July boost for private home sales

Source : Today - 16 Aug 2008

But sector’s outlook still cloudy on slower growth

DEVELOPERS sold 897 private homes out of the 1,322 launched last month, the highest number since last August, according to monthly data released on Friday by the Urban Redevelopment Authority (URA). This represents a 68-per-cent take-up rate.

While the sales were a modest increase from June, when 1,069 units were launched and 801 sold, there was little to suggest that the property sector would see a sustained pick-up in the coming months. The take up rate then was 75 per cent. The rise was also not as significant compared to the surge in June from May, when launches and sales more than doubled.

Most of last month’s transactions came from projects outside the core central region, such as Livia in Pasir Ris, Clover by the Park in Bishan and Kovan Residences, that catered to mid-range to mass-market home buyers.

Livia, which was priced at an average of $671 per square foot, accounted for a large chunk of the sales in July, with 301 units in the Pasir Ris Grove condominium sold. Prospective buyers were still largely holding out, as developers launched many more residential units for sale than they were able to sell, said Mr Nicholas Mak, consultancy and research director of property firm Knight Frank.

“The stock of unsold homes in the developers’ inventory will gradually increase,” said Mr Mak.

The outlook for the property sector is likely to stay cloudy due to worries that the limping United States economy would lead to slowing growth here. Just last week, the Government cut its forecast for Singapore’s growth rate to 4 to 5 per cent from its earlier forecast of 4 to 6 per cent.

“Since the end of July, there has been a slowdown in launch activity and take-up momentum due to more dismal news of the US sub-prime debacle being released,” said Mr Li Hiaw Ho, executive director of CBRE Research.

There may also be fewer launches and sales this month as superstitious buyers generally avoid buying a home duringthe Hungry Ghost Month, which lasts from Aug 1 to Aug 30 this year.

There are concerns that rising interest rates may weigh on property market sentiment. With the Singapore dollar heading into its fourth week of decline, the reduced expectations for currency strength should see the Singapore interbank offered rate (Sibor) start to rise. Housing loans in Singapore are typically pegged to Sibor.

But analysts said that with interest rates at the current low levels - Sibor at slightly more than 1 per cent - a gradual rise would not affect the behaviour of prospective home buyers, especially with banks keen on pricing their mortgages competitively to maintain or increase their market share.

“Property transactions are long-term investments and most investors hold on to their property for about five to seven years,” said Mr Donald Han, the managing director of property consultancy Cushman and Wakefield.

“Most owner-occupiers are more affected by fundamentals than anything else,” he added, saying that speculators are more affected by changes in interest rates.