Property Take

HSR International Realtors Pte Ltd

Estate Agent Lic. No. L3002226G


www.hsr.com.sg



03 Oct 2014
Narrowing price gaps between CCR and outside CCR

Highlights
Recently, we analyzed the price trends of the private secondary residential market
by the different market segments, namely Core Central Region (CCR), Rest of
Central Region (RCR) and Outside Central Region (OCR).
We observed that the price gaps for secondary private residential market in CCR vs.
RCR/OCR have been narrowing since the market softened. The price gap between
CCR and RCR median prices reached a high of S$610 psf in 4Q2011. In 2Q2014,
this gap fell to S$461 psf (Diagram 1). Similarly, between CCR and OCR median
prices, the price gap has fallen from a high of S$870 psf to $712 psf for the same
period (Diagram 2).
The profile of buyers offers one plausible explanation. Historically, there is a high
correlation between the percentage of non-Singaporean buyers and the price gaps
between CCR vs. RCR/OCR (Diagram 3 and 4). In other words, the higher the
percentage of non-Singaporean buyers, the higher the gap is. Since 2007, non-
Singaporean buyers make up on average about 47% of yearly transactions in CCR,
34% in RCR and 31% in OCR. At the peak of the gap in 4Q2011, non-Singaporeans
represented 61% of the total secondary transactions for non-landed properties in
CCR compared to 35% in 1Q 2014.
Will the spreads further narrow? The answer could have important implications on
property investors. If investors believe in the scenario of shrinking gap, they would
do well divesting their CCR properties and investing into RCR/OCR (ignoring impact
of taxes/duties as this differs for different scenarios). The converse is true if investors
believe the gap will widen.
During the last Global Financial Crisis in 2007-2009, the price gap between CCR vs.
RCR fell from a peak of S$643 psf in Q42007 to S$367 psf in Q12009. As property
prices continue to fall, we believe this gap will continue to shrink by another $50-
$100 psf.





1H2014 recorded a 42.9% fall in secondary transactions (2,179 units) compared to the
same period last year (4,043 units). The slowdown in the residential property market
prompted us to look at price trends of the secondary market by the different market
segments, namely Core Central Region (CCR), Rest of Central Region (RCR) and Outside
Central Region (OCR) since 2007. Secondary market includes both sub sale and resale
transactions. We have excluded Executive Condos and Enbloc deals from our analysis.

Shrinking price gaps between CCR and RCR/OCR. We observed that the price gaps
for non-landed secondary residential market in CCR vs. RCR/OCR have been narrowing
since the market softened. Since the 1
st
round of cooling measures in 2009, the price gap
between CCR and RCR median prices peaked in 4Q2011 at S$610 psf. In 2Q2014, this
gap fell to S$461 psf, or approximately 24% decline. Similarly, between CCR and OCR
median prices, the price gap has fallen from a high of S$870 psf in 4Q2011 to $712 psf
in 2Q2014, a decline of 18%.

We analyzed the possible reasons including price growth. By 2Q2014, CCR experienced
a significant price growth of 52.5% compared to 1Q2007 but this lags the price growth of
103.3% and 94.6% in RCR and OCR respectively.










Singapore
Residential



Page 2 of 4
03 Oct 2014
Diagram 1

Source: URA, HSR Research

Diagram 2

Source: URA, HSR Research

Positive correlation between non-Singaporean buyers and price gaps. One possible
explanation can be found in the profiles of the buyers. Looking at data from 2007 till
1Q2014, there is a high correlation between the percentage of non-Singaporean buyers
and the price gaps between CCR vs. RCR/OCR. In other words, the higher the
percentage of non-Singaporean buyers, the higher the gap is. Since 2007, non-
Singaporean buyers make up on average about 47% of yearly transactions in the CCR,
34% in RCR and 31% in OCR. At the peak of the gap in 4Q2011, non-Singaporeans
represented 61% of the total secondary transactions for non-landed properties in CCR
compared to 35% in 1Q 2014.

Our regression analysis shows that theres a high correlation (R-square of 45%) between
the % of non-Singaporean buyers in CCR and the price gap between CCR vs. RCR
median prices. The correlation is slightly lower (R-square of 12%) when compared to
OCR median prices.

