Singapore Property: 2Q10 flash estimates released

By Foo Sze Ming
Mon, 5 Jul 2010, 08:54:16 SGT

Last week, the URA and HDB released the flash estimates of price indexes for 2Q10. The URA Property Price Index gained 5.2% QoQ in 2Q10 and has surpassed its previous high in 2Q08. In the HDB resale market, the pace of price increase picked up again in 2Q10, after a temporary slow down in 1Q10. HDB’s intention to cool the HDB resale market is clearly evident in its recent actions that aim to increase the supply of new HDB flats and provide more affordable options to new home owners. With rising concerns over the strength of US economic recovery, signs of a slowdown in China and the ongoing euro-zone debt crisis, buying sentiment could be dented in the near future. Nevertheless, fundamentals of the residential property market remain sound. We have a NEUTRAL rating on the property sector, with a preference towards the residential segment.

URA PPI surpassed previous peak. Last week, the URA and HDB released the flash estimates of price indexes for 2Q10. For private properties, the URA Property Price Index gained 5.2% QoQ to 184.1 in 2Q10, surpassing its previous 177.5 high in 2Q08. But the pace of price increase continued to ease in 2Q10. This as the pace of price increase in the Rest of Central Region (RCR) slipped from 7.9% in 1Q10 to 4.5% in 2Q10. In contrast, the pace of price increase in the Core Central Region (CCR) and Outside Central Region (OCR) picked up in 2Q10, gaining 5.1% (4.4% in 1Q10) and 5.7% (4.3% in 1Q10) respectively. While prices in RCR and OCR have already surpassed their previous high in 2008, CCR prices have yet to hit reach the previous 2008 peak.

HDB resale prices picking up again. In the HDB resale market, prices of resale flats gained 3.8% in 2Q10 and the pace of price increase picked up again in 2Q10, after a temporary slow down in 1Q10. Meanwhile, median Cash-Over Valuation (COV) for HDB resale flats has also increased to S$30,000 in 2Q10, based on transactions recorded by property agency firms. HDB’s recent actions are clearly intended to cool the HDB resale market. On 30 Jun, HDB launched three Build-To-Order (BTO) projects in Punggol and Sengkang, offering a total of 2,696 flats - the largest number offered in a single launch so far. Then on 1 Jul, HDB launched two residential and one mixed commercial-residential site for tender under the Government Land Sale (GLS) Programme. The actions aim to increase the supply of new HDB flats and provide more affordable options to new home owners.

Fundamentals remain sound. With rising concerns over the strength of US economic recovery and signs of a slowdown in China, also not forgetting the ongoing euro-zone debt crisis, we believe that buying sentiment in the property market could be dented in the near future, particularly in the mass market, where buyers tend to be more price sensitive. Nevertheless, fundamentals of the residential property market remain sound, supported by reasonable affordability and prudent lending by financial institutions. Property developers are also well-capitalized and we do not see any pressure for them to cut prices ahead. As such, we expect the property market to remain stable for the months ahead. We have a NEUTRAL rating on the property sector, with a preference towards the residential segment.

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