Sharp drop in Q1 new home sales

Source : Today - 18 Apr 2008

But don’t expect prices to fall, say analysts

IN another sign of a lull in the private residential property market, developers managed to sell only 795 new homes in the first three months of this year — a hefty 46 per cent decline from the fourth quarter of last year.

“This was the second lowest quarter of developer sales since the Sars-stricken quarter” in the first three months of 2003, said DTZ Research in the real estate consultancy’s first-quarter Singapore Property Market Report released yesterday.

“Developers and buyers are taking a wait-and-see attitude and some are holding back launches,” said DTZ in the report.

According to the Urban Redevelopment Authority (URA), developers launched 1,395 units in the first quarter this year, 291 fewer than the 1,686 in the previous quarter.

But even with the dwindling activity in the first quarter, most developers — especially the larger ones — are in no hurry to cut prices. “Developers were still able to put up with lacklustre sales, bolstered by the revenue surge during the past two years,” noted DTZ.

The bigger and more established developers are likely to hold out until the market regains its firm footing — unless a darker cloud of prolonged gloom descends in the form of a deepening United States sub-prime mortgage crisis or regional uncertainties, said Mr Donald Han, managing director of real estate firm Cushman and Wakefield.

Currently, a generally optimistic outlook for Singapore’s economy continues to prop up the property market. In fact, larger developers may even hold out for as long as two years until the Temporary Occupation Permits are obtained for their projects.

And even then, they may choose to rent out instead of selling the new apartments. Indeed, monthly rents of prime apartments have risen between 2.1 and 2.5 per cent quarter-on-quarter, noted the DTZ report.

However, some smaller developers subject to tighter bank credit, may yield to pressure to cut prices.
“Some developers may have taken out loans pegged to higher interest rates so they may price their property lower to clear stock,” said Mr Han.

Earlier this month, estimates from the URA showed that the rise in home prices had been moderating, with prices up 4.2 per cent in the first three months, down from the 6.8 per cent growth in the previous quarter. Overall, there were only about 2,000 private residential transactions in January and February this year, down sharply from the 5,200 deals recorded over the same period last year.

The number of private home transactions has fallen in part due to the cooling of en bloc sales, which stood at a “standstill” in the first quarter, noted real estate firm Colliers International.

There was just one collective deal — that of Ban Guan Park at Holland Road with a price tag of $31.1 million.

At the peak of en bloc fever in the second quarter of last year, there were 41 collective sales worth a total of about $6.5 billion, which supplied the market with potential buyers.

While the residential sector is cooling down, other segments of the property market such as office, industrial and retail are going strong. This has kept overall property investment sales at $8.4 billion in the first quarter this year, just 1 per cent above the previous quarter, according to the DTZ report.