A man went to the races and won big, taking home $50,000 in winnings. The following week, he won $25,000. Did he win big? Of course he did!
When developers’ sales for May hit 1,078 units – about half of April’s near-record 2,208 units, the market was adjudged to have cooled significantly. Has it?
Even if market sentiment had not been hit by the European debt crisis, April’s near-record-breaking figure of over 2,000 was going to be difficult to match anyway.
And have we considered how many units were actually launched by developers in May? Just 1,134 units. Can people buy more homes if fewer units are offered for sale?
Finally, the transacted prices did not show a downward trend, which would have been consistent with a poor showing.
It is no wonder readers are thoroughly confused. One week it is up, the next week it is down and the following week up again.
The news also reported price resistance as a factor, as more units sold came in the lower price categories.
Price resistance makes sense only when the market is dominated by home buyers. For the investor, it is his affordability to make a play in the market. If the investor is convinced that there is further price upside, he will buy, no matter how high the price. Similarly, he will not bite – no matter how much the price correction – if he is sure that the price declines will continue.
Back to developers’ sales. If we want to get it right, 650 units sold per month is average, 750 to 850 is above average, 1,000 units is very good. Way above 1,000 is sizzling.
Then we look at the prices and the spread of sales among projects. Are they consistent with a good or poor showing? What about sales for completed properties? Transactions dived 70 per cent in May compared to April. But remember, one is dominated by investors, the other by owner occupiers. Then make your final market judgment. But do keep in mind these are figures for just one month. Have perspective.
Finally, about that $36 million price for a house in Sentosa Cove. As no valuer in Singapore can match that price, no bank can give a loan, which means it is likely to be paid fully in cash. Feedback from my colleagues tell me there has been a growing number of such deals involving Chinese nationals.
By Colin Tan, head of research and consultancy at Chesterton Suntec International.