Our checks across the property market segments suggest that primary home take-up rates continue to be strong, even as launch prices at some new projects are close to last cycle’s peak prices. Availability of low short term mortgage rate is keeping investor interest high in this market. Interestingly, we noted that valuation mismatches and weak rental yield seem to be already stalling the momentum in secondary home sales. Banks are now offering valuations that are 10-12% lower than the asking prices of home owners, restricting funding for completed homes.
Primary market: Good take-up rate continues
Take-up rate at new launches this weekend were healthy, but slightly lower WoW.
High priced “Volari” sold 55-60% of total units, and mid-market “Waterfront Key” sold 60% of launched units. High-end “360 Skyline” sold only 8% of all units.
Better demand was for smaller units, with buyer profile being local. Investment interest has risen, given price momentum and lower mortgage rate availability.
Prices at some newer launches are closer to/higher than previous cycle peak prices e.g. “Ascentia Sky”, “SilverSea”, “The Gale”, “Volari”, and “Waterfront Key”.
Our visits to a number of new projects launched this weekend (17-19th July) suggest that take-up rates still look healthy, although slightly weaker than last weekend. The surprise was the good demand seen for CDL’s newly launched high-end condo project, Volari, were 43 units (50% of total) were sold by Sunday noon, despite a rather large ticket size (S$2.6m, for a regular two bedroom unit). Buyers at all these projects are largely local. Investment related interests have risen significantly, helped by the rather low mortgage rate currently available, and the improvement in economic activity expected with the start of the Integrated Resorts in 1Q10.
Interestingly, we note that some of the new projects that have been launched in the last two weekends are at prices that are close to previous peak transaction prices (from similar condominium in their location). Projects that have crossed previous peaks include “Ascentia Sky”, “SilverSea”, “The Gale”, “Volari”, and “Waterfront Key”.
Secondary market: Expectation mis-match, momentum slowing Checks on secondary market suggest that seller expectations have risen significantly – Asking prices are ~20-25% higher than last transaction prices.
Bank valuations are now 10-12% lower than seller’s asking prices
Activity was brisk, but property brokers mentioned that volumes are lowering.
Furthermore, to assess the state of the secondary market we did home viewing at a few condominiums across Singapore, this week. These included, Citylights, The Sail@ Marina, The Metropolitan, Park Infinia, The View at Meyer, Pebble Bay, and Costa Rhu. The asking prices are now 15-25% above the last reported transactions prices in these condominiums. Some asking prices are even very close to previous cycle’s peak transaction levels in the said condominium. This, we understand from brokers, is now deterring buyers, and that the expectation mis-match has increased in the last two weeks.
More interestingly, we also checked with the valuations being offered by the various banks for the same units. Based on our checks, we note that bank valuations are now 10-12% below the asking prices of some of the home owners. Foreign banks, we understand, have become very stringent in the valuations being offered, while the local banks are still ready to negotiate on the valuations and adjust where differentials between original valuation provided and the proposed transaction price is less than 5%.
Rental market: Yields in the 3.0-3.5% range Checks on the rental market suggest that asking rental yields are in the 3-3.5%.
This is still higher than the short tenure floating mortgage rates being offered by banks, but more in line with the longer tenure (1-3 year) fixed rates.
Bulk of the home financing is happening at the shorter end of the curve, suggesting risk, if short-end SIBOR/SOR move upwards.
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