Private home market gaining momentum

For the past couple of weeks, you get the sense that momentum is building up in the private housing market.

In an ironic twist, a private residential site tender at Flora Drive in Upper Changi broke new ground on Wednesday, the same day National Development Minister Khaw Boon Wan said it was not time yet to remove the property market cooling measures.

It was the first site sale to reverse the tide of cautious bids for the past few land tenders. The tender attracted eight bids, with the top offer coming at S$163 million or S$361 per sq ft per plot ratio. This is 11 per cent higher than the S$325 psf winning bid for an adjacent site sold in June which attracted only four bids.

You could say that this day was some time in the making. Even as the past few state land sales attracted lower – and fewer – bids, the point is that they still got sold. The past few years have been golden years for developers, with many achieving strong profits. Many are facing the “good” problem of how best to re-invest these profits.

But more important than profits for developers is that housing sales are continuing, albeit at stable price levels.

The latest developer sales numbers for last month showed housing units sold jumping by 20.7 per cent from the previous month, or by 25.8 per cent, including the sale of Executive Condominiums.

Can the buying momentum continue and surpass the record 16,292 private homes achieved last year? It is a tall order but why not, if – as many have predicted – developers are rushing over themselves to push out their units.

And if sales continue to be robust, can we expect prices to remain unchanged for long since rising prices and sales often always go hand-in-hand?

Adding to the momentum is the ongoing collective sales – but with a big difference this time. The en bloc sale scene has clearly entered a new phase where the majority of owners for some projects are “determined” to sell.

This week alone saw five developments being put up for collective sale – Faber Garden, Dragon Mansion, Newton Lodge, Dunearn Gardens and Jasmine Court.

For the majority of owners in Dragon Mansion and Dunearn Gardens, they are openly lowering their price expectations. If owners are determined to sell, I strongly suspect they will get it sold eventually.

What will be the impact of this continuous stream of collective sales? For one, they will remove some of the housing stock and possibly some rental units – which will lend some support to the rental market.

Some owners will choose to rent while others will downgrade for the time being. This will again impact both the rental market and raise housing sales for existing developments. Others will seize their opportunity to make big money, enough to possibly retire comfortably.

For these owners and other investors, the path is clear. There is price stability in the private housing market – which means no more cooling measures for the time being. They may even derive some comfort from Mr Khaw’s announcement on Wednesday that his top priority for the next two years will be to tend to the housing needs of two groups: Newlyweds and vulnerable families.

As the saying goes, when the cat’s away, the mice will play.

By Colin Tan – head of research and consultancy at Chesterton Suntec International.

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