The economy is in turmoil and that's a fact. However, it doesn't necessarily spell the end to consumer spending especially in the real estate arena, since enough evidence has emerged that interest and demand is widespread. PropertyGuru, Singapore's leading online property portal finds the best property deals and opportunities that have emerged from the adversity.

2008 saw the world stand still as it watched the credit crunch climax into a financial tsunami. With the global meltdown of giant financial institution Lehman Brothers and the near- collapse of both insurance giant AIG and Citigroup, the rippling effects where felt everywhere. Singapore was not spared, neither was its real estate industry.

The Real Deal

As the economic gloom seeped into the Singapore property market, cautious investor sentiment took hold, leaving the property investment market subdue in 2008.

According to the fourth quarter 2008 report released by real estate firm CB Richard Ellis (CBRE), "In stark contrast to a record high of 14,811 new homes sold in 2007, only 4,300 4,400 new homes were sold in 2008. Preliminary estimates for the fourth quarter URA residential price index showed a decline of 5.7%, which translates to a total fall of 4.3% y- o- y, after a 31.2% increase in 2007."

Private residential prices fell 4.7% after rising 30% in 2007. Prices of non-landed properties fell by some 6.3% in the fourth quarter, compared to a decline of 2.5% in the previous quarter.

The decline in sales volume was also mirrored in the secondary market. CBRE noted that some 7,400 7,600 resale transactions and 1,600 1,650 sub- sales were recorded in 2008, a far cry from the 20,985 resale transactions and 4,863 sub- sales seen in 2007.

The luxury market also started to move at a slower pace. In 2008, a total of 49 "Good Class Bungalows" (GCB) worth $785 million were sold. By comparison, 87 GCBs worth $1.15 billion were sold in 2007 says CBRE in its 2008 Luxury Residential report.

The plummeting home prices coupled with the shrinkage in sales volume clearly reflected a loss of confidence in the market from all vantage points. Developers were hesitant to launch new projects because of the expected lukewarm response from homebuyers and the difficulty of pricing their projects in a down market.

PropertyGuru, Singapore's leading property portal, saw home-hunters' behaviour change with searches for condos above $1m declining 21% over the last 8 months - as shown below.

Condo Searches - For Sale	Jun-08	Feb-09	Change
$0k - $600k	27%	28%	7%
$600k - $1m	51%	54%	6%
$1m - $2m	17%	15%	-13%
Over $2m	5%	2%	-51%

Source: PropertyGuru.com.sg

Comparisons of rental asking prices by PropertyGuru's agents for seven popular Singapore condos also supported the cooling market conditions - with up to 27% decreases in asking price in one case over the last 12 months.

As Singapore's economy slid into a technical recession from the third quarter of 2008, potential buyers stood on sidelines all the more, in anticipation of further uncertainty.

Mass Market - Priced to Sell

Plagued by the terms "soft" and " gloomy", as well as a sombre January confirmed the lull that many market watchers, property industry players, analysts and home buyers had expected in 2009.

A Credit Suisse and DBS report predicting100,000 to 200,000 employee-retrenchments in Singapore over the next 2 years as well as the Singapore Government re-forecast of the 2009 GDP figures three times in as many weeks in January signaled a bumpy ride for the year.

As everyone scrambled to figure out their contingency plans, an interesting turn of events in the mass market segment took everyone by surprise.

When Roxy Homes decided to go ahead and launch Nova 88 in Balestier in January, some 500 visitors thronged the showflat and even flocked to re-launches, indicating interest amongst home buyers was still strong.

The property market further defied the downturn in February with the successful launches of Caspian by Frasers Centerpoint Ltd (FCL) and Alexis Alexander by joint venture partners Yi Kai Group and Fission Group.

Adding some buzz to an otherwise quiet market, FCL reported within weeks of the launch that 65% of its 712-unit Caspian condominium near Jurong Lake had been snapped up whilst the 293-unit Alexis Alexander was a sell-out.

