Property optimism unfazed by govt caution: analysts

Another month of strong sales in October; consultant says speculative purchases still few and far between under stringent cooling regime

Thu, Nov 16, 2017

Lynette Khoo

MOST market watchers are not too concerned about recent attempts by the government to douse market exuberance, which they see as having little impact on residential buying demand for now.

Their optimism stems from another month of strong sales by developers in October, where buyers were seen picking up units mostly in already launched projects.

"As unsold inventory in launched projects reduce, and as prices recover, the market is turning in favour of developers," said JLL national director of research and consultancy Ong Teck Hui.

Rather, what may keep sales moderate in the near term is the fact that many of the more affordable private residential projects have been sold out or are substantially sold down, and some developers are choosing to stay "low-key" for their new launches, he added.

Some 969 new private residential homes and executive condominiums (ECs) were sold last month, an increase of 7 per cent from September. Excluding ECs, the 758 private residential units sold in October represented a 15.4 per cent increase from September. The monthly data compiled by the Urban Redevelopment Authority (URA) is based on a survey of developers. This brings the first 10 months of sales by developers this year to 13,236 units (9,460 private homes and 3,776 ECs), already surpassing last year's full-year sales by 10.6 per cent.

But recent attempts by the government to take the heat off the property market recovery have also become more apparent. The latest cautionary note from Minister for National Development Lawrence Wong came during his speech on Tuesday at a dinner gathering of real estate players, when he urged homebuyers to do their homework before making their purchases, given the large supply of private homes for sale over the next one to two years and elevated vacancy rates.

Flash estimates from SRX Property on Wednesday also showed a steeper 0.7 per cent decline in private non-landed home rents in October from a month ago, compared to a 0.1 per cent dip in September.

PropNex Realty CEO Ismail Gafoor felt that while it is a timely reminder for homebuyers to take a long-term view of their property purchases, speculative purchases are now few and far between under the stringent regime of the total debt servicing ratio (TDSR) and additional buyer's stamp duty (ABSD).

"Most buyers today are discerning but the demand is positive simply because people have earlier held back their purchase decision not knowing how long more the market would soften," he said.

Mr Ong noted that the minister has a point to make on buying prudence given the supply deluge one to two years down the road. But the countervailing factor is that developers' inventory has pared down to a low level. This, coupled with strong demand, is spurring a price recovery with a 0.7 per cent rise in prices in the third quarter - the first uptick after 15 quarters of decline.

But Edmund Tie & Company's research head, Lee Nai Jia, was one who felt that buying sentiment may be slightly dampened by the minister's recent caution on the market. The market may see this as a signal from the government that it may intervene if the market gets too heated, he explained.

Of the two low-key project launches in October, The Navian by Roxy-Pacific Holdings in Jalan Eunos launched 24 out of 48 units and sold 12 units at a median price of S$1,543 per square foot (psf). Carpmael Thirty-Eight, developed by a private company, Lim Wen Heng Construction, launched all of its 16 units but sold none.

The top selling projects for the month include Sophia Hills, jointly developed by Hoi Hup Realty and Sunway Developments, Martin Modern by GuocoLand and Qingjian Realty's EC project, iNz Residence.

Both in district 9, Sophia Hills moved 62 units in October at a median price of S$2,029 psf while Martin Modern moved 47 units in October at a median S$2,343 psf. The prime region or the Core Central Region (CCR) saw the biggest percentage jump in transactions across regions - a 143 per cent surge from a month ago and a year ago - to 141 units in October.

PropNex Realty CEO Ismail Gafoor attributed this to the price factor. "Today's CCR property prices, averaging between S$2,000 psf to S$2,300 psf, are deemed very attractive because 2018 new launches in the Rest of Central Region (RCR) are predicted to hit well above S$1,700 psf, thus narrowing the price gap in these two regions," he said.

While there may be seasonal easing during the year-end lull period in November and December as the supply of potential new launches gets limited, the launch of the 735-unit Parc Botannia by Sing Holdings and Wee Hur last Saturday, which had already sold 230 units over the first weekend at an average S$1,270 psf, is expected to buoy November sales figures.

Consultants are expecting a strong closure to 2017, with primary new home sales by developers for the full year reaching 11,000-12,000 units excluding ECs, or 15,000-16,000 units if ECs are included. Last year, developers moved 7,972 private homes and 3,999 ECs.