More on the July private home sales figure

By The Folks @PropTalk - August 16, 2011 No Comments

The number of private homes sold by developers rebounded in July after falling for the preceding two months, but the outlook remains tingled with uncertainty about the state of the financial markets and the economy.

The jury is also out on the extent to which the increase in income ceiling for buyers of new HDB flats and exec condo (EC) projects will siphon off demand for mass-market private condos.

Urban Redevelopment Authority’s figures show that developers sold 1,386 private homes (excluding ECs) in July, up 17.3% from 1,182 units in June.

Developers sold 583 ECs last month, up from 212 units in June and the best showing since a five-year hiatus in new EC project launches ended in October last year. This was buoyed by the release of two projects in July – Riverparc Residences in Punggol and Blossom Residences in Segar Road. Including ECs, developers’sales surged 40.2% month on month to 1,954 units in July.

Other than ECs, which are a hybrid public and private housing, chart-topping projects in July included new projects with attractive location attributes – Skyline Residences near Telok Blangah MRT Station and with views of Keppel Golf Links and the sea (167 units sold at a median price of $1,902psf); The Miltonia Residences, with a view of the Orchard Golf Course and Lower Seletar Reservoir (124 units); Thomson Grand, boasting views of Island Golf Course and Lower Pierce Reservoir (108 units) and Seastrand in Pasir Ris (116 units), notes CBRE Research.

The rebound was helped by low home loan rates, the return of home buyers after the June school holidays and possibly some buyers speeding up their decisions to avoid buying during the Hungry Ghosts Month, which started on July 31.

“The Government’s earlier announcements on increased public housing supply and income ceiling revision have not impacted on the market significantly so far, as evidenced by the rebound in buying activity in July,” said Credo Real Estate executive director Ong Teck Hui. “However, it’s harder to gauge their impact on the private housing market over the longer term,” he added.

In the first seven months of this year, developers sold 9,425 private homes (excluding ECs) – close to the 9,966 units they sold in the same year-ago period. Some market watchers say this point to robust demand.

However, Nomura Singapore analyst Sai Min Chow points out that the latest July sales number (excluding ECs) was down 10.8% year on year. He also highlighted that the inventory of launched but unsold units has risen from 3,480 units in July 2010 to 5,010 units in July 2011 and reiterated his warning that “inventory build-up in the primary market in Q3 2011 to Q4 2012 is likely to fast track a price correction”.

CBRE noted that interest in upmarket projects remained selective in July – a unit at The Orchard Residences was sold at $4,299psf. On Cairnhill Circle, two units at Hilltops fetched $3,319psf and $3,528psf and a couple of units were transacted at Helios Residences for $3,084psf and $3,488psf.

After July’s strong sales, most market watchers expect a slowdown again this month due to the Ghosts Month as well as greater caution among buyers in the face of turmoil in financial markets and weak sentiment on the global economic front. Jones Lang LaSalle is predicting 900 – 970 unit sales in August. Colliers too forecasts the figure could slip below the 1,000-unit mark. Credo’s figure is 800 – 1,100 units.

Many analysts reckon that some of the demand for new mass-market private condos could be siphoned off into new EC projects, as the household income ceiling for new EC buyers has just been raised from $10,000 to $12,000. However, Knight Frank chairman Tan Tiong Cheng suggests this may not happen if developers are nimble with pricing.

“Seeing the writing on the wall, developers who have already bought land for mass market private condos and who have sufficient margin, could elect to lower their price expectations a little if they wish to move units.

“Some potential buyers who were previously stretched by developers’ pricing strategy for new private condo launches may then be wooed back.

Colliers’ consultant (research and advisory) Tay Huey Ying points to two potential bright spots for the private home sales market – low interest rates and a potential influx of another round of hot money from troubled western nations.

DTZ Southeast Asia chief operating officer Ong Choon Fah offers some advice to those trying to find their ways in murky waters: “To each his own, and potential buyers have to do their homework and know how much risk they can afford to take.”
Source: The Business Times

To expect the July sales numbers to be impacted by the government’s earlier announcements is somewhat unrealistic, since the stock market was still booming for much of the month while all the talks about increased public housing supply and income ceiling revision were well… just talks.

But now that the Prime Minister has made the announcement during his NDP Rally speech last Sunday, the August sales figure is likely to be hit with a triple whammy of revised regulations for public housing/EC purchases, the financial market turmoil amid global economic uncertainties and the typical lacklustre purchasing sentiments during the Hungry Ghosts Month. So the wife and I will not be too surprised if the August figure (excluding ECs) drops to between 800 – 900 units.

And speaking of ECs, we believe that this is now a more attractive option (given the raised income ceiling to $12,000) for upgraders or new home buyers compared to neighbouring mass-market projects. Most ECs these days have facility offerings and quality of finishing that are comparable to their private condo counterparts. ECs are also

• Built closer to HDB estates (imagine: wet markets, supermarkets, HDB neighbourhood shops and malls = amenities galore that’s within walking distances)

• Fully convertable to private status after 10 years

• Can be resold to locals after 5 years.

Given the $300 – 400psf price difference between new EC (median price for Blossom Residences: $702psf) and new private condo (average price for Foresque Residences: $1,100psf) and with the new SSD (Sellers’ Stamp Duty) in play, the wife and I will definitely be looking to buy a EC rather than the condo next-door if we are moving to Punggol or Bukit Panjang. This is assuming we qualify, of course…


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