Caspian's first 250 units - priced at an average of $580 psf- sold like hot cakes within days indicating that when priced attractively, sales will be closed.

Taking advantage of the recent surge in buying interest and motivated by Caspian's and Alexis' success, more developers have decided to backtrack their "wait and see" attitude and move forward with launches.

Expected soon are the launches of Coastal Breeze Residence at Pasir Ris, Double Bay Residences in Simei, The Beverly at Toh Tuck Road, Waterfront Waves in Bedok, Oasis@ Elias, The Gale on Flora Road in Upper Changi and Ascentia Sky on Alexandra Road.

Taking pricing cues from Caspian and Alexis, most of these projects are expected to be priced within the $600-plus psf range.

"...those where the prices are below the $1000/ sq ft, and especially for those below the $800/sq ft, already there are many HBD upgraders who are prepared to look into this market because it's a buyers' market. Developers are also very sensitive to this and they are pricing it right to clear their stock," said PropNex's CEO, Mohamed Ismail in a recent interview with PropertyGuru, Singapore's leading property portal.

"The response is very encouraging in today's market. It goes to show that there's still demand in the market, as long as the project is priced attractively..."reiterated Peter Ow, Executive Director, Knight Frank in an interview with The Business Times.

However, developers are not stopping there. Determined to close deals, many are getting creative with their marketing strategies, throwing in more upmarket features to entice buyers such a pool views, deferred payment schemes, absorbing stamp and legal fees, renovation vouchers, private lifts and full-length kitchen windows.

Red Hot HDBs

Another segment not dampened by the recession is the Housing Board homes or smaller HDB flats.

In fact, the current economic gloom seems to have added to their allure say property experts.

According to statistics from HDB, January's quarterly sales of three room and smaller flats received more than 11 applications for every flat on offer.

New flats are also proving to be popular. HDB noted robust demands in its late-December build-to-order (BTO) units at new projects Punggol Regalia and Sunshine Court in Choa Chu Kang.

Analysts say the recent trend was expected given that buyers tend to favour smaller flats during uncertain economic conditions as they don't want to over-commit but at the same time still need a place to live. Four-room flats are usually best suited for majority of Singaporean families.

Smaller flats have generally also been highly sought after because they are ready to move into and are usually established in good locations.

Another emerging trend identified by industry analysts was the narrowing of the price gap between four and five room flats. Five room flats as well as executive units are soon expected to start selling below value so prices will come down sooner or later thus, contributing to the narrowing price gap.

In a recent interview with PropertyGuru, PropNex's CEO Ismail Mohamed said, "...public housing market will not be affected at all because the demand is far greater than the supply that is available right now. And as such public housing is expected to do well especially the smaller flats of public housing-- the 3 bedroom and 4 bedroom is expected to increase by 5-8% in 2009. I'm expecting the smaller flats to increase by 5-8% and the bigger flats 3-5% (5 room and executive).

Lukewarm Luxury

Luxury sales activity is expected to remain tepid in 2009 similar to the pace in the second half of 2008.

In its 2008 Luxury Residential report, CBRE predicts a 10-15 % dip in luxury apartment/condos this year as well as a 10% drop in price of GCBs.

"...When times are good, buyers are willing to pay a premium for a GCB. However, in the midst of a downturn like now, buyers will be looking to pay market rate. Fire sales will be hard to come by as most of the GCB owners have the capacity to hold," noted Douglas Wong, CBRE Director of Luxury Homes.

The only action that the luxury market might experience this year would be developers attempting to clear unsold units in projects that were already launched earlier which, according to CBRE, would inevitably lead to price cuts.

Fiery Sales

In the cooling property market, some 2006/2007 property speculators over-stretching themselves and a number of recent new project launches, has led to the come-back of "fire sales".

Whilst there are no formal definitions of ‘fire sales', most experts deem this to mean at least 10% lower than the latest bank valuation or last transacted price for the same/similar unit.

