Price growth slowing for upgrader segment of private homes market
The private residential market's upgrader segment will likely witness slower price growth, according to Wing Tai Chairman Cheng Wai Keung.
This is due to the maturity of the upcycle in the segment, as well as the higher risk of impact from public housing policy revisions.
Instead, more price growth is expected in the luxury market, fuelled primarily by wealth generation, limited supply and liquidity. He noted that prices of luxury homes are still around their 2007 levels.
"I cannot say this is the peak of the market but the probability that it will remain high is shorter by the day. Everything has a cycle, and if you continue to be in the upcycle, the probability that it will turn is so much closer," Cheng said.
"I cannot predict when it is going to be coming. But all I can say is the longer you stay at this level, the higher the probability that it will turn," he added.
Aside from the maturity of the upcycle in this segment, Cheng believes that the upgrader segment is more affected by the Housing & Development Board (HDB) market, which may possibly witness excess supply based on the increase in supply of new HDB flats this year and in 2012.
Additionally, Wing Tai's Deputy Chairman Edmund Cheng said that the winning land bids for mass-market private housing land parcels at state tenders are too high, which leaves a small profit margin for property developers.
Expecting bids to fall in the near future, he added that, "(In) the last one and a half years, two years, you can see there's so much demand...stronger than the supply side. It is coming to a tail end. So it's important that government must balance it to ensure that there is no oversupply...(that) it does not flood the market with sites."
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