The saying goes that a rising tide lifts all boats. But to use the aphorism to describe the private residential property market here would be somewhat inappropriate.
There is gathering optimism in the sector for sure - home sales are up and developers are falling over themselves tabling audacious bids for sites, and there is a resurgence in collective sale activity.
These point to renewed confidence in the real estate market, but home prices and rents are still falling and vacancies remain high, making it hard to read the market.
Condominium rents plummeted by more than 12 per cent as of March 31 from a peak in the third quarter of 2013.
The persistently weak leasing market has kept some investors at bay. Small-business owner Derick Tang, who has been looking to buy a three-room condo unit in the East Coast Park area for investment, says he is not rushing into any purchase owing to the poor rental market.
"It is not worth the heartache when you have to rent it out cheaply or suffer the horrible experience of searching for tenants. I am not worried about prices going up, so I will wait," Mr Tang, 38, told The Straits Times.
Yet many others have flocked to pick up units - both new and resale homes - in recent months, particularly after the Government eased certain cooling measures in March.
That the property market is sending mixed signals may seem confusing, but analysts - reading the various signs - say they hint at a potential recovery following a three-year slump in prices.
The slowing rate of price decline and rising volumes suggest that demand and supply are converging, and would bring about a stabilisation in prices.
Private home prices fell over the last three years but at a slower clip, with a 3.1 per cent drop last year, and declines of 3.7 per cent in 2015 and 4 per cent in 2014.
More than 5,700 new private homes were sold in the first five months of this year, easily surpassing the 3,278 moved in the same period last year.
New launches such as Grandeur Park Residences in Tanah Merah and Park Place Residences at PLQ in Paya Lebar booked brisk sales when they hit the market earlier this year. Meanwhile, in the resale market, an estimated 4,845 completed homes have been sold based on caveats lodged as of June 13 - about 30 per cent higher than the entire first half of last year, ERA Realty Network noted.
Developers may sell 10,000 new homes, excluding executive condominiums (ECs), this year, up from about 8,360 last year.
The perception that the market is bottoming out is leading more buyers back and hastening developers in securing sites to capitalise on an expected price upturn.
A slight tweak in the seller's stamp duty (SSD) in March by the Government also boosted sentiment, further driving sales. Sellers need pay SSD for homes sold within three years of purchase, not four.
BLOCKBUSTER LAND BIDS
The fervent land grabbing among developers saw eye-popping bids for sites in the last few months.
A tender for a non-landed private residential plot in Toh Tuck Road attracted a record 24 bids in April, with Malaysian developer SP Setia clinching the 99-year leasehold plot for $265 million or $939 per square foot per plot ratio (psf ppr).
Chinese developers Logan Property and Nanshan Group jointly bought a residential site near Queenstown MRT station in Stirling Road for $1.003 billion or $1,050 psf ppr last month.
Recently, entities linked to Singapore Press Holdings and Kajima Development secured a plum mixed-use site in Bidadari estate for $1.132 billion or $1,181 psf ppr.
The collective sale market has also fired up this year, with four deals valued at over $1.5 billion done so far - already trumping the three collective sale transactions worth about $1 billion in the whole of last year.
PRICE DIP, BUT NOT FOR LONG?
Meanwhile, prices appear to be moderating, falling at the slowest pace in three years, with a 3.1 per cent drop last year. It continued the downtrend, dipping by 0.4 per cent in the first quarter from the fourth quarter of last year.
As of March 31, home values have come off by about 11 per cent from a peak in the third quarter of 2013.
Despite the robust sales, developers have so far kept prices competitive. This is because buyers are price sensitive owing to the total debt servicing ratio framework, which limits a borrower's total monthly debt obligations to 60 per cent of the individual's monthly gross income.
Healthy sales and fewer new project launches have whittled the number of unsold uncompleted private homes to an all-time low of 15,930 - not counting ECs - as of the end of the first quarter. That is down from 22,370 units a year ago, and a peak of 43,473 in the second quarter of 2008.
Developers could be in a better position to raise prices in the next six to 12 months, given the brighter economic prospects and perceived supply completions tapering off from the high levels in 2014 to 2016.
The aggressive land bids will likely keep selling prices firm in the coming year, perhaps lifting them up slightly, analysts noted.
Based on the recent tender bids and collective sale deals, the average price per square foot could go beyond $1,900 next year.
That said, the probability of runaway home prices seems low, given that the majority of the cooling measures remain firmly in place.
DOUR LEASING MARKET
For all the cheer in property sales volumes, dark clouds still loom large over the leasing market, and they are unlikely to be dispelled this year.
The leasing market is still soft - new completions are adding to current inventory at a time when MNCs (multinational corporations) are either shrinking or growing headcount more slowly and on local-leasing packages.
As rents taper, vacancies of condos improved for three straight quarters after peaking at 10.4 per cent in the second quarter of last year. It fell to 9.1 per cent as of March 31.
Barring any economic downturn, market watchers say the weak rental segment could turn a corner within the next two years.
"Once the bulk of the supply passes in the rest of 2017, we should be starting to see the market recover in perhaps 2019," said ERA key executive officer Eugene Lim.
Historically, rents can only move up significantly when vacancy rates are below 8 per cent.
Going by trends in 2009 and 1999, a pickup in home prices tends to precede the recovery in the leasing market.
In the third quarter of 2009, prices rose 15.7 per cent while rents continued to fall by 2.1 per cent. Subsequently, both prices and rents were on a general uptrend till the third quarter of 2013.
Should the prediction hold out, the real estate market could be finally dragging itself out of a rut, with the prospect of price recovery next year that could spill over to the rental segment.
Analysts expect overall private home prices to fall by 1 per cent to 2 per cent this year, before rising by potentially 2 per cent to 3 per cent next year.
Policymakers here appear to have successfully engineered a "soft landing" of the property market - a remarkable feat given that prices rose by 62 per cent between 2009 and 2013.
Like Singapore, several countries have over the past year further tightened rules on housing to rein in household debt and to quell overheating in the residential market.
South Korea earlier this month announced stricter mortgage rules and curbs on speculative resale of homes in Seoul and parts of Busan.
Australia's banking regulator in March rolled out fresh loan curbs on concerns that rapidly rising prices could stoke a housing bubble. Foreign buyers will also have to pay a higher stamp duty surcharge when they buy properties in Australian cities such as Sydney and Melbourne.
Hong Kong, one of the world's most expensive property markets, is still grappling with runaway prices despite rolling out new cooling measures last November and in May this year.
In Singapore, the Government's resistance to easing cooling measures - particularly the additional buyer's stamp duty - despite industry lobbying now seems like a masterstroke amid the resilient buying demand, low interest rate environment and ample liquidity in the market.
Adapted from: The Straits Times, 28 June 2017