www.shaproperty.com

Prices at nearly 40 per cent of new prime district condominium projects launched in 2005 either fell or showed no movement between the time of their launch and the first quarter of 2006.

A Jones Lang LaSalle (JLL) study of developer sales showed that some 27 projects were launched in districts 9, 10 and 11 in 2005.

Transactions at 10 out of 27 of these developments showed negative or no price movement between the average price at the time of launch and average prices for the latest transactions made in 2006. Six fell in price while four showed no change.

Of the six that dropped in average price, two depreciated by between 12-15 per cent, while prices at the other four fell by less than 5 per cent.

The JLL study excluded sub-sales (and the effect of speculation) to reflect a more accurate overall market price.

Of those developments that showed price gains, six appreciated by less than 5 per cent, two by less than 10 per cent, five by less than 15 per cent, and three by less than 20 per cent.

The trickle-down effect created by the high prices fetched at developments like The Sail @ Marina Bay and various developments at Sentosa Cove is, as JLL head of research (South-East Asia) Chua Yang Liang points out, a 'theoretical concept that is difficult to pinpoint, let alone measure'.

Between the first and second quarters of 2005, the increase in Urban Redevelopment Authority's property price index (PPI) more than doubled from 0.5 per cent to 1.2 per cent. It then increased by 0.2 per cent in Q3, followed by 0.1 per cent in Q4. Flash estimates for Q1 2006 show that the PPI also increased by 0.1 per cent.

'If we just use price as an indication of this effect, then we haven't seen it in the mass market. Within the higher-end market though, this effect is possibly more evident,' added Dr Chua.

Still, the wide price range for developments in Districts 9, 10 and 11 - between -15 per cent and +18 per cent - should be cause for some concern.

To some extent, this reflects the uncertain recovery of the property market. This has, in turn, prompted some developers to launch their developments in phases, perhaps exacerbating the price issue by controlling supply of new units in the hope of gauging demand to price their projects optimally.

City Developments Ltd (CDL) group general manager Chia Ngiang Hong said: 'The initial soft launch is usually only open to a select group of CDL customers who are on the wait list and have indicated strong interest in the project.

'Price adjustments are made within each phase to ensure that they remain competitive, taking into consideration the market conditions. This also helps to protect the investment made by the buyer.'

Another reason for the spread in prices - perhaps more grave - is that the lower end of the two-tier market may have grown to include mid-market properties. And in this respect, one cannot underestimate the impact of rising home loan interest rates.

Tay Huey Ying, associate director for research and consultancy at Colliers International, said: 'The borrowing environment is less favourable compared with 10 years ago, although the loan-to-value ratio has recently been raised to 90 per cent. In addition, policies on use of CPF funds for purchase of private properties are less favourable now than in 1996.'

Knight Frank head of research Nicholas Mak pointed out that rising interest rates usually affect the mass market and Housing and Development Board (HDB) upgraders, but added that Singapore buyers in all categories are generally 'more realistic' about property prices. Indeed, it seems that foreigners are to blame for the mixed prices.

'Foreigners have different reasons for buying. We don't have a big bond market but property is stable and bulky - representing a large single investment,' added Mr Mak.

Quek Kwang Meng, Citigroup Private Bank (Asia-Pacific) managing director and head of real estate, said that real estate 'is often a huge portion of our client's overall portfolio'.

He added: 'This is more so among Asian clients than with clients from other regions. It could be as much as 40-50 per cent with some clients, but on average it is about 15-25 per cent.

'Many of Asia's high net worth clients built their fortunes in real estate first before venturing into other businesses and sectors.'

How this affects property prices here is still uncertain. Some note that increasingly, savvy investors - with help from equally savvy private bankers - seem to be banking on additional gains by hedging against currency and interest rate fluctuations, perhaps adding to the volatility of the property market.

Wealth management firm dollarDex said that it is possible that some foreign investors may have sold their properties here because the Singapore dollar has strengthened against their own currency.

On Indonesian investors in particular, dollarDex said: 'The condition is ripe in the sense that the rupiah has come down from 6,400 (rupiah to the Singapore dollar) in August last year to 5,600 now.

'In fact, some initial signs are already there, with a few small sales consummated.' Coincidentally, sub-sales for the period of 2005 were the highest in Q4.

Official figures for Q1 PPI are expected to be out tomorrow, and a clearer picture of what exactly is happening with the property market here may emerge.