Pace of new home sales eases in Aug

Source : Straits Times – 16 Sep 2009

Figure dips to 1,699 from July’s 2,772 but it’s still robust – it was 325 in Aug 2008

THE buying rush that galvanised home sales in July eased off last month, with 1,699 units of new private homes changing hands.

That is still a robust number – only 325 units were sold in August last year – but well under the record 2,772 shifted at breakneck pace in July.

The slower pace of sales was possibly due to the onset of the Hungry Ghost Month, which prompted some developers to lie low as superstitious buyers stayed away.

Developers launched 1,641 units last month, down from 2,878 in July, according to Urban Redevelopment Authority data yesterday.

Some price resistance also set in last month, with potential buyers thinking twice about putting their cash down in the light of rising prices.

At some projects, people returned units they intended to buy, possibly because they felt the price was too high or they had problems securing loans. They lose 25 per cent of their deposit in such a situation.

This has occurred at some new launches like Centro Residences in Ang Mo Kio. It sold 87 units as of end-July and another 17 units last month at a median price of $1,231 per sq ft (psf). Total sales now are at only 91, indicating that 13 units have been returned.

Also, the supposedly sold-out Optima @ Tanah Merah still has three unsold units, data for last month showed.

Overall, however, August figures were still very strong, particularly given the weak economic climate.

The buying sentiment has also trickled down to the secondary market, where prices have risen, said Jones Lang LaSalle.

Only three projects registered impressive sales last month, a far cry from July, when several developments lodged sales of more than 100 units.

The popular 99-year leasehold Trevista in Toa Payoh sold 413 units at a median price of $943 psf last month. It has since sold 469 units out of 590.

Buyers picked up 203 units at a median price of $1,537 psf at the 235-unit Viva in Suffolk Walk. And the Optima sold 164 units at a median price of $843 psf.

The luxury-end segment stayed quiet, though a Scotts Square unit in Scotts Road was sold at $4,304 psf.

Sales are expected to slow for the rest of the year, though, after the Government introduced measures on Monday to calm the fast-rising market and stop any speculative bubble from forming.

It has axed the interest absorption scheme that allows buyers to defer the bulk of the purchase price until the property is completed. Scheduled land sale tenders are also being reinstated.

‘As the new measures are likely to affect market sentiment in the immediate future, the residential sales momentum is likely to moderate in the fourth quarter and further price increases will be checked,’ said CBRE Research executive director Li Hiaw Ho.

The measures could deflate some of the speculative froth and limit the rate of price growth in the coming months, but they are not expected to derail the property market’s recovery, said Ngee Ann Polytechnic real estate lecturer Nicholas Mak.

Sales are expected to total between 13,000 and 15,000 this year, which will still be one of the highest annual figures in the past 14 years, said Mr Mak.

Some consultants take a more cautious view. Developers are unlikely to delay projects that are already at the advanced stages of launch preparations, said Colliers International director for research and advisory Tay Huey Ying.

It makes sense for them to launch early at current prices instead of at a later date when values may come under pressure from the Government’s cooling measures, she said.

Jones Lang LaSalle’s head of research for South-east Asia, Dr Chua Yang Liang, noted that the Government has sent a strong message to the market that it will intervene if the strong sales performance gets overtly inflated by sentiments and becomes unsustainable.

While monthly demand for new launches is unlikely to fall to the level recorded after the collapse of Lehman Brothers, a ‘more conservative’ volume of possibly between 500 and 550 units a month is likely if price and interest rates – the two key driving forces in today’s market – remain stable, he said.