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Thread: Supply, interest rates frame housing debate

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    Published October 16, 2009

    Supply, interest rates frame housing debate

    Developers' sale of 1,143 units in Sept takes Q3 figure to record 5,719 units


    (SINGAPORE) The property market yesterday toasted the sale of a record 5,719 private homes in the third quarter, even though the industry posted a second consecutive month-on-month drop in sales to 1,143 units in September. Despite the high point, the discussion in property circles was marked by circumspection.

    The number of homes that developers manage to sell in the fourth quarter as well as next year will be limited by the shrinking stock of launch-ready homes and developers' fast-depleting landbanks.

    While the economic outlook is improving, the accompanying scenario of rising interest rates may cause some to re-evaluate their property investment decisions as mortgage rates rise. If savings rates on bank deposits also increase, this will take some shine off parking money in property, which is what many investors have been doing this year, says DTZ executive director (consulting) Ong Choon Fah.

    Urban Redevelopment Authority figures released yesterday showed that developers sold 1,143 private homes (excluding executive condos) in September, down 36.6 per cent from the 1,804 units they sold in August, which in turn was about 35 per cent below the July high of 2,772 units.

    The 5,719 units developers sold in Q3 busted the previous record of 5,129 units in Q2 2007. With 12,969 private homes sold in the first