Week in Review – 29 January 2015

Private homes see price and sales drop in 2014, likely to continue, Subletting of flats to rise amid cooling resale market, Singapore named as most liveable city for expats, Upward trend in office rents to continue
Private homes see price and sales drop in 2014, likely to continue 
Data released by the Urban Redevelopment Authority (URA) on 23 January showed that prices of private homes (excluding Executive Condominiums) fell by 1.1 per cent in the fourth quarter, pulling prices down by four per cent for the whole of 2014, the first year of overall price declines since 2008. The decline was across all segments of the private residential property market. In the fourth quarter, prices of non-landed properties in the Core Central Region (CCR) fell by 0.9 per cent; prices in the Rest of Central Region (RCR) and Outside Central Region (OCR) declined by 1.4 and 0.8 per cent respectively. In 2014 prices in CCR, RCR and OCR dropped by 4.1, 5.3 and 2.2 per cent respectively.
The downtrend will likely continue across all segments of the private residential property market. Analysts from CIMB estimated that the price decline is too far from the government’s goal to merit easing cooling measures. Ms Lock Mun Yee, a CIMB analyst stated that “Given the marginal price declines so far, we do not anticipate a loosening of policy measures on credit and transaction costs this year. We expect private home prices to decline by another 10% in 2015-16.” Ms Lock added, “While the high-end market experienced the greatest price declines in 2014, the increasing completion of more suburban units over the next two years, particularly shoe-box apartments, are likely to depress property prices in the mass-market segment as well.”
A total of 7,316 private housing units were sold last year, significantly fewer than the 14,948 units sold in 2013, according to the URA. In Q4 2014, 1,376 private residential units were sold, compared to 1,531 in Q4 2013. A Colliers report noted that the poor 2014 performance can be attributed to weak demand intensified by the cooling measures.
According to a Bloomberg report, bargain hunters are waiting for further declines. Mr Alex Zou, a homebuyer who attended an auction at Amara Hotel told Bloomberg, “There are no bargains available yet…for now, I’ll wait and watch the market.”
Subletting of flats to rise amid cooling resale market
An increasing number of Housing and Development Board (HDB) resale flats are transacted at or below valuation, according to Singapore Real Estate Exchange (SRX) data. 8,500 HDB resale flats changed hands in 2014; 41.6 per cent in Q4 2014 were below valuation, compared to 36.9 per cent in Q1 2014. Transactions above valuation dropped from 48 per cent in Q1 2014 to 20 per cent in Q4 2014. Transactions at valuation climbed to 37.6 per cent in Q4 2014 from 15.7 per cent in Q1 2014. Property analysts told Channel NewsAsia that “a weaker market sentiment and changes to HDB resale procedures put in place last March” contributed to the overall trend.
As resale prices fell, the number of HDB flats approved for subletting climbed in the last quarter of 2014. Subletting approvals rose by 16.2 per cent to 10,365 in Q4 2014. Total approvals reached 36,228 for the whole of 2014, 20.5 per cent higher than in 2013. Analysts who spoke to TODAY agreed that more Singaporeans who have purchased private homes are renting out their HDB flats while waiting for the right price to sell.
Mr Nicholas Mak, Executive Director of Research and Consultancy at SLP International Property Consultants, told TODAY, “It may be easier to rent out the HDB flat than the condo unit because of the large supply of new and old condos competing for tenants above the S$3,000 a month budget…As such, the average quarterly subletting volume may hover at around 9,000 units this year.” He predicted that the downtrend of HDB prices will likely continue in 2015, in the absence of any change in government policies, or any external factors affecting the housing market.
Singapore named as most liveable city for expats
Singapore has been ranked the most liveable city in Asia and the world, according to an index for expatriate living conditions, published by ECA International. This is the 16th consecutive year that Singapore has received this accolade. Mr Lee Quane, Regional Director for Asia at ECA International said “Good air quality, solid infrastructure, decent medical facilities, low crime and health risks have contributed to Singapore maintaining its position at the top of the global ranking for quality of living for Asian assignees.” The index is updated annually and uses a host of factors to assess the overall quality of living in over 450 locations worldwide.
Upward trend in office rents to continue 
While private home sales slowed, rentals of office space rose by 1.7 per cent in the last quarter of 2014, and by 9.8 per cent for the whole of 2014, according to URA data. Ms Lynette Leong, Chief Executive Officer of CapitaCommercial Trust Management said to TODAY that “The market is looking good as supply is very tight this year, so the rise in rentals will continue.” She added that prime office rents increased by 15 per cent in 2014 and would continue rising in the coming year.
Rents may soften however, with an oncoming supply of office space over the next few years. According to real estate broker Knight Frank, an estimated 1.15 million sq ft of new office space will be available this year, rising to 1.6 million and 4.7 million sq ft, in 2016 and 2017 respectively.