New home market to ease to a steadier state

New home sales in January were robust despite the introduction of yet another round of property market cooling measures that month, with developers selling a total of 2,013 private residential units, excluding executive condominiums (ECs), representing a hefty 43 per cent surge from the previous month.

The strong sales performance was due partly to attractive pricing and other incentives in the aftermath of the latest curbs but, more importantly, it also reflected the underlying demand from genuine first-time Singaporean private home buyers who are generally unaffected by the additional buyers’ stamp duty (ABSD) and other measures. These buyers find much value parking their money in private property due to persistently low interest rates.

Yet, while a new home sales figure of 2,000 units or more can be read as an indication that home buyers have turned very optimistic in the month — especially now that there are fewer shoebox apartments pushing up the monthly quantum — January’s performance does not mean that the strong buying will be sustained.

New private home sales are expected to moderate to between 1,500 and 1,800 units monthly in the first half of the year. February new home sales data will be released by the Urban Redevelopment Authority on March 15.

To achieve robust sales, projects have to be attractively priced, especially in the midst of several new launches. But there is a limit on further discounts, rebates and incentives that the developers are willing to give.

While the pricing or rebates may have attracted buyers in January, they will not be so easily moved when projects are similarly priced in the forthcoming months, as the new levels essentially become a standard price.

Many of the upcoming developments are in areas where prior projects have been recently launched. Drastically cutting new project prices — while giving the developer an edge over competitors who had earlier launched sales in the vicinity — may give rise to the perception that the new project is a low-frills or less well-designed one.

Not all developers are willing to go that route, especially those who are financially strong and who want their flagship suburban condominium project to stand out.

Following the latest curbs, the pool of potential buyers largely consists of those who require more time to evaluate choices and make up their minds.

As each Singaporean can now only purchase one “ABSD-free” private property, he or she will be very cautious in selecting the “dream property”.

Joint investors who typically team up with friends or family members to invest in pricier condominiums will easily exhaust their chance for an ABSD-free private property through such purchases — therefore such Singaporean buyers are likely to be very cautious when buying private residential property.

But buyers’ interest for ECs, the private-public hybrid housing type, is expected to remain strong, reflecting the upgrading aspirations of the mass market.

Recent cooling measures on EC developments indicate that the segment is continually being monitored and policies calibrated to make the market for such housing more sustainable.

They also suggest that land for EC development will be supplied by the state as far as is necessary, instead of the authorities tightening EC supply or withdrawing the scheme altogether, following the recent furore over super-sized units bought by those who are probably able to afford an unsubsidised private property.

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

Source : Today – 8 Mar 2013

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