Published August 27, 2009

Homes of over $1.5m cut bigger slice of Q2 deals

They make up 22% of total transactions, compared with 10% a quarter earlier

By KALPANA RASHIWALA
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(SINGAPORE) Improved sentiment in the private residential sector has filtered from the mass market to the upper tiers in the second quarter of this year, an analysis of caveats shows.

The proportion of caveats in Q2 for private housing transactions above $1.5-million was bigger than in Q1.

A study by DTZ shows that 22 per cent of transactions in Q2 were for deals above $1.5 million, compared with just 10 per cent in Q1.

Also, the number of transactions in the $1,500-1,999 per square foot (psf) range jumped more than 10 times, from 34 units in Q1 to 369 in Q2. And the number of deals for units costing $2,000 psf or more rose from just 10 in Q1 to 67 in Q2.

Another indicator of activity spreading to the higher end of the market is that a quarter of caveats lodged in Q2 were for properties in the prime districts 9,10 and 11, up from 14 per cent in Q1.

Buyers with private addresses accounted for 56 per cent of private home purchases in Q2, up from 44 per cent in Q1. This reflects a spillover of buying from the mass market to the upper tiers, DTZ said.

Conversely, HDB upgraders' share of caveats lodged for private home purchases slipped from 56 per cent in Q1 to 44 per cent in Q2.

'HDB upgraders have been able to participate in the current home buying wave due partly to the wealth effect brought about by rising HDB resale prices,' said DTZ South-east Asia research head Chua Chor Hoon.

'As well, wages went up in the past few years prior to the stagnation and wage cuts seen last year and this year. As a result, prices of entry-level private condos are generally still quite affordable for HDB upgraders.

'But if developers keep on increasing prices, mass-market private condos will become less affordable again to HDB upgraders.'

DTZ's analysis shows that 75 per cent of total private housing deals involving buyers with HDB addresses were at or below $1 million in Q2, down from 87 per cent in Q1.

Also, 37 per cent of buyers with HDB addresses picked up properties in the $600,001-800,000 band in Q2. In contrast, 60 per cent of buyers with private addresses purchased units costing above $1 million.

DTZ found that buyers with HDB addresses acquired smaller homes than buyers with private addresses.

It said that 77 per cent of purchases involving HDB upgraders were for homes up to 1,400 sq ft, compared with 52 per cent of transactions by buyers with private addresses in Q2.

The property consultancy also said that 88 per cent of purchases by HDB upgraders were for homes outside districts 9, 10 and 11. HDB upgraders bought mostly mass-market condos. Their most popular picks were Mi Casa in Choa Chu Kang and Double Bay Residences in Simei, with respective median selling prices of $633 psf and $663 psf.

Looking ahead, Ms Chua reckoned that activity will continue to filter to the upper levels of the private housing market for the rest of this year in tandem with a general improvement in the Singapore economy.

'As well, most economies seem to have seen their worst and are improving,' she said. ' That will help to bring back more foreign buyers to the Singapore property market.'

Some market watchers said that whether the upper end of the market sees more transactions hinges partly on developers' willingness to launch more high-end and luxury projects.

But Knight Frank executive director (residential) Peter Ow reckoned that the likelihood of a significant pick-up in launches over the next few months in these segments is slim.

'We can see that for the mass-market and mid-tier projects, the take-up rate slows when developers raise prices,' he said.