[B.5] Secondary home market faces steep challenges in 2009

Secondary sales of both landed and non-landed private homes in January and February 2009 can only be described as ‘flat’ by any standards. More detailed information is as follows.

[B.5.1] Sales of Landed homes subdued

The overall sales of landed homes in the Jan/Feb 2009 period were modest. Likewise, average price also fell between 1.5% and 2.2%. In the previous quarter, average price fell between 3.8% and 5.8%. (See Tables [7] to [9] for details of private landed home sales by house types).

[B.5.2] Secondary sales of non-landed homes fell

In the same Jan-Feb period of 2008, a total of 1,797 condo/apartment deals were struck. However, this year, only 771 deals were transacted during the same period. This means that this year’s transactions were a mere 43% of last year’s performance.

Average prices of freehold non-landed private homes in the prime districts of 9, 10 and 11 fell 3.7% on a quarterly basis to S$1,120 psf in Q1 2009. This is smaller than the 14% price fall in Q4 2008.

The average price of luxurious homes in the prime districts also registered a slower decline of 3.6% in Q1 2009, after sliding 22% in Q4 2008.

Outside the prime districts, the average price of non-landed, 99-year leasehold homes slipped 2.6% in Q1 2009, after falling 5.8% in Q4 2008.

[B.6] Rents of prime condos falling 15%

As more new home supplies are entering the prime districts and more expatriates are being sent home in the midst of the on-going recession, landlords in prime districts 9, 10 and 11 may have to be very realistic about their asking rents when it comes to lease renewal.

Right now, rentals of these units have fallen by 15% to 20% from the middle of 2008. Likewise, rents in non-prime and suburban areas have also fallen by the same rate, and could fall by another 10% this year.

The average monthly rent for luxurious non-landed homes in Singapore fell 18.8% on a quarterly basis to $5.20 psf pm in Q1 2009.

For example, St Regis rents start at $7,500 for the smallest 1,507 sq ft three-bedroom unit and $20,000 for the 3,757 sq ft, four-bedroom unit, or around $5 to $5.30 psf per month. The average rent record for Grange Residences, a prime but slightly older condo, is at $6.20 psf per month at the end of last year.

Meanwhile, the average rents of non-landed homes in the prime districts fell 16.2% on a quarterly basis to $3.65 psf pm in Q1 2009. However, newer projects are still able to command rents of $4.60 psf to $5.00 psf per month. For example, the transacted rents for one-bedroom units of 690sq ft at the Sail @ Marina Bay now stand at $3,200 a month.

[B.7] Investment sales slow to a trickle

Investment property sales have suffered a major blow in Q1 2009. In terms of investment volume, they have dropped to the 1998 level. Back then, investment sales dropped to $107 million in Q1 1998 and as low as $47 million in Q3 1998. In Q1 2009, the volume was $153 million with only about ten investment deals, down from 15 in the previous quarter.

The residential sector accounted for the largest share or 46% of total investment sales in Q1, including the sale of two 19th-floor St Regis units which went for $2,153 psf or 21% below the original developer’s launch price.

The office sector made up 34% of Q1 2009 investment sales with the $27 million sale of Genesis Building in January making up for more than half of the total value in this sector.
 
There were totally no transactions involving major developers, funds, real estate investment trusts or any land sale by the government in Q1 2009.

Prepared by Sam Gian - Independent Real Estate Sales Trainer