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Aug slump in new home sales unlikely to affect cooling measures: analysts

Units sold down 69% from July high; consultants say buying inertia may set in
Wednesday, September 16, 2015 - 05:50

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The slump in developers' private homes sales last month came in largely expected, after July's sales were skewed by the launch of a massive project.

Singapore

THE slump in developers' private homes sales last month came in largely expected, after July's sales were skewed by the launch of a massive project.

However, the slump is hardly an impetus for the government to tweak the property cooling measures now. And with such status quo expected to last at least until the end of the year, a buying inertia may ensue, consultants say.

Excluding executive condominiums, some 495 private residential units were sold by developers in August, the latest data from the Urban Redevelopment Authority revealed.

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This marked a 69 per cent plunge from the 1,611 units sold in July, but then the number of units launched was 59 per cent lower than in the previous month.

The month-on-month dive was the result of a spike in July, during which 73 per cent of the volume came from the launch of private condominium project High Park Residences, where the majority of units were priced at less than S$1 million.

Desmond Sim, head of research at CBRE for Singapore and South-east Asia said: "Sales numbers for August point to stable underlying demand for projects, reverting to the 400 to 500 level following the spike in the previous month. It will be some time before any decision is made on the lifting of cooling measures."

Knight Frank head of research and consultancy Alice Tan pointed out that the initial hype for new launches in the preceding months fizzled out in August and there was a lack of new launches.

"The Hungry Ghost Festive is less of a factor in this day and age, especially for younger buyers," she said. "It is still about pricing and the anticipation of further price adjustments down the road."

Of the 495 new private residential units sold in August, 72 per cent were in the suburban areas, where 82 per cent of new units launched were located. Consequently, the top 12 selling projects in August were all in the Outside Central Region (OCR).

Including the public-private hybrid ECs, developers sold 961 residential units, compared to 2,106 units in July.

Bucking the sales momentum in the EC market was MCL's Sol Acres in Choa Chu Kang Grove; the absolute number of units sold in this development during its launch weekend made it the best-selling EC project so far this year. Some 259 out of its 1,327 units were sold in August, with a median price of S$787 per square foot (psf).

Private condo project High Park Residences in Fernvale continued to sell 76 units in August at a median price of S$933 psf, after moving 1,139 units in July alone, based on the latest monthly data compiled by URA.

"This shows that a project with more affordable pricing will find buyers more easily in the current market," said JLL national research director Ong Teck Hui.

As for the EC market, sales pick-up in recent launches has been "gradual rather than robust". Buyers remain price-sensitive, so it remains to be seen whether more of them will come forward with the raising of the income ceiling, he said.

City Developments' The Brownstone in Canberra Drive, a 638-unit EC project launched in July with 182 units sold in that month, moved another 36 units in August at a median price of S$817 psf.

The income ceiling for households buying new ECs was raised from S$12,000 to S$14,000 from Aug 24.

CBRE's Mr Sim said that, with more EC launches this year and the larger pool of qualifying buyers arising from the income ceiling hike, there should be a 5 to 10 per cent increase in EC sales volume for the whole year.

But prospective EC buyers will still need to consider larger factors like developers' track record, finishings, location, the mortgage servicing ratio, as well as the nearly 5,000 unsold EC units that have already been launched, he added.

Also in the pipeline are a few EC projects slated to be launched over the next few months. These include Sim Lian Land's Wandervale in Choa Chu Kang, CDL and TID Residential's The Criterion in Yishun and Frasers Centrepoint and KH Capital's joint project Parc Life in Sembawang; units at JBE Holdings' Signature at Yishun are expected to sell at an average S$750 psf or less when booking begins on Sept 26.

Upcoming private condo launches include Nanshan Group's maiden project in Singapore called Thomson Impressions in Lorong Puntong. The Andrew Residences by MCC Land is targeted to launch in October or November. UOL and Kheng Leong are expected to release their 663-unit Principal Garden condo in Prince Charles Crescent next month.

PropNex CEO Mohammed Ismail noted that prices for upcoming projects will remain competitive as the potential pool of buyers shrinks and developers face steeper competition.

"With no changes to the government curbs on the horizon in 2015, the private residential market is expected to remain soft," he said. "We expect new private home sales volume to be about 8,000 to 9,000 units. Transaction volume will continue to be launch-driven, largely dependent on the price and location of the project."

Notably, the strong mandate that the Singapore electorate has just given the ruling party to continue governing the country for another term is now seen providing an impetus for policies enhancing housing affordability to continue.

Any adjustment to property cooling measures that runs counter to that principle will affect the government's credibility, consultants said.

With the topic of foreigners still a touchy one, it is unlikely that the government will reduce the additional buyers' stamp duty (ABSD) for foreigners' property purchase, Ms Tan said.

Consultants foresee that the government will go only as far as to lift the ABSD for Singaporeans' second or third home purchase.

Citing rising interest rates, currently low speculative activities in property, tight financing rules and looming housing supply, ERA Realty key executive officer Eugene Lim said that lifting the ABSD for Singaporeans will not affect the stability of residential property prices.

The timing of the Federal Reserve's interest rate hike, which will raise the cost of borrowing here, is critical to any policy adjustment. "If they delay the hike in interest rates, it will prolong the impasse," JLL's Mr Ong said.

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