Property sales are picking up: What next?

Thu, Aug 22, 2019


DEVELOPERS' overall housing sales volume for July 2019 was their highest in 12 months.

New projects have also been launched this year at relatively high prices for their respective locations.

These trends are likely to persist in the near term as developers keep rolling out new launches to ride on the improvement in home-buying momentum.

The upbeat mood flies in the face of dour news on the Singapore economy amid global trade tensions. This has set some observers wondering as to whether a fresh round of property cooling measures could be on the cards.

The subject will have implications for property market players including listed developers with upcoming private residential project launches.

These include City Developments, which has a condo project in Sims Drive and a joint venture with CapitaLand for a project in Sengkang; and GuocoLand (Midtown Bay in Beach Road, Meyer Mansion and a 40 per cent stake in a condo on the former Pacific Mansion site in the River Valley area.)

Other listed developers with projects to launch include Wing Tai (along Middle Road), UOL Group (Avenue South Residence in Silat Avenue), and SingHaiyi (Parc Clematis in the Clementi area),

What are the odds of a fresh round of cooling measures being unveiled in the near future?

Well, there are at least three schools of thought.

In the first camp are those who think that the answer is likely to be a "yes"; they point to the pick-up in private home sales in both primary and secondary markets, accompanied by an increase in prices.

The Urban Redevelopment Authority's widely-watched price index for private homes rose 1.5 per cent quarter on quarter in second-quarter 2019, erasing the modest 0.7 per cent decline over the preceding two quarters that had followed the introduction of cooling measures in July 2018.

That came after URA's price index had climbed 9.6 per cent over five quarters (Q3 2017 to Q3 2018), outpacing Singapore's economic growth.

Those in the first camp argue that going forth, developers are expected to continue launching residential projects at high prices- because they had paid high prices for development sites during the land-buying spree that lasted from 2017 to first-half 2018. Developers are probably hoping that the declining interest-rate environment will help stoke home-buying fervour.

Also noteworthy is a resurgence over the past couple of months in foreign buying interest, particularly from mainland Chinese, in the Singapore luxe residential segment; this is thought to be linked to protests in Hong Kong against the HK-China extradition bill, as well as US-China trade tensions.

In times of uncertainty, Singapore is seen as a haven of stability and its property market benefits from this.

If this nascent revival in foreign buying spreads to the other tiers of the Singapore private housing market, concerns may be raised about a potential property bubble.

In the second camp are those who acknowledge the current buzz in the island's real estate market, and all the above factors which raise the likelihood of government intervention. However, they reason that things will pretty much take care of themselves due to the economic headwinds and softer labour market.

Sure, developers have a propensity to up new launch prices - but they would have to be mindful of whether buyers can afford these prices. Moreover, there is a substantial pipeline of launches, and developers face a five-year deadline to finish selling their projects (from the date of site purchase) - which point to downward pressure on home prices in the mid to longer term.

Those in the third camp argue that the authorities should consider easing some of the cooling measures. Property seems to be bucking the overall gloom in most sectors of Singapore's economy and the authorities should foster its recovery, goes the thinking. For now, though, this may seem a perverse argument - unless property prices slide alongside the economy and jobs market.

It is still early days.

The authorities will probably watch how the various factors play out and shape Singapore's property market conditions over the next few months, before deciding on whether, when or how to act.