Mass market home prices average $1m

Straits Times: Fri, Sep 23
AVERAGE prices for mass market flats in suburban areas have surpassed the psychological threshold of $1 million, according to a new study. Values for new and resale private homes in the three months to June 30 averaged $1 million, up from about …

AVERAGE prices for mass market flats in suburban areas have surpassed the psychological threshold of $1 million, according to a new study.

Values for new and resale private homes in the three months to June 30 averaged $1 million, up from about $970,000 in the same quarter last year, according to data compiled by Mr Ku Swee Yong, chief executive of International Property Advisor, and the Singapore Condo agency.

There were 3,931 sales made in that period with sizes averaging 1,157 sq ft, making the average price of about $880 psf, the report said.

Mr Colin Tan, head of research at Chesterton Suntec International, noted that the $1 million mark is a psychological threshold – developers have been reluctant to price their projects above that limit because they believe it is difficult to push homes at that price.

However, with prices of suburban properties inching up in recent quarters, Mr Ku said, crossing $1 million was a ‘foregone conclusion’.

He added that with prices of Housing Board (HDB) flats continuing to rise, upgraders, who make up a sizeable portion of private home-buyers, are more willing to spend on their new flats.

Senior manager for Asia Pacific research at Cushman and Wakefield, Mr Ong Kah Seng, noted: ‘One factor could be that developers have already paid out a certain amount for land and that’s why they are pegging their prices at that level. Also, the new homes could be built with more premium features to justify the increased price.’

Singaporeans typically make up a large percentage of suburban home-buyers, but Chesterton’s Mr Tan said foreigners are increasingly keen on units on the city outskirts.

‘Singapore is becoming a well-established safe haven for people looking to invest their money.

‘But with the strengthening of the Sing dollar, it could mean that foreign investors who would typically have their eye on mid-market homes are now also considering mass market suburban homes too,’ he said.

The other psychological barrier – $1,000 psf – is one of the final frontiers left to cross for suburban properties, say analysts.

Several new suburban projects, including euHabitat at Eunos and The Luxurie at Sengkang, have already inched up to or past that psf threshold.

But experts say those are outliers and it is unlikely $1,000 will be the new average psf price seen across the board.

Cushman’s Mr Ong said that while buyers will still be interested in projects with distinctive selling points, there may be a mismatch between sellers’ expectations and home-buyers’ willingness to pay such prices.

Economic uncertainty is keeping some home-buyers at bay, but Mr Ku pointed out that if Singapore’s economy keeps growing and the global situation remains stable, then average psf prices could rise.

Suburban neighbourhoods of Punggol, Sengkang and Pasir Ris will see about 28,000 new homes, public and private, over the next five years, according to Mr Ku.

But market experts do not expect prices to soften much in response.

‘I don’t think we will see the average transaction price and average psf prices come down, especially when interest rates are so low and there’s still liquidity in the market,’ he said.

Cushman’s Mr Ong also noted that even in the event of a slight price correction, opportunistic buyers will be quick to snap up flats, taking prices back to previous levels.

He added that suburban mass market units are generally considered the most affordable private homes, so crossing the $1 million barrier could raise concerns about affordability among buyers ineligible for public housing or executive condominiums.

WHAT WILL AFFECT DEMAND

1 Increased supply in areas of Punggol, Sengkang and Pasir Ris

2 Economic uncertainty

3 Continued interest from foreigners
Source: The Straits Times © Singapore Press Holdings Ltd

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