More difficult for HDB upgraders to achieve their condo dreams?

Contrary to the popular belief that prices have stabilized in recent quarters, the cost of owing a new condo is still high, says Alan Cheong, director of research and consultancy at Savills Singapore, in his Oct 3 report. "The possibility of upgrading to a new home is slipping beyond the reach of many Singaporeans," he adds. Cheong cites the example of new suburban condos that were priced in the $700 to $900psf range pre-global financial crisis now trading at $1,000 to $1,500psf in the resale market.

Units in sought-after locations near MRT stations such as Kovan and Serangoon are being transacted at $1,300 to $1,600psf. In addition, new suburban condos near MRT stations are being launched at more than $1,000psf. "Increasing HDB prices have helped raise the support levels for the private market," he adds.

With interest rates remaining low, and more capital flowing in as a result of QE3," we are cautiously optimistic that property prices may be poised to trend higher, possibly rising by at least 10% by end of 2013", notes Cheong. "Astute international buyers are expected to seek value buys in the luxury market."

A 10% increase in residential prices by next year would be no surprise, judging from the winning bid prices achieved at government land sales, which have risen 27% in the last six months, estimates Cheong. "Developers will have to pass the higher cost back to consumers."

He sees "the influx of such hot money [precipitating] into the formation of property bubbles", which could also mean the implementation of more government cooling measures. He questions the effectiveness of the property curbs in limiting speculative purchases. "The property curbs may not have doused the strong buying sentiment nor subdued the rising prices," he says.

In a report dated Sep 25, Morgan Stanley Research expressed caution in the residential market. With interest in new launches rebounding after a seasonally slow August/September, and the post-QE3 announcement on Sep 13, there is increased risk of further policy action, says Sean Gardiner, managing director of Morgan Stanley Research, and analyst Wilson Ng. However, developers are facing higher costs and a margin squeeze, notes Morgan Stanley. Thus, the analysts are expecting prices to see a 13% decline through 2013.

Source: THEEDGE SINGAPORE

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