Developer sales fall 15% in August amid slow launches

[SINGAPORE] Developers' residential sales continued to languish in August, falling 15 per cent to 432 homes sold as launches were delayed until after the Hungry Ghost Festival.

This was the lowest number of new private units sold in a month so far in 2014, according to figures from the Urban Redevelopment Authority. It excludes executive condominiums (ECs), a public-private housing hybrid. Including ECs, developers sold 490 homes last month, a 13 per cent drop from July.

Developers usually avoid launching projects during the Hungry Ghost month because superstitious buyers consider it inauspicious to purchase property during that period. SLP International executive director Nicholas Mak counted 21 days in August that were part of the Hungry Ghost month.

As a result, only 351 new units were launched in August, a 20 per cent drop from July and the lowest in the year so far. In fact, no new residential project was launched, but only various phases of previous projects were launched.

For this reason, CBRE research head Desmond Sim thinks that simply looking at the decline in the number of units sold, which is a function of supply, does not offer a full picture. Case in point: when the number of units sold shot up to about 1,500 in May this year in tandem with a spike in launches.

"If this month the butcher is not selling meat, you can't say no one is buying meat," he said, thus preferring to use a six-month rolling average, which produces a smoother trend line with less volatility and knee-jerk reactions (see chart). But the slow activity can also be put down to buyers taking their time to look over properties while holding out for possible price cuts.

"In light of the existing total debt servicing ratio (TDSR) ruling and property cooling measures, prospective buyers are maintaining a wait-and-see approach in anticipation of further price changes," Knight Frank Singapore research head Alice Tan said.

CBRE's Mr Sim agrees that there is no need for buyers to commit very quickly to a project, given the array of options available in terms of location and product type.

But while developers will probably continue to price their projects competitively to maintain sales momentum, real estate lawyer Lee Liat Yeang, partner at Rodyk & Davidson LLP, believes price cuts, if at all, will not be drastic.

First, some cannot afford it, having bought the land at high costs. Secondly, its effectiveness is limited, especially when the discount is slight. Thirdly, it might never end; further cuts may be required once units stop moving again. Fourthly, developers also risk upsetting buyers who had bought units earlier.

"Everybody's waiting for developers to cut prices. The more they cut, the more buyers expect them to cut. It's a psychological mind game which is why I think many developers are not cutting prices," he said.

In August, suburban projects sold best, making up over half of new private home sales, with Wheelock's Panorama taking the lead (54 units sold). This was followed by Coco Palms (23 units) and Lakeville (21 units). Units at city-fringe project Eight Riversuites at Whampoa East also moved quickly, with 22 units sold.

The slowdown in the market this year becomes more evident when compared to 2013. From January to August 2014, about 5,600 and 5,350 new private homes have been launched and sold respectively - just about half of the 11,480 and 11,180 units launched and sold in the corresponding year-ago period, noted Mr Mak.

Consultants expect the full-year number of units sold to range from 8,000 to 9,000. Sales and launches in September are expected to improve with the launch of Keppel Land's Highline Residences, as well as the expected launches of Marina One Residences, 70 St Patrick's and Bellewoods EC.

Already, Highline Residences, which began closed-door sales over the weekend, has sold more than 80 per cent of its 160 launched units at an average S$1,900 per square foot (psf) after discount.

Marina One Residences also held a private preview of its show gallery on Saturday. Sales have not started but prices will likely average S$2,600 psf. 70 St Patrick's is also open for advance showflat viewing now.