It has been a long winter for Singapore's property market, but the first blooms of spring are showing. The signs of a revival are strong, such as greatly increased sales volumes and fierce bidding for land by developers ready to fork out eye-watering sums.
The latest pointer to an upturn was the keenly contested Toh Tuck Road site, which drew 24 developers - a record for a non-landed government sale site.
Malaysian developer S P Setia offered $265 million for the 18,721.4 sq m plot, which works out to $939 per square foot (psf) per plot ratio, surprising analysts, who were expecting bids capped at $200 million.
"Developers have a positive view of the market from 2018," said Ms Tricia Song, head of research at Colliers International.
"The land price for the Toh Tuck site was way above expectations, implying a breakeven cost of $1,490 psf," she added, noting that a 10 per cent profit margin would imply an average selling price of $1,660 psf.
"Based on that profit margin, the developer is probably looking at a 10 to 15 per cent price appreciation over the next three years."
Private home sales figures have also whetted the appetite of developers. A total of 977 units were sold in February, treble the 303 units sold in the same month last year, raising expectations for new home sales figures to be released next Monday.
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Mr Alan Cheong, head of Singapore research at Savills, was unequivocally bullish on his assessment of the market.
"The market has turned around and, on the ground, people are now recommitting," he said.
Mr Cheong noted that unchanged cooling measures, like the total debt servicing ratio (TDSR), have made the revival of the market look more gradual, preventing it from "turning in its full glory".
But property watchers should not expect a revival akin to a roaring dragon come back to life. Mr Cheong likened it to "a newborn baby" that was "still fragile".
"The turnaround in sentiment is noticeable and broad-based, but it lacks the horsepower to accept certain strides in prices - although a gradual creep in prices upward can be accepted by the market," he said, adding that seasoned property agents were now busy closing deals.
Most analysts were cautiously optimistic, forecasting higher sales volumes, but adding that prices would continue declining and hit bottom by the end of this year.
Dr Lee Nai Jia, head of South-east Asia research at Edmund Tie and Company, said that "because of the current excitement, there will be more en bloc sales".
"Developers are also encouraged by sales at Park Place Residences, as the units are quite expensive. This makes them optimistic that while bid prices may be high, there is demand for good-quality homes," Dr Lee said.
Land prices are unlikely to come down, as foreign developers have shown strong interest and could be more focused on getting boasting rights to having developed a property in Singapore than making maximum profit, he added.
Meanwhile, Mr Desmond Sim, CBRE's head of research for Singapore and South-east Asia, was more cautious, saying that it is "too early to call it a turnaround".
"There is a lot of positivity in the market after the tweak in cooling measures, but if you couldn't buy because of TDSR two months ago, you still can't buy now," he noted.
Mr Sim added that while the record low number of unsold units, land prices and aggressive bidding favour a positive reading of the market, macroeconomic factors and the fact that "larger units are not being sold" call for a more balanced view.
"A housing purchase is not like buying a Louis Vuitton bag - macroeconomic views still matter," he said, citing higher unemployment rates and the likelihood of further interest rate hikes.
Adapted from: The Straits Times, 14th April 2017