City&Country: Offshore-- Singapore’s private new home sales in February defy expectations

The number of new private homes sold in February in Singapore was 1,101 units, down about 9% compared with the preceding month (see Table 1). The fact that the volume of new home sales stayed above the healthy level of 1,000 units in February even when the full impact of the cooling measures would likely have set in, “is an indication of the resilience of the market against the latest set of cooling measures”, says Tay Huey Ying, director of research & advisory at Colliers International.

According to Jones Lang LaSalle (JLL) in an analysis of pre- and post-policy effect, transaction volume in the first 30 days after the latest round of policy measures, which came into effect on Jan 14, fell a mere 5%. This is far less severe than the 33% drop in volume after the Sept 15 measures in 2009 and the 24% fall following the Aug 30 measures last year.

“The recent market reaction has been marginal, considering that there is also the seasonal slowdown from the Spring Festival effect,” says Chua Yang Liang, JLL’s head of research for Southeast Asia. “The numerous policies set in motion previously, including this latest round, have eradicated much of the speculation, leaving largely the genuine homebuyers and the long-term investors at play. The fairly resilient nature of the market suggests that there could be a larger fundamental market demand than we have assumed or even understand.”

Developers had also launched 37% more units for sale in February than in January, with a total of 1,170 new units released for sale last month. Overall market take-up rate at these new launches had dropped from 96% to 64%, with demand in most newly launched projects seeing take-up rates of less than 50%. These figures suggest that market sentiment has moderated and “the bullish demand has cooled”, adds Chua.

Support for small-format units prevailed, as seen in the sale of 43 units of Loft@Stevens (median price of S$1,960 psf) and 31 units of Palmera East (median price of S$1,250 psf). At a third project, Suites@East Coast, 56 of 116 small-format units were sold, at S$1,438 psf.

“Anecdotally, more recent transactions seemed to have closed with some form of discount and/or sales perks,” observes Christine Sun, senior research manager at Savills Singapore. “This may imply that some sellers are starting to adjust their prices subtly and are selectively willing to negotiate their prices with genuine buyers.” However, she doesn’t expect a drastic drop in overall home prices in the near future, as many developers are still financially strong and some had bought land parcels at relatively high bid prices previously.

If executive condominium (EC) sales were included in the new home sales last month, the drop in volume would have been more significant at 21%, according to Savills’ Sun.

A total of 127 EC units were sold in February, compared with 345 units sold in January, notes Li Hiaw Ho, executive director of CB Richard Ellis Research. Most of the units sold came from Prive in Punggol and Austville in Sengkang. Since the return of the EC market in October 2010 with the launch of Esparina Residences and The Canopy, a total of 1,503 ECs have been sold, representing 68% of the total supply of 2,199 units.    

There are strong reasons for the lacklustre EC market. “The steady supply of EC cannot depend solely on demand from first-time homebuyers,” observes Nicholas Mak, executive director of SLP International Property Consultants. “HDB upgraders are required to absorb this growing supply.

However, the latest rules require larger cash outlay [40% downpayment] from homebuyers with existing mortgages, which has led to a dent in demand from HDB upgraders.” There are a total of 696 unsold units from four EC projects launched on the market before February.

The best-selling projects by absolute number of units in February were Waterfront Isle (282 units), My Manhattan (69 units) and the EC Austville Residences (63 units). These are mass-market projects located in the suburbs or in the Outside Central Region (OCR), which together accounted for about 67% of new home transactions in February, “a strong demand not seen since April 2008, when sales in the OCR accounted for 71.7% of all sales”, notes Colliers’ Tay.

Contrary to expectations that demand for mass-market homes would be most affected by the latest government measures, a total of 737 units were sold in February, 23% higher than the 599 units achieved in January. This contrasts sharply with the sales volume for mid-tier projects located in the Rest of Central Region (RCR) and for high-end homes in the Core Central Region (CCR), which fell by 45% and 30% m-o-m, respectively, in February (see Table 2).

“The dominance of the mass-market segment in developers’ sales in February 2011 could be the result of buyers becoming increasingly price-conscious due to the cutback in affordability following the lowering of loan-to-value (LTV) to 60% for homebuyers with more than one outstanding loan,” says Tay.

About 82% of apartment and condo units sold in February fell within the price band of “up to S$1,500 psf”, compared with 62% in January. Sales at the top end were also more subdued, with only seven transactions above S$2,500 psf and just one transaction above S$3,000 psf — that of a unit at Tomlinson Heights that was sold at S$3,227 psf.

By contrast, more than 30 units above the S$3,000 psf level were sold in January, with the most expensive  being a unit at Scotts Square, which went for S$4,626 psf. “Players in this segment of the market are in no hurry to buy, as they are waiting for the right opportunity to go in,” explains CBRE’s Li.

Nevertheless, the market is bracing itself for decreasing volumes of below 1,000 units in the next few months. Developers are expected to continue with their launches amid the global uncertainty that now includes unrest in the Middle East and the economic impact of the earthquake and nuclear crisis in Japan. “Buyers are expected to be increasingly more price-sensitive and are likely to take more time to evaluate their purchase decision or adopt a wait-and-see attitude,” says Colliers’ Tay.

For the rest of 1H2011, sales in the primary market could be more subdued, with new home sales ranging from 800 to 1,200 units each month. “If the trend persists, new home sales for the year could be 20% to 30% lower than the previous year,” says SLP’s Mak. Sales will depend on various factors, including market sentiment, government policies and the number and size of new project launches each month, he adds. “In the present climate, it is quite likely for sales to fall below the 1,000 le­vel in March.”

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 852, Apr 4-10, 2011