After July spike, developers seek clues in next few months

New home sales in June dropped almost half from May – but the numbers will jump back up this month with the last-minute buying frenzy the night before a new round of cooling measures kicked in on July 6.

Given the skewed performance in July – over 1,000 units in Riverfront Residences, Park Colonial and Stirling Residences were snapped up on the night of July 5 – market watchers expect the impact of these measures on buying demand to be more clearly felt only in the months ahead.

Such uncertainty has given developers cause for pause, with many reviewing their project launch dates.

Tan Tee Khoon, head of residential project marketing at Knight Frank Singapore, reckoned that buyers are likely to be circumspect and selective in the next three to six months as they work out their financial outlays.

“This is especially so for the second, third and subsequent property buyers. While discounts are a practical way of wooing buyers to purchase now, we expect new launch prices for private residential property to hold steady nonetheless as the costs of land acquisition are high.”

Latest figures from the Urban Redevelopment Authority showed that developers sold 654 housing units in June, 41.7 per cent lower than a month ago and 20.2 per cent below a year ago.

More than half of the sales (57 per cent) were for units in the suburban area or Outside Central Region, one-third in the city-fringe or Rest of Central region and the rest in the prime areas or Core Central Region.

With another 52 executive condominiums (ECs) sold last month, developers’ total sales tally for June was 706 units – representing a 43.9 per cent decline from a month ago and a 33.6 per cent drop from a year ago.

While the month-on-month decline in developers’ sales for June was in line with a 31.5 per cent fall in units launched in June, the year-on-year decline came in the face of a 4.6 times surge in units launched in June from a year ago. No EC unit was launched in a month-ago or year-ago period.

Observers felt that the weaker take-up rate in June is partly due to head-on competition between Affinity At Serangoon and The Garden Residences, which are in close proximity and launched at the same time, potentially cannibalising demand from each other.

“Buyers could have also baulked at pricing levels as both sites were launched at above S$1,550 psf, a benchmark for the vicinity,” said Christine Li, senior director for research at Cushman & Wakefield.

Last month, the Oxley-led consortium moved 107 units at Affinity at Serangoon at a median price of S$1,584 per square foot (psf) while Keppel Land and Wing Tai Holdings sold 64 units at The Garden Residences at a median S$1,662 psf.

MCL Land sold 121 units at Margaret Ville at a median S$1,873 psf. In the same month, two other smaller project launches – One Draycott by Champsworth Development (unit of SDB International) and 33 Residences by Macly Group – sold one unit at S$2,599 psf and six units at a median S$1,629 psf respectively.

Based on preliminary estimates for the second quarter, developers sold a total of 4,090 private homes and 1,046 EC units in the first half of this year. This is less than the 6,039 private homes and 2,026 EC units sold in the first half of 2017.

Weaker sales in the first half of this year, however, have been largely launch-driven. Developers have been holding back their launches to ride an anticipated price climb, but this strategy has been upended by the fresh round of cooling measures.

JLL national director for research and consultancy Ong Teck Hui observed that in the secondary market, transactions were buoyant in the first half of this year. Volumes rose 37 per cent from a year ago, which he perceived as more reflective of buying demand.

This suggests “lost opportunity in the primary market as 6,000 or more new private homes could have been taken up in H1 2018 if launches had been more forthcoming,” he added.

The latest tightening of cooling measures – including a hike in additional buyer’s stamp duty (ABSD) for most categories of buyers and lowering of loan-to-value (LTV) limits – will impact investors most. First-time buyers also have to fork out a higher cash/CPF outlay for upfront payment for purchases due to the lowered LTV.

“With the tighter measures in place, demand is expected to moderate but there will still be interest from buyers who are now more price-sensitive but may still purchase if pricing is realistic,” Mr Ong said.

Post-July, August may feel the impact of cooling measures and the seasonal lull associated with the Hungry Ghost Festival from mid-August to early-September, Ms Li said. “August sales could potentially fall by around 40-50 per cent from July’s sales as the market adjusts to the new cooling measures.”

Still, market fundamentals remain unchanged, she stressed. The property market is still positioned for growth on the back of firm economic outlook and healthy household balance sheets flush with cash, Ms Li posited. “Despite a higher barrier of entry, the value proposition of the Singapore residential sector remains attractive.”

Dr Tan of Knight Frank Singapore noted that transaction costs and property prices here are still a tad lower than Hong Kong’s. It is also premature to think that Singaporeans will turn to overseas markets as foreign properties cater to a different risk appetite and some governments have also tightened controls on foreign buyers and accessibility to credit, he said.

For now, developers here will be tweaking their pricing expectations and marketing strategies. JPMorgan property analyst Brandon Lee said that those who bought land before Q3 2017 “should be able to stomach lower average selling prices, yet attain decent profit-before-tax margins of 5-15 per cent”.

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