Developer sales to hit steady state

In the private residential market, developer sales continued to slow down in June, when only 1,371 new homes were sold.

The Urban Redevelopment Authority’s (URA) price index for the second quarter also showed that prices of uncompleted non-landed private homes fell by 0.9 per cent from the previous quarter, while those for completed non-landed private homes increased by 2.3 per cent.

The slowdown in primary home sales in June reflected a moderation after sizzling developer sales from January to April, with the school holidays also partly to blame.

Yet, the market had already begun to take a breather in May, as developers and home buyers took a reality check amid renewed uncertainty in the Western economies. They wondered if prices could sustain their record highs in such an external environment, especially amid ample forthcoming housing supply.

Although last month saw a resurgence in developer sales, this revival is expected to be short-lived.

With prospective buyers looking for lower-cost alternatives in the resale market, developer sales are likely to remain average for the rest of the year, with pricing expected to stay at current levels.

New home sales are expected to hover around 1,200 to 1,500 units each month – excluding executive condominiums – reflecting a steadier state than before.

Such a slowdown would reflect the increasing cautiousness on the part of buyers, even as the persistently low-interest-rate environment will sustain interest in the property market.

Some prospective buyers are also aware that there may be many projects – launched or in the pipeline – in the vicinity of the development they are eyeing. This paints a mental picture of a large supply of new homes in the neighbourhood.

Projects typically need at least six to 10 months from the date of site acquisition to be launched for sale. Hence, in the second half of this year, the suburban condominium projects that will be launched or are launch-ready will be from sites that were awarded in December last year to April this year.

Some of such sites are near other projects that have been recently launched. Benchmark prices have been set, while demand for homes in the area has been partially absorbed by the earlier projects.

So the pricing for the new projects is expected to be competitive. For instance, the Mount Vernon site awarded in January has Bartley Residences in the vicinity, whereas the Hillview Parcel B site awarded in March is near The Hillier.

The second quarter of this year has already seen a reduction in developer sales of shoebox apartments, hence easing concerns that such homes are being offered at a sizzling pace at the expense of family-sized units.

URA data showed that the take-up of shoebox units accounted for 19 per cent of new sales in the second quarter, down from 27 per cent in the first quarter.

Looking ahead, developers are unlikely to provide large numbers of shoeboxes, unless the locality really suits none other than single home buyers. The majority of suburban condominium projects slated for launch in the second half of this year will likely comprise a lower proportion of shoebox apartments and focus on family-oriented branding with more exciting themes.

By Ong Kah Seng – Director at R’ST Research, an independent property market research and advisory company in Singapore.

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