Buyers waiting on the sidelines

Source : Today - 16 Oct 2008

Property developers sell just 376 units last month despite launching four times as many units

SALES of private homes continued to languish last month, with the poor sales in August - the Hungry Ghost month - proving to be more than just the usual annual blip.

It was more of a sign of things to come, as the ongoing financial turmoil takes its toll on home-buying sentiment.

According to data released yesterday by the Urban Redevelopment Authority (URA), property developers sold 376 units in September - just 51 more than in the preceding month - despite launching almost four times as many units. In stark contrast, developers launched more than 1,000 units in June and July and sold more than 800 in each of those months.

The latest figures come a day after an official with Malaysian plantation giant IOI Corporation told Malaysian newspaper The Star that the company is postponing the launch of Sentosa Cove due to the slowdown in the residential property market.

Property consultants had been predicting sales to rebound after August. But the collapse of United States bank Lehman Brothers and the US government bailout of insurance company AIG on Sept 15 put paid to such hopes.

But although macro economic conditions continue to look unfavourable, with Singapore slipping into recession, analysts are split over whether private home prices would come down drastically in the months ahead.

Chesterton Suntec International associate director Colin Tan, for one, believes the latest data have erased any ambiguity over whether Singapore’s property market has turned.

Noting that developers were “resisting making deeper price cuts”, Mr Tan said: “Developers are under pressure to maintain their revenue flow - that’s why they have to launch new units. The fundamentals have actually deteriorated quite sharply. The writing is on the wall: If you don’t lower prices, you can’t sell.”

Commenting on the latest private home sales figures, Jones Lang Lasalle said in a press release that the “aggressive supply far exceeded what the market could digest”.

It added that the “apparent supply overhang” is most severe in the core central region, where only 70 out of the 258 units launched were actually sold.

While high-end projects such as Orchard Scotts, Martin No 38 and Reflections at Keppel Bay all sold units above $2,000 per sq ft,median prices were generally heading south - although CB Richard Ellis executive director Li Hiaw Ho maintained that there was “still no broad-based decline”.

Singling out a “slight easing of prices” in the Bukit Timah and Newton areas,Mr Li noted that prices of units at Madison Residences and Floridian along Bukit Timah Road have fallen some 10 per cent, compared to last year.

Prices of apartments at Viva and Park Infinia - at Lincoln Road and Thomson Road respectively - are about 5 per cent lower than those achieved by comparable projects in the beginning of the year.

And buyers are still shying away from the luxury market.

While luxury development Nassim Park Residences sold eight units at a median $3,349 psf in August, only one unit was sold this month, fetching a price of $3,197 psf - an indication of a “weakened market for high-end properties”, according to PropNex chief executive Mohd Ismail.

Taking a more optimistic view, Mr Mohd Ismail felt the property market was “recovering”, and he did not expect developers to drop prices in the next few months. “Singapore’s economy is expected to weather the storm and property here remains a viable and lucrative investment,” he said.

Pointing out that the number of units sold had increased by 17.5 per cent as compared to August, he noted the fact that almost six out of 10 of the units purchased had a median price of over $1,000 psf - the highest proportion for the year so far.

He said: “Stocks, shares, equities and other such financial investments are now largely avoided. People here are looking to a ‘bricks-and-mortar’ investment, and choose therefore to plant their funds in property.”

URA’s preliminary estimates showed private home prices dropping 1.8 per cent in the third quarter, after having climbed 3.9 per cent in the first six months of this year.

Based on the latest figures, the total sales for private homes in the first nine months of the year hit 3,890.

And Mr Li expects a demand of “1,000 to 1,400 new homes” in the final quarter of the year, with prices set to fall by between 2 and 4 per cent.

With the HDB resale market going strong - HDB resale prices rose 4.2 per cent in the third quarter - Mr Li expects HDB upgraders to continue to shore up demand for private homes.

He added: “But other potential buyers would prefer to wait on the sideline for a more sustainable solution for the global financial turmoil.”