Mass-market homes will see fastest price increases this year

Local buyers still panic binging, says Savills.

According to Savills Singapore's April residential briefing for Singapore, local buyers are fast-tracking their purchases in fear of new cooling measures and increased competition from other buyers as predicted in a recent population white paper predicting increased headcount in the corporate sector. Developers though are reluctant to hike prices in fear of triggering anoter slew of cooling measures, which could temper the feared price increased to within general inflationary rates.

Here's more from Savills Singapore:

The banking crisis in Cyprus signalled that the eurozone crisis is far from over and could sporadically flare up and affect global confidence. The subdued macro economic environment in the west, as well as new property curbs are expected to put a rein on overseas buyers, which in turn would dampen prices in the luxury segment. Mass-market homes will continue to lead price increases this year, supported by demand from local buyers. The prospect of new cooling measures and forewarnings from the population white paper that the headcount here is set to increase, could have motivated local buyers to bring forward their purchases out of fear of being priced out in future.

It also appears that the slew of cooling measures have so far been more feared by developers than by buyers. Given this asymmetric behaviour, developers will likely not raise prices too aggressively out of concerns that they might trigger the authorities to introduce another round of cooling measures. Prices are therefore likely to rise at general inflationary rates this year.

On the leasing front, an increasing supply of luxury units should continue to weigh down rents in this segment. At the end of last year, the number of unsold units in the CCR constituted 18% of the total stock in the submarket. The proportion was lower in the OCR at 12%. The performance of the leasing market, on the other hand, is not uniform. Smaller units in both prime and suburban areas could still enjoy rental upside in the short term as more overseas tenants have smaller rental allowances these days with businesses becoming increasingly cost conscious. However, a potential supply onslaught could clip growth over a longer time period.

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