While the Singaporean government has been trying to stabilize property prices island-wide since last year, but as Chan Ai Cheng discovers, the strong foreign demand for Singaporean real estate persists.

As far as property market trends go, a robust market is still in play with the various cooling measures not impacting market performance much. In the meantime, house prices have seen a moderating effect take place while prices are not expected to dive further in the year. The following parts of this series will look at the reasons behind the cooling measures as well as the effect on property prices and the people of Singapore.

Surprising Upward Trends for January Private Home Sales

The last round of cooling measures – Additional Buyer’s Stamp Duty (ABSD), announced on 8 December, 2011 and the uncertain economic outlook for 2012 did not seem to have any impact on January 2012’s private property home sales. The month saw an increase of 1,240 private residential transactions, a 196.2% raise from December’s low private homes sales transactions month of 632 units.

This transaction volume of 1,872 units represents a 57.4% upward year-on-year shift from January 2011’s units (excluding EC’s), and 26.2% from the 1,483 units in January 2010. The figures revealed caught many by surprise as the market usually softens during the Chinese New Year period, as home buyers prepare for celebrations. Additionally, many home buyers would have taken a wait-and-see approach especially with the onset of the latest ABSD cooling measure.

In January, the top selling projects were – Far East Organization’s latest Watertown projects in Punggol Central, that sold a massive 770 units with mean prices of S$ 1,169 psf, The Hillier at Hillview Rise (another one of Far East Organisation’s latest project) sold 387 units at a mean price of S$ 1,289 psf and Parc Rosewood that sold 198 units at S$ 951 psf while The Nautical at Jalan Sendudok sold 83 units at S$890psf. The Rainforest (EC) at Choa Chu Kang sold 172 units at S$ 753 psf. Private sales volume in January was mainly sustained by sales in the Outside Central Region (OCR) with the highest record number of transactions at 1,967 in that region since January 2011.

Overall, sales activities were mainly centered in the OCR and RCR and the projects launched had the stamp duty ‘reimbursement’, thus homebuyers’ decision to purchase the private property was not deterred by the additional stamp duty that they had to pay. Additionally, the still-healthy percentage of units transacted in the S$ 1,000 – S$ 1,999 psf range remains strong as developers launch mixed-use projects that are favored by many.

Moderate to Negative Price increase

The rate of increase in property prices has continued to moderate, with private home prices rising just 0.2% in 4Q2011. It was however, projected that the Private Property sector will probably hit a negative price increase in the next few months with the onset of the ABSD. While HDB upgraders will take the opportunity of the price correction to purchase or invest with mid- to long-term perspectives, speculators or investors are taking a more conservative approach and this could have resulted in the consecutive lowest transaction volume in the Core Central Region (CCR).

For 2012, Mr. Ismail, CEO of PropNex, forecasts an overall 5-8% decline in prices for private residential properties in CCR. Mass market condominiums in the Outside Central Region should see moderation as new developments in this area were launched at prices that are sensitive to the cooler market sentiment.

With regards to the most recent cooling measures, the launch prices were more sensitive to the cooler market sentiment. Meanwhile, with regards to the most recent measures, the full impact would only be seen clearly after 1Q2012.

Singapore’s Property Market

Singapore’s property market – like most other major cities in this region – is experiencing a boom time that has lasted for several years now. Strong foreign buying interest is often cited as one of the main reasons for supporting the bullish real estate sector there.

Reinforcing the argument that its property sector is maintaining an upward trajectory, the private residential market ended 2010 at a record high with a 17.6% rise in prices for the year. Volume also hit a record last year with 16,292 units of residential properties sold, compared with 14,811 in the previous peak of 2007.

That the continued rise in property prices could lead to a property bubble is certainly a concern, but it is worth noting that Singapore’s authorities have always kept tabs on prices to ensure a sustainable property market.