Thursday, April 12, 2012

Price gap between mass market, city homes narrowing

The price gap between private homes in the mass market and Core Central Region (CCR) is narrowing, with market watchers saying the gap has narrowed to just above 60 percent in Q1 2012 compared to 108 percent in Q2 last year.

This is due to mass market homes recording price increases at a much faster pace.

According to a report by Channel NewsAsia, the average price of city homes in the second quarter last year hit S$1,850 psf while mass market homes recorded a median price of S$895 psf. However, mass market home prices have since climbed to around S$1,000 psf while prices of city homes have dropped to about S$1,660 psf.

“Long-term sustainable level is about 50-60 percent gap in the two markets,” said Chua Yang Liang, Head of Research at Jones Lang LaSalle (JLL).

“The price will have to slow down by that time. It will be driven by buyers moving out from the mass market into the high end. At that point in time, buyers will be saying ‘why do I buy in the suburbs when for just a bit more I can buy somewhere downtown?’.”

Several analysts noted that the strength in prices of mass market homes has been boosted by healthy growth of resale flat prices, which has risen more than 80 percent in the past few years.

However, analysts expect to see a decline in the resale flat market in the next two to three quarters.

“We are going to see a plateauing of HDB resale mainly due to the contraction of your cash-over-valuation… In the first quarter we saw a contraction of about 12 percent. The mass market cannot continue to move upwards without seeing some stabilisation,” noted Donald Han, Special Advisor at HSR International Realtors.

View the original article here

Source From Property Guru

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