Prime residential prices may increase 18% by end of 2010

Based on the UBS Investment Research, launch prices for newly built private houses has increased by 18% and 10% in mass and prime districts respectively during the first half of 2009.

As foreigners start to purchase and the interests continue to improve, analysts Michael Lim and Regina Lim are now anticipating that the prime prices will increase by 18% up to 2007 and will peak by the end of 2010. However, luxury prices are not likely to reach the $4,000 to $4,500 per square foot levels perceive in 2007. Nevertheless, due to the locals’ fervent purchasing, mass prices have reached the 2007 peak, and there is a possibility that these prices will stagnate at present levels. According to the analysts’ report last Aug 24,”For mass market launch prices, we believe they could stagnate at current levels after rising around 20 per cent in 2009”.

It has also been showed in the study of the UBS that this year, the demands for private houses are coming from the local buyers. During the first 7 months of 2009, the developers have managed to sell more than 10,100 units, mainly in mass market condos where purchasers are mostly Singaporeans.

Based from the report, “In H1 2009, we saw a sharp increase in buyers who currently live in public housing (HDB).” For the new sales, compared with 24% in 2007, there have been 54% of purchasers who owns HDB addresses. For resale transactions, 44% of purchasers own HDB addresses, in contrast to the 22% in 2007. Additionally, a huge portion of non-Singaporean purchasers are permanent residents.

Looking forward, UBS considers that the insistent demand for prime housing units will develop as interest increases among the foreigners. According to the report, there are signs of improvements for prime units in the second quarter of 2009. In the second quarter of 2009, prime districts’ resale transactions have increased more than five times to 230 per month, from 42 a month in the first quarter. Compared with the 30% in first quarter of 2007 and 16% in the first quarter of 2009, Prime resale transactions now make up 24% of all resale transactions.

According to the analysts, the low completions supply will support the price increase that the UBS anticipates. UBS anticipates the total number of residences to be around 16,000 per year from 2009 to 2015.

However, there are also analysts who are less optimistic. According to Fera Wirawan, an analyst at RBS Singapore, the prices of residential properties can go down 10% to 20% over the next 12 months on back of falling rental yields, anti-speculative measures, and escalating supply.

According Wirawan’s analysis, while prices of high-end and mid-tier homes are presently 22% and 8% off their peaks respectively, the mass-market residential prices are currently at peak 2007 levels.