reporter2
27-04-22, 11:43
Expect volume to pick up in new home sales soon
Apr 26, 2022
Data from the Urban Redevelopment Authority (URA) shows private property prices in the first quarter of 2022 rose 0.7 per cent from the previous quarter.
Post property cooling measures that kicked in on Dec 16, 2021, home prices appear to be resilient, but the volume of new home sales has plummeted.
Month-on-month, new private home sales rose in March, but the figures for March and the first quarter are down by close to 50 per cent compared to a year ago. For Q1 2022, the number of private homes excluding executive condominiums sold by developers fell by 40 per cent from the previous quarter to 1,825 units.
https://i.imgur.com/QHCzwTu.png
Perhaps developers and buyers are happy to adopt a wait-and-see attitude post the property cooling measures.
Some developers chalked up strong sales when property prices and volumes were buoyant in 2021. Based on URA’s data on developer sales for March, projects launched for sale in 2021 such as the 696-unit CanningHill Piers, the 558-unit Midtown Modern and the 487-unit Pasir Ris 8 have achieved cumulative sales of 86 per cent, 74 per cent and 89 per cent respectively to date, as of March
For projects under construction that have locked in strong sales, project risk is substantially reduced as progress payments received from buyers can help fund the construction of the said projects.
Moreover, when much of a project’s inventory has been sold, a developer may refrain from offering discounts to lure new buyers, as such moves can upset earlier groups of buyers and inflict reputational damage to a developer.
Also, in projects that have seen strong sales, developers may be happy to keep some units to sell post project completion. Such units may fetch premium prices as buyers can see the completed product and move into their new homes quickly.
For new projects that have yet to be launched for sale, many developers may not face financial pressure to clear stock fast, as they have fairly conservative gearing levels.
Generally, developers do not have many Singapore housing projects on hand, so many may opt to wait for good windows of opportunity before launching a project for sale. If the appetite for new homes is uncertain, developers may hold back from sales launches, as the damage caused by poor take-up at a launch can be hard to undo. A project that is poorly received at its launch could struggle to entice potential buyers, who fear that something is amiss with the said project.
Halt to upswing in prices
While prices have held up post the property cooling measures, the strong upswing in private home prices, which rose over 14 per cent between Q1 2020 and Q4 2021, may have come to a halt.
The halt in the positive price momentum can in turn cause buyers to bide their time in closing deals. When home prices are rising strongly, transaction volume rises as potential buyers commit for fear of missing out. In 2021, the number of new sale and resale transactions of private homes rose 31 per cent and 86 per cent respectively versus 2020 and 31 per cent and 113 per cent respectively versus 2019.
Transaction volume in the resale market has a knock-on effect on the primary market, as some people commit to buying new homes after freeing up funds from selling an existing home. Singapore citizens and permanent residents (PRs) may need to divest an existing home first in order to avoid incurring additional buyer’s stamp duty (ABSD) when buying another home. ABSD is payable for the purchase of second and subsequent homes by citizens and PRs.
Resale transactions of private homes in Q1 2022 fell 29 per cent from the previous quarter and 25 per cent year-on-year, according to URA.
The combination of the cooling measures, rising interest rates, as well as slowing global economic growth due to the conflict in Ukraine and Covid-lockdowns in parts of China, may make potential home buyers uncertain about the direction of home prices and hesitate to commit to buying for fear that prices may fall.
Revving up new home sales
Nonetheless, expect more developers and potential buyers to come off the fence soon and new home sales to bounce back substantially.
While many developers may have good holding power and do not want to cut prices to move inventory, they have to deal with tight timelines to clear housing stock.
ABSD remission applies to sites bought on or after Dec 8, 2011 for the development of five or more homes if the remission conditions are met. One condition for ABSD remission is for a developer to sell all homes in a development within 5 years from the acquisition date. For sites acquired on or after Dec 16, 2021, housing developers are subject to 40 per cent ABSD of which, 35 per cent ABSD may be remitted upfront subject to conditions.
Projects with substantial housing inventory left to sell may need to ramp up sales as they approach completion. The 455-unit leasehold Riviere at Jiak Kim Street by Frasers Property has an estimated date of vacant possession of March 2023 and has sold 48 per cent of units based on URA’s data on developer sales for March.
For projects that have yet to be launched for sale, developers may have limited room to defer launches much longer, given ABSD deadlines. It may be optimal to spread sales of a project, with several hundred units, over a period of say three years instead of squeezing sales into a time frame of 12 to 18 months.
Some potential home buyers may need to commit fairly urgently to buying. First-time buyers, who are living with family members or renting a place, may want to buy a unit fairly quickly and may want to take advantage of cooling measures that make it tougher for other groups of potential buyers. A newly-wed couple or a growing family may want to buy a new home that meets their needs soon so they can enjoy a good living environment.
The slowdown in the new sale market for private homes may not last much longer, as there are reasons for fence-sitting developers and buyers to commit to doing deals soon.
Look for launches in the suburbs and city fringe, where demand will come largely from locals buying their first home, to lead the rebound in new home sales.
https://www.businesstimes.com.sg/opinion/expect-volume-to-pick-up-in-new-home-sales-soon
Apr 26, 2022
Data from the Urban Redevelopment Authority (URA) shows private property prices in the first quarter of 2022 rose 0.7 per cent from the previous quarter.
Post property cooling measures that kicked in on Dec 16, 2021, home prices appear to be resilient, but the volume of new home sales has plummeted.
Month-on-month, new private home sales rose in March, but the figures for March and the first quarter are down by close to 50 per cent compared to a year ago. For Q1 2022, the number of private homes excluding executive condominiums sold by developers fell by 40 per cent from the previous quarter to 1,825 units.
https://i.imgur.com/QHCzwTu.png
Perhaps developers and buyers are happy to adopt a wait-and-see attitude post the property cooling measures.
Some developers chalked up strong sales when property prices and volumes were buoyant in 2021. Based on URA’s data on developer sales for March, projects launched for sale in 2021 such as the 696-unit CanningHill Piers, the 558-unit Midtown Modern and the 487-unit Pasir Ris 8 have achieved cumulative sales of 86 per cent, 74 per cent and 89 per cent respectively to date, as of March
For projects under construction that have locked in strong sales, project risk is substantially reduced as progress payments received from buyers can help fund the construction of the said projects.
Moreover, when much of a project’s inventory has been sold, a developer may refrain from offering discounts to lure new buyers, as such moves can upset earlier groups of buyers and inflict reputational damage to a developer.
Also, in projects that have seen strong sales, developers may be happy to keep some units to sell post project completion. Such units may fetch premium prices as buyers can see the completed product and move into their new homes quickly.
For new projects that have yet to be launched for sale, many developers may not face financial pressure to clear stock fast, as they have fairly conservative gearing levels.
Generally, developers do not have many Singapore housing projects on hand, so many may opt to wait for good windows of opportunity before launching a project for sale. If the appetite for new homes is uncertain, developers may hold back from sales launches, as the damage caused by poor take-up at a launch can be hard to undo. A project that is poorly received at its launch could struggle to entice potential buyers, who fear that something is amiss with the said project.
Halt to upswing in prices
While prices have held up post the property cooling measures, the strong upswing in private home prices, which rose over 14 per cent between Q1 2020 and Q4 2021, may have come to a halt.
The halt in the positive price momentum can in turn cause buyers to bide their time in closing deals. When home prices are rising strongly, transaction volume rises as potential buyers commit for fear of missing out. In 2021, the number of new sale and resale transactions of private homes rose 31 per cent and 86 per cent respectively versus 2020 and 31 per cent and 113 per cent respectively versus 2019.
Transaction volume in the resale market has a knock-on effect on the primary market, as some people commit to buying new homes after freeing up funds from selling an existing home. Singapore citizens and permanent residents (PRs) may need to divest an existing home first in order to avoid incurring additional buyer’s stamp duty (ABSD) when buying another home. ABSD is payable for the purchase of second and subsequent homes by citizens and PRs.
Resale transactions of private homes in Q1 2022 fell 29 per cent from the previous quarter and 25 per cent year-on-year, according to URA.
The combination of the cooling measures, rising interest rates, as well as slowing global economic growth due to the conflict in Ukraine and Covid-lockdowns in parts of China, may make potential home buyers uncertain about the direction of home prices and hesitate to commit to buying for fear that prices may fall.
Revving up new home sales
Nonetheless, expect more developers and potential buyers to come off the fence soon and new home sales to bounce back substantially.
While many developers may have good holding power and do not want to cut prices to move inventory, they have to deal with tight timelines to clear housing stock.
ABSD remission applies to sites bought on or after Dec 8, 2011 for the development of five or more homes if the remission conditions are met. One condition for ABSD remission is for a developer to sell all homes in a development within 5 years from the acquisition date. For sites acquired on or after Dec 16, 2021, housing developers are subject to 40 per cent ABSD of which, 35 per cent ABSD may be remitted upfront subject to conditions.
Projects with substantial housing inventory left to sell may need to ramp up sales as they approach completion. The 455-unit leasehold Riviere at Jiak Kim Street by Frasers Property has an estimated date of vacant possession of March 2023 and has sold 48 per cent of units based on URA’s data on developer sales for March.
For projects that have yet to be launched for sale, developers may have limited room to defer launches much longer, given ABSD deadlines. It may be optimal to spread sales of a project, with several hundred units, over a period of say three years instead of squeezing sales into a time frame of 12 to 18 months.
Some potential home buyers may need to commit fairly urgently to buying. First-time buyers, who are living with family members or renting a place, may want to buy a unit fairly quickly and may want to take advantage of cooling measures that make it tougher for other groups of potential buyers. A newly-wed couple or a growing family may want to buy a new home that meets their needs soon so they can enjoy a good living environment.
The slowdown in the new sale market for private homes may not last much longer, as there are reasons for fence-sitting developers and buyers to commit to doing deals soon.
Look for launches in the suburbs and city fringe, where demand will come largely from locals buying their first home, to lead the rebound in new home sales.
https://www.businesstimes.com.sg/opinion/expect-volume-to-pick-up-in-new-home-sales-soon