Condo buyers seen to be cautious in H2

[SINGAPORE] With a drastic fall in developers' sales of private condos last month, the market is increasingly tilted in favour of homebuyers in the second half of this year.

URA data yesterday shows developer sales of private condos plunging 68 per cent to 482 in June from a month earlier.

Though fewer launches (418 units) in the traditional lull season of school holidays and the World Cup are to be blamed, consultants do not expect sales to jump when developers ramp up condo launches.

PropNex CEO Mohd Ismail warned that the "air of caution" is expected to linger, with monthly sales in the second half expected to be around 600-800 units.

This would mean that the estimated 2014 sales of 9,000-10,000 units are 35 per cent shy of the units sold in 2013, he projected.

There are fewer "affordably priced mass-market projects" in the pipeline, said Chia Siew Chuin, director of research and advisory at Colliers International. "Furthermore, the slowdown in buying momentum - even for popular projects - indicates that buyers continue to face inertia to commit."

Developers were more focused on moving units at existing projects rather than launching new projects in the traditionally slow month. Favourable pricing perceptions enabled certain projects to still garner interest after the initial launch.

City Developments' Coco Palms in Pasir Ris, launched in May, sold 55 units at a median price of $1,014 per square foot (psf) in June. The Panorama in Ang Mo Kio managed to move 49 units at a median price of $1,287 psf. It had sold 100 units in its re-launch in May at a median $1,241 psf after developer Wheelock Properties cut prices by some 10 per cent.

Another top seller in June was The Skywoods at Dairy Farm Heights, where 19 units were sold at a median $1,235 psf. The project - developed by TA Corporation, Hock Lian Seng Holdings, King Wan Corporation and Far East Distillers under Bukit Timah Green Development - managed to move only 82 units from its launch in September to May.

The developers managed to revive interest in The Skywoods after offering some "star-buys" with 3 per cent discount from preview prices and raising the commission for agents, according to sources.

Only two new projects were launched last month - Wing Tai-led The Crest in Prince Charles Crescent with 469 units and Roxy-Pacific's 222-unit Trilive freehold condo in Kovan. Both projects had a slow start, with 35 units at The Crest sold at a median $1,682 psf and 19 units at Trilive sold at a median 1,605 psf.

Other projects launched in May such as Kallang Riverside and Waterfront @ Faber saw buying interest cooling off, with only six units and 16 units sold respectively in June.

Ong Teck Hui, JLL national research director, said: "The fundamental weakness in demand due to the TDSR and other cooling measures prevents any market pick-up from being sustained. After TDSR, there is just not enough demand to continually soak up unsold units, so we are seeing sales progress slowing significantly or even stalling completely after initial launch."

More than half of private condos sold in June were in the suburban areas (269 units), while city fringe areas accounted for 35 per cent (167 units) and core central region made up 10 per cent (46 units). URA's data also showed that 49 executive condos (ECs) were sold by developers, down from 59 in May.

In the first half, 4,523 private condos (excluding ECs) were sold - 11 per cent fewer than in H2 of 2013, based on the latest data. This is a 56 per cent dive from about 10,182 units sold in the year ago period, which essentially means that sales by developers have more than halved since the TDSR kicked in in June last year.

Nicholas Mak, SLP International executive director, said: "As the government is not expected to ease any of the cooling measures and TDSR in 2014, and the local economy is growing at a very moderate pace, there is a growing possibility that the total number of private homes sold by developers in 2014 may fall under 11,000 units. If this happens, it would be the lowest volume since the financial crisis of 2008, when developers sold only 4,264 private homes in that year."

Alice Tan, research head at Knight Frank, said she expects third-quarter new sales volume to reach 2,500-3,000 units, "fuelled by the gradual return in interest for a few highly-anticipated mid to large-scale projects such as The Highline Residences and City Gate". "Developers are also likely to launch projects with attractive offers to boost sales performance in the coming quarter."

Mr Ismail noted that prices could come under pressure as the potential pool of buyers shrinks and developers face greater competition, exacerbated by a sizeable residential supply coming on-stream.