0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
1
Q

2
0
0
7
2
Q

2
0
0
7
3
Q

2
0
0
7
4
Q

2
0
0
7
1
Q

2
0
0
8
2
Q

2
0
0
8
3
Q

2
0
0
8
4
Q

2
0
0
8
1
Q

2
0
0
9
2
Q

2
0
0
9
3
Q

2
0
0
9
4
Q

2
0
0
9
1
Q

2
0
1
0
2
Q

2
0
1
0
3
Q

2
0
1
0
4
Q

2
0
1
0
1
Q

2
0
1
1
2
Q

2
0
1
1
3
Q

2
0
1
1
4
Q

2
0
1
1
1
Q

2
0
1
2
2
Q

2
0
1
2
3
Q

2
0
1
2
4
Q

2
0
1
2
1
Q

2
0
1
3
2
Q

2
0
1
3
3
Q

2
0
1
3
4
Q

2
0
1
3
1
Q

2
0
1
4
2
Q

2
0
1
4
S$ psf
Price Gap between CCR and RCR
Price Gap CCR Median Prices RCR Median Prices
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
1
Q

2
0
0
7
2
Q

2
0
0
7
3
Q

2
0
0
7
4
Q

2
0
0
7
1
Q

2
0
0
8
2
Q

2
0
0
8
3
Q

2
0
0
8
4
Q

2
0
0
8
1
Q

2
0
0
9
2
Q

2
0
0
9
3
Q

2
0
0
9
4
Q

2
0
0
9
1
Q

2
0
1
0
2
Q

2
0
1
0
3
Q

2
0
1
0
4
Q

2
0
1
0
1
Q

2
0
1
1
2
Q

2
0
1
1
3
Q

2
0
1
1
4
Q

2
0
1
1
1
Q

2
0
1
2
2
Q

2
0
1
2
3
Q

2
0
1
2
4
Q

2
0
1
2
1
Q

2
0
1
3
2
Q

2
0
1
3
3
Q

2
0
1
3
4
Q

2
0
1
3
1
Q

2
0
1
4
2
Q

2
0
1
4
S$ psf
Price Gap between CCR and OCR
Price Gap CCR Median Prices OCR Median Prices


Page 3 of 4
03 Oct 2014
Diagram 3

Source: URA, HSR Research

Diagram 4

Source: URA, HSR Research

Will the price gaps continue to narrow or reverse its trend and widen? The answer
could have important implications on property investors, especially at times when loans
are harder to come by. If investors believe in the scenario of a shrinking gap, they would
do well divesting their CCR properties and investing into RCR/OCR. The converse is true
if investors believe the gap will widen. We are ignoring the impact of taxes and duties as
this differs based on different scenarios as well as profiles.

During the last Global Financial Crisis in 2007-2009, the price gap between CCR vs. RCR
fell from a peak of S$643 psf in Q42007 to S$367 psf in Q12009. As property prices
continue to fall, we believe this gap will continue to shrink by another $50-$100 psf.


R = 44.5%
20%
30%
40%
50%
60%
70%
80%
300 400 500 600 700
P
e
r
c
e
n
t
a
g
e

o
f

n
o
n
-
S
i
n
g
a
p
o
r
e
a
n

b
u
y
e
r
s
CCR vs RCR Price Gap S$ psf
Non-Singaporean Buyers vs.
price gap between CCR and RCR
R = 11.6%
30%
35%
40%
45%
50%
55%
60%
65%
70%
75%
500 600 700 800 900 1,000
P
e
r
c
e
n
t
a
g
e

o
f

n
o
n
-
S
i
n
g
a
p
o
r
e
a
n

b
u
y
e
r
s
CCR vs OCR Price Gap S$ psf
Non-Singaporean Buyers vs.
price gap between CCR and OCR


Page 4 of 4
03 Oct 2014
Table 1
Price Gap Possible scenarios Potential action
Widens
CCR prices fall slower than RCR/OCR
prices
Invest into CCR

Divest from
RCR/OCR
CCR prices increase faster than RCR/
OCR prices
Narrows
CCR prices fall faster than RCR/OCR
price Divest from CCR

Invest into RCR/OCR CCR prices increase slower than
RCR/OCR price
Source: HSR Research


Commonly Used Abbreviations & Glossary

CCR Core Central Region

OCR Outside Central Region

PSF Per Square Feet

RCR Rest of Central Region

VS. Versus




HSR Research (research@hsr.com.sg)

Bernard Tong, Head of Operations (bernardtong@hsr.com.sg)

Wong Shanting, Research Analyst (wongshanting@hsr.com.sg)















This report is for information
purposes and has been prepared
by HSR Research based on
sources believed to be reliable.
Any opinions or estimates in this
report are that of HSR Research as
of this date and are subject to
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