by Ravi Chandran


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