PropertyGuru has recently launched a "Fire Sales" section to address this burgeoning segment. The tool essentially aims to help agents promote and dispose of their property rapidly and to help consumers find these bargains.

As experts expect the current economic climate to spark off more fire sales, this is proving to be the fastest growing section for PropertyGuru.

Just Looking!

Recent PropertyGuru stats show that approximately 65% of home-searchers are actively looking for "properties to buy". This is evidence enough that despite the sluggish economy, latent demand is still there - even if some are still only focused on bargain-hunting, researching the market and/or monitoring the value of their own home.

 

 

Source: PropertyGuru.com.sg

Whilst the East Coast remains the most popular location for PropertyGuru's users, searches in districts 19 and 20 (Serangoon / Thomson area) and 22 to 24 (West) have grown 35% and 10% respectively. Two of the major property hotspots of 2007, the core central region (districts 1 to 8) and Newton/Bukit Timah areas (districts 11 and 21), have seen their popularity decline by 6% and 14% respectively.

Online Opportunities

At such uncertain times when market sentiments can change at the blink of an eye, the most effective way to keep track of the best property deals and get the latest information in real time is online. This is the key reason why the real estate industry is ditching more traditional forms of information medium such as newspapers and turning to the internet.

 

 

Source: PropertyGuru.com.sg

 

Despite the cool property market, PropertyGuru has seen its users grow tenfold over the last 12 months. The drivers for the continued rapid increase in consumers moving online for property search boils down to what PropertyGuru terms as the "5 x Cs"

• Connectivity - With high-speed broadband access becoming the norm at home and work enabling consumers in Singapore and overseas to easily go online 24x7. IDA estimates household broadband penetration in Singapore has reached 99%.
• Convenience - Consumers are able to access the information whenever and wherever they are.
• Content - More relevant and detailed information that can be provided online including multi-media rich (photos, videos, animation, graphics) content. This makes the research and decision making process easier and faster.
• Customized - Information can be easily tailored to meet the consumer's specific areas of focus. It is not mass market and generic that traditional media provides given the lack of interactivity and personalization.
• Control - Consumers like to be in control. The Internet allows this.

By focusng heavily on the "5xCs", PropertyGuru is able to provide a faster, more convenient, personalized and relevant information service to house-hunters to help them make better decisions, faster.

Benefits are not only reserved for consumers but advertisers as well. Advertising online does not only allow a company to get exposure and leads but also allows them to narrow their target audience, promote their brand internationally and most importantly to measure Return of Investment (ROI).

"Online advertising offers a very compelling value proposition because it gives marketers a bigger bang for their buck," says Evan Neufeld, comScore vice president of advertising solutions.

"Not only does online marketing have the benefits of more attractive advertising rates and a faster growing retail channel, but it's clear from the results of our studies that Internet marketing also generates incremental sales in retail stores."

Online advertising is today a $3.2 billion industry and growing rapidly in Singapore as marketers cut budgets and focus more closely on return on investment.

Property advertisers not only get exposure and leads through a website like PropertyGuru which gets some 7 million page views/month, but are also able to gain from accessing partner sites like Yellow Pages and eBay.

Non property advertisers (e.g. financial services, retailers, digital products/services, automotive, travel etc.) are able to promote their brand and products in a highly targeted and measurable way to a large affluent consumer base in Singapore and overseas.

Looking Forward

House hunting season has really only just started this year in Singapore following Lunar New Year festivities and the government budget announcements. From the looks of things, buyers are expected to remain active in the market albeit keeping a cautious attitude, swooping in at the right time to scoop up good deals at appealing locations provided developers continue to price their projects right and dangle attractive carrots in front of them.

As home prices continue to fall gradually for a few more months, the three key factors that will affect home sales in 2009, according to property experts, will be interest rates on housing loans, jobs and pricing.