Developers’ optimism at 7-year high, near levels before cooling measures

SINGAPORE — Property developers’ optimism about the market has climbed to its highest level in seven years, or just before the first of a series of policy measures was introduced to cool the market.

And reflecting the frenzied snapping up of en bloc properties and high bids lodged for land sales, more are now expecting a substantial increase in home prices in the next six months.

Their sentiments were captured in a survey of about 250 developers,builders and real estate consultancies, among others, carried out by the Real Estate Developers’ Association of Singapore (Redas) and the National University of Singapore’s (NUS) Department of Real Estate and released on Wednesday (Oct 25).

Aggregating sentiments on the current situation and the future, the mood in the real estate sector in the third quarter peaked at a score of 6.6, a shade lower than the 6.8 in the first quarter of 2010. Back then, loan thresholds were lowered and additional duties were announced for sellers who sold properties within a year of purchase.

These measures were the first in a series imposed by the Government over the years to cool a sizzling market that had shown signs of beginning to overheat. While the measures succeeded in tamping down prices and activity, they left developers pessimistic about the direction the market was taking. In 2011, for example, the equivalent score in the same survey - which is carried out quarterly - plunged to a low of 3.3. A sub-5 score signals deteriorating market conditions, whereas anything higher than 5 reflects improving conditions.

Reflecting sentiment that the tepid property market has begun to turn the corner over the last few months, 16.7 per cent of developers polled in the third quarter expect residential property prices to spike in the next six months, far outstripping the 2.9 per cent who held similar views in the preceding three months.

Around half (52.8 per cent) anticipated a moderate increase, whereas 22.2 per cent expected prices to remain the same.

The high score points to a “robust and broad-based” recovery, especially in the residential and office property markets, noted Associate Professor Sing Tien Foo of the NUS’ real estate department.

“The optimistic sentiments in (the third quarter) were consistent with increases in recent housing transactions and en bloc sales activities in the market.”

Prime residential, suburban residential and office sectors showed “clearer signs of recovery with robust increases in transactions” lately, the report stated.

Since the start of the year, there has been a rush of developments gunning to go en bloc, with some even anticipating the year to record a 10-year high as developers look to beef up their land banks in anticipation of an upturn in the property market. So far this year, 19 deals worth S$6.76 billion have been closed — including S$906.7 million paid for Amber Park, the largest freehold collective sale by dollar value.

Private home prices also posted their first increase in four years earlier this month.

Half of the developers surveyed expect to increase new launches slightly over the next six months, while 41.7 per cent expect to stand pat. Only 5.6 per cent of respondents said they would launch fewer units.

On potential headwinds, a slowdown in the global economy and rising interest rates were of concern to about half the respondents. About one-third of them also cited a downturn in the domestic economy and an over-supply of new properties as risks.

Developers were also more concerned than before about supply side factors, including new land releases, new project launches and speculative activities.

“With the current recovery in sentiment, developers are also worried that the Government will introduce more cooling measures to the market while keeping the existing ones,” the report said.