How do homebuyers counter the ever-rising housing prices?
(Singapore is moving towards the cramped housing of cities like Hong Kong. Image courtesy of thinkstock.)
According to the Urban Redevelopent Authority (URA), it seems more are doing so by going for smaller homes.
The URA index, which tracks prices of flats, shot up 18% last year. In the first nine months of this year it inched up another 6%. Currently prices are 16% higher than the index’s previous peak in the second quarter of 2008.
More specifically, the URA index moved up just 1.3% in the three months leading to September 30. September 30 marked the eighth consecutive quarter of moderation, as cooling measures and global economic turmoil formed a wet blanket on buyer interests.
Yet while it appears that prices are decreasing their growth rate, home seekers have adapted by lowering their expectations and downgrading the sizes of their homes, said DTZ Research. It found that private homes of less than 1,000 sq ft made up 41% of all sales in the first three quarters of this year. This is up from 35% in 2010 and 22% in 2007.
DTZ head of Asia-Pacific research Chua Chor Hoon noted that buyers generally look at the absolute price of a home instead of its per sq ft (psf) price when deciding if they can afford a piece of property. “Hence, new home sizes have become smaller so that the overall quantum still remains affordable for home buyers even while the unit price rises,” she said to The Straits Times.
Other industry insiders spoke of how recent land tenders have yielded more units than what was initially estimated. This is because developers have begun banking on the shrinking-home trend. OrangeTee head of research and consultancy Tan Kok Keong observed that apartment sizes have shrunk across most segments. While suburban three-room flats ranged 1,000-1,100 sq ft a few years ago, new projects offering the same type of homes now span just 900-1,000 sq ft.
Interestingly, this smaller-home trend plays to the developers’ advantage – smaller units generally boast higher psf prices.
Why then are home hunters more readily accepting of such new projects? The reason is simple: as prices of homes in Singapore rise, buyers are becoming less willing to shell out more money for a flat of the same size. At the same time, the face value price – in spite of the relatively higher psf – would still add up to an amount that buyers find acceptable.
Should this buying trend continue, Singapore could be looking at a cramped (and expensive) housing scene similar to what Japan and Hong Kong are already experiencing.
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