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Thread: New home sales up 57% in Feb despite Covid-19

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    Default New home sales up 57% in Feb despite Covid-19

    New home sales up 57% in Feb despite Covid-19

    Lower interest rate environment could prompt some home buyers to enter the market, analysts say

    Tue, Mar 17, 2020

    NISHA RAMCHANDANI


    DESPITE the Covid-19 outbreak, developers sold 975 units in February, or over 57 per cent more month-on-month, as demand for private residential homes held up.

    And while analysts pointed out that the lower-for-longer interest rate environment could prompt some home buyers to enter the market, the ongoing correction in stock prices and a slowing economy could present downside risks to buying sentiments in the near term.

    A total of 933 units were launched in February, of which 601 were in the Core Central Region (CCR), 115 in Rest of the Central Region (RCR) and 217 were Outside the Central Region (OCR). In comparison, 598 units were launched for sale in January, and 596 units were released in February a year ago.

    Meanwhile, the number of units sold in February last year was 455, or less than half the 975 private homes moved in February this year. The figures - which were released by the Urban Redevelopment Authority (URA) on Monday - exclude executive condominium (ECs) units, which are a public-private housing hybrid. Including ECs, developers moved 1,314 units last month, more than double January's 640 units, and nearly triple the 457 units sold in February a year ago.

    "Brisk sales were driven largely by new launches and selected projects that are competitively priced to attract value-conscious buyers," said Tricia Song, head of research (Singapore) at Colliers International.

    Christine Sun, head of research at OrangeTee & Tie, said: "Despite the current pandemic and uncertain economic outlook, new home sales rose a third consecutive month. (This). . . was the second-highest February sales in eight years, slightly below the 979 units inked in February 2017."

    Citing URA's Realis data, Ms Sun noted that the number of purchases by Singaporeans (excluding ECs) grew strongly in February to 812 non-landed homes, up from the 413 units in January and 351 units in December last year. Meanwhile, the number of foreign buyers (permanent residents and non-permanent residents) rose from 116 in December to 149 in February.

    JLL's senior director (research & consultancy), Ong Teck Hui, said: "The significant increase in private home sales by developers in February is not totally surprising as the month after Lunar New Year typically posts much higher sales, as experienced in previous years. In comparing the strong sales in February 2020 with the lower numbers in February 2019, one should note that the former was post-Lunar New Year while the latter was the festivity month, when sales are typically low-key."

    The top seller in February was Wing Tai's 522-unit The M in Middle Road, which despite the virus outbreak managed to sell 380 units, or 73 per cent, during its launch month at a median price of S$2,439 per square foot (psf). Analysts pointed to its location near Bugis MRT station, affordable pricing as well as competitive pricing vis-a-vis other projects in the area such as Midtown Bay which debuted at a median price of S$2,900 psf in October last year. JLL highlighted that 76 per cent of the 380 units scooped up at The M were transacted at under S$1.5 million.

    Other new launches in February included 162-unit Verticus at Balestier, which sold 13 of the 20 units launched at a median price of S$1,999 psf, and Dalvey Haus at Dalvey Road, where one of its 27 units was bought at S$3,228 psf. Meanwhile, top-selling projects which contributed to sales volumes included Treasure at Tampines (97 units), Parc Esta (53 units) and Jadescape (46 units).

    A total of 339 ECs were sold in February, driven largely by the 496-unit Parc Canberra which sold 324 homes at a median price of S$1,111 psf. PropNex Realty expects strong demand for the other two ECs to go on sale this year - OLA Residences in Sengkang and an EC at Tampines Avenue 10.

    Desmond Sim, CBRE's head of research (South-east Asia), said: "Affordability in terms of overall quantum continues to be the driver of demand. Buyers out there continue to be more discerning on location, and developer's reputation will swing their choices. The lower interest rate also seems to be another catalyst for buying momentum; however, affordability remains key for both EC and non-EC markets." This year, CBRE Research expects new home sales to clock between 7,000 and 8,000 units, despite a tough H1 2020.

    Although the Covid-19 outbreak could dampen market sentiment, the US Federal Reserve's surprise move to slash interest rates to nearly zero will support housing demand, highlighted Ms Song.

    She added: "However, rate cuts and quantitative easing are no magic bullets should the global and Singapore economy descend into a recession. Unemployment rate could then rise, and we should expect demand and prices for residential property to decline." For now, Colliers is sticking to its forecast of 9,800 new homes to be sold by developers this year, albeit with downside risks remaining.

    Similarly, Mr Ong cautioned that the Covid-19 pandemic and deep corrections in stock markets amid an oil price war could result in greater economic uncertainty, thus moderating private home sales volume and prices.

    Wong Xian Yang, senior research manager (Singapore and South-east Asia) at Cushman & Wakefield, said that fire sales are unlikely at this point, since most developers have robust balance sheets and are not yet at risk of failing to meet their Additional Buyer Stamp Duty (ABSD) deadlines in 2020 and 2021. However, he added: "Developers will continue to offer some discounts for selected units or early bird discounts to entice buyers into the market."
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