Thursday, December 11, 2008

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High-End Condos fared worse than Mass Market Condos

Credo's study shows that average prices of high-end projects generally posted declines, ranging from 12%-28% during the period. In contrast, the average prices of units in selected projects in the mass market generally rose 1%-7% between second-half 2007 and second-half 2008.

What goes up faster will come down faster

Market watchers note that high-end residential property prices climbed much earlier during the bull-cycle and the price gains recorded were also much steeper. In contrast, mass-market home prices have lagged. 'So what goes up faster during the bull-run also tends to fall faster during the downturn; its physics,' as one seasoned residential property consultant put it.

High-End Condos' Demand More Elastic

Credo Real Estate managing director Karamjit Singh feels that high-end condo prices tend to be more elastic in relation to property cycles compared with mass-market projects. This is partly due to differing buyer profiles in the two segments. 'Suburban condo buyers usually make their purchases for their own use and less as a tool for investment or speculation, unlike buyers in the high-end segment,' Mr Singh says.

'Prices are not a perfect science at the high-end due to the profile of the rich and foreign buyers who make up a good proportion of demand. They're less price sensitive and the products are less homogeneous; if there's something they like, even if it is priced at a premium, they're quite happy to buy it,' Mr Singh says.

Mass Market Buyers for own occupation

Agreeing, another property consultant says that during the downward slide, 'investors, if they need to keep themselves liquid, will exit. In many cases, they may still make a profit even if price drops, as they entered the market early. But even if they need to cut losses, they will. Suburban home buyers, however, are likely to have purchased for their own occupation or upgrading, so they can't sell so readily.'

Global crisis impacted the rich much more than the man in the street

Credo's Mr Singh points out that the dramatic volatility in high-end prices over the past three years has also been shaped by the large number of prime district en bloc sales in 2006-07. This led to a chunk of the physical stock being withdrawn and driving high-end prices up astronomically. On the flip side, this global crisis in 2007-08 has actually impacted the rich much more than the man in the street, thereby dampening demand for high-end homes.

High-End Property Price Fell 12%-28%, Mass Market Condos Up 1%-7%

Credo's sample looked at Four Seasons Park condo, Ardmore Park and Cairnhill Crest in the Orchard Road belt, which showed average transacted prices fell 27, 12 and 17 per cent respectively in H2 2008 over H2 2007.

At Sentosa Cove, Credo's sample basket comprised The Azure, The Berth and The Oceanfront condos. The declines were 22 per cent for The Azure and 28 per cent for The Oceanfront. The sole unit transacted this half for The Berth was at $1,590 psf, down 5 per cent from the $1,679 psf average price achieved for 20 deals in H2 last year.

In the city centre, the average price at Marina Bay Residences fell 17 per cent to $1,985 psf in H2 2008 with five deals done. At The Sail @ Marina Bay, the average price slipped 14 per cent to $1,811 psf, with 42 deals in H2 2008.

In the mid-priced segment - defined as the low-$1,000 psf price range - One Amber, Sky@Eleven and The Tessarina - saw average transacted prices fall 19, 21 and 17 per cent respectively.

However, suburban Singapore demonstrated greater price resilience. Average transacted prices of eight of nine projects studied in the west, east and north posted 1 to 7 per cent gains in H2 2008 over H2 2007.

Trends to continue to 2009

Credo's analysed caveats captured by Urban Redevelopment Authority's Realis system up to early November. 'We selected projects we felt symbolise their respective location-based categories, are large enough with sufficient transactions relative to the project size to reflect a clear trend, and were ideally not affected by en bloc sales initiatives last year as that could distort price patterns,' Mr Singh explains.

Property analysts generally expect the trend of high-end home prices being less resilient than mass-market prices to continue in 2009.

Price gap between high-end property and mass market will eventually close

However, DTZ executive director Ong Choon Fah argues that the decline in the high-end segment has to slow down at some stage. 'There has to be a price gap between the mass-market and high-end; otherwise, we'll start seeing a trade-off and demand may shift to the upper segments under market dynamics,' Mrs Ong says.

Extracted from Singapore Property Forum

May also want to read:
Spore High End Properties merely High-Priced
99 Leasehold Property: Calculation of Depreciation Rate based on Singapore Land Authority Data
Spore Property History 1960-2008
Property Repricing Expected After Jan's Singapore Budget


Anonymous said...

High & mid-end price falls is common sense. Speculation is the predominant factor and sentiment evaporates first. This trend will most likely continue as the recession drags on.

Low-end market, whose resilience is due to the relative absence of speculation, will also likely break once the 'real' recession hits potential HDB upgraders' jobs, bonuses and salaries. Its still early days as far as the 'real' recession is concerned. Wait and see.


Lucky said...

Property buyers looking at the mass market should remember that private property price has fallen across the board, including mass market condos. The above study shows year-to-year comparison but it is the latest statistics that's indicative of things to come - Mass market condo prices are also falling.

Anonymous said...

I think everybody will be surprised how the mass market condo prices will hold high. There are still some unpolished gems in the west area which are extremely good in terms of investment.With the the new ITE institute coming up near choa chu kang, the potential i feel is extremely good

Anonymous said...

Care to explain how ITE will attract the valuation of mass market properties?

Smart Buyer said...

From my own experience, ITE doesn't really change the valuation of mass market properties much. What are your views?

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