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Caution remains the buzzword for now

Developer sales in 2015 up 2.9%; most market watchers see another flattish year ahead

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Developers sold 7,529 private homes in 2015, according to preliminary Urban Redevelopment Authority (URA) data on Friday, up 2.9 per cent from 7,316 a year earlier.

Singapore

DEVELOPERS sold 7,529 private homes in 2015, according to preliminary Urban Redevelopment Authority (URA) data on Friday, up 2.9 per cent from 7,316 a year earlier. They also found buyers for 2,562 executive condo (EC) units last year, an increase of 62.4 per cent from 2014's 1,578. ECs are a public-private housing hybrid.

For this year, some market watchers such as ERA Realty Network key executive officer Eugene Lim are expecting a flat sales performance in both the private housing and EC segments - assuming there is no change in cooling measures.

He forecasts that about 7,500 private homes and 2,600 EC units could be sold in the primary market in 2016. "Of course, the volumes will be higher if some of the cooling measures are lifted or tweaked."

So far, ERA has not received any instructions from developers of a delay in launch schedules for projects slated for release in the months after Chinese New Year, arising from the current rout on the stock market. "While the stock market has been volatile, it has not plunged to crisis levels. Developers are mindful that sentiment may be affected and are likely to take this into account when pricing their units for sale," Mr Lim added.

Among the projects that ERA will be marketing are Wandervale in Choa Chu Kang and The Visionaire in Sembawang Road/Canberra Link (both EC projects), Sturdee Residences, The Wisteria in Yishun and a condo at Toa Payoh Lorong 4/6.

Knight Frank executive director of residential services Tay Kah Poh said: "Most developers will continue to take a cautious approach when it comes to launches but will look out for windows of opportunity to launch or relaunch their projects."

In terms of pricing, he expects developers to look at comparable projects in the locale before factoring in a discount to that. "This will help to boost initial sales; however they could still get stuck after a while as some potential buyers may anticipate further price cuts . . ." Most developers will take an incremental approach rather than do anything drastic when it comes to prices, he added.

Analysts also note that developers would be constrained from slicing prices too much by the high prices they paid for their sites and high construction costs.

Desmond Sim, CBRE Research head of Singapore and South East Asia, sees fewer new projects to be released as developers' inventory is running low. Still, he expects developers' sales of private homes for 2016 to remain around 7,300-7,500 as seen in the past two years - with about 60 per cent of new sales coming from an estimated pool of 14,000 unsold units in launched projects. "Overall home prices will moderate marginally by 1-3 per cent; some of the existing projects might see some discounts while a number of new launches have strong location attributes."

CBRE's analysis of URA Realis caveats data shows that the number of resale transactions for private homes rose 21.6 per cent to 6,008 last year from 4,939 in 2014. While there has been much anecdotal evidence of buyers being drawn to the secondary market, where sellers are more amenable to negotiating on price, a point to note is that URA's definition of resales also includes units sold by developers in projects that are completed, that is, received Certificate of Statutory Completion, and where the individual strata titles have been issued to buyers. An example would be Goodwood Residence in the Bukit Timah area, where any sales by developer GuocoLand would be classified as "resale" in URA's definition.

While Singapore is under a cloud of economic slowdown, rising interest rates and weak stock market sentiment, some market watchers point to scenarios where more private homes could be sold this year.

JLL national director Ong Teck Hui suggests that if the economic slowdown turns out to be moderate, sales could improve to 7,500-8,500, "with lower prices drawing more buyers into the market".

PropNex CEO Ismail Gafoor too says that sales in 2016 is likely to be about 8,000 units "as we foresee developers will dangle incentives to move their unsold units".

SLP International executive director Nicholas Mak suggests an even higher number, 9,000-11,000, as developers could roll out more than they did last year if there is an uptick in sentiment, given that some projects on sites sold by the state in 2014 have yet to be launched.

Alan Cheong, research head at Savills Singapore, said that for a developer who believes the current air of uncertainty would blow away within, say, three months, rescheduling a launch is a good risk-management strategy as the developer would not run the risk of opening a showflat, receiving lukewarm response and then suffering from negative publicity from the earlier slow sales, when the market rebounds.

"On the other hand, if they believe this inclemency will remain for a while longer, then deferring their launches is optimal. This strategy would get a boost from a potential tweaking of cooling measures if the economy hits a severe air pocket," he added.

URA's preliminary December 2015 data shows that developers did not launch any new housing projects during the month. The top-selling project was The Poiz Residences (64 units sold at a median of S$1,430 psf), followed by Sky Vue (20 units at S$1,571 psf) and Botanique at Bartley (17 units at S$1,302 psf), JLL noted. In the EC segment, 20 units were sold at The Brownstone at a median price of S$814 psf.

Developers sold 384 private homes last month, half the 759 units in November 2015 but a 67 per cent year-on-year jump. Just 124 EC units were sold last month, a one-third drop from the previous month.

URA will release the final 2015 new sales numbers on Jan 22.