http://www.businesstimes.com.sg/arch...ise-volatility

Published April 24, 2012

NEWS ANALYSIS

Weekly developer sales statistics may raise volatility

More frequent information release could accentuate buying in a hot market

By Kalpana Rashiwala


IN the second half of this year, Urban Redevelopment Authority (URA) will provide weekly updates on prices of private homes sold by developers. This should provide more material for those doing research before buying a private residential property. But it may also produce some unintended consequences.

First the positive side. Home buyers, property analysts and others will be able to get hold of more timely information on prices of private homes sold by developers and possibly more detailed information on the type of units sold than what is currently being released on a monthly basis.

Some developers are still coy about releasing certain information when releasing new projects, for example, the overall average per square foot prices of units released.

They prefer instead to give a range of prices, or average prices for certain unit types. So most market participants have to wait until the 15th of the following month when URA releases monthly sales data for the preceding month compiled from developers' submissions.

This shows among other things the number of units developers sold for each project during the month, along with the median per square foot price as well as the highest and lowest psf prices of units sold. A breakdown of the number of units sold by broad psf price bands is also available.

Soon, buyers could get hold of such information and perhaps even more on a weekly basis. It may be possible that URA, in its weekly information releases, could list some details of the individual units developers have sold within each project - such as the size of the unit, the floor it is located on (at least in bands, for example, levels 1-5, 6-10, etc).

Such information would give users a finer sense of pricing within projects and allow them to figure out for instance that the high psf median price reported for a certain project in the previous week might have something to do with the fact that mostly small units were sold or that the units transacted were mostly on the project's upper floors.

URA has yet to finalise details of the information parameters it will include in its weekly release of developers' sales stats.

Generally the sense on the ground is that more frequent release of developer sales information would be positive. "This would be a more consumeristic practice, trying to help the home buyers as much as possible to make better-informed decisions," notes Credo Real Estate executive director Ong Teck Hui.

Sensible judgments

Agreeing, Knight Frank chairman Tan Tiong Cheng said: "People can look at the sales information and make more sensible judgments rather than just relying on agents. Reality will sink in: how many units are selling; which projects are selling; which are not."

No doubt, developers whose projects are doing well may enjoy positive publicity on rosy sales stats; those whose projects aren't doing so well may feel uncomfortable from the weekly information disclosure.

Beyond that, some industry players are concerned about possible unintended consequences. One is that more frequent release of sales information on a weekly basis could accentuate trends at both extremes of the property market.

"Basically, people can react faster. Previously with less frequent information flow, during a slowdown, people would react more slowly in holding back their property purchase. But now that it will be easier to get sales information earlier, they could abandon interest quicker and may withdraw to the sidelines even faster," says Knight Frank's Mr Tan.

Given the current hot market, the reverse could be true. More frequent releases of developer sales and pricing stats could spur even more to plunge into the property market in herd-instinct fashion. "It cuts both ways and could potentially make the property market more volatile," suggests Mr Tan.

Preliminary URA numbers show that developers sold a record 6,682 private homes excluding executive condos (ECs) in Q1 2012, up about 85 per cent both quarter on quarter and year on year and surpassing the previous quarterly high of 5,578 units in Q3 2009.

Already in some quarters a view is surfacing that fears of oversupply with an attendant collapse in private home prices may be overstated given low interest rates, strong liquidity and the continuing appeal of real estate as a hedge against inflation.

"Buyers these days seem to be less perturbed about any impending property downturns as they're confident that in the long run, prices will reach a new high again - predicated on Singapore's economic success as well as perception of land scarcity in Singapore," says Credo's Mr Ong.

There are also factors behind the underlying strength in private home prices, barring external shocks of course.

Oligopoly of five

Savills Singapore research head Alan Cheong says: "Supply is controlled by an oligopoly of five top developers with a market share of more than 40 per cent of developers' private housing sales excluding executive condos (ECs) last year and these developers also have strong holding power.

"Second, new home sales are chasing supply. For mass market projects, the first 30-40 per cent of the project should be easily cleared within three months after launch. The rest should progressively be sold as the project heads towards completion."

He also expects leasing demand to remain strong due to continued significant increases in population. In addition, he argues: "Home prices at a broad macro level are still within one standard deviation of the long-term trend line, so the market is not in overbought territory."

He adds that a possible reason that the recent cooling measures have not been as effective as earlier thought could be that the market was not in an overbought state. "Unless the government resorts to the unlikely scenario of interest-rate intervention or drastically restricting the use of CPF savings for housing purchases, future policy measures might also not be so effective."

So it remains to be seen whether more frequent release of developers' housing sales stats will help to cool home buying. But since URA is making the effort to provide such information and creating greater transparency in the property market, potential buyers ought to use this opportunity to take a step back and do their sums before taking the plunge. They should also assess whether they can still afford to service their housing loan in the event that interest rates start to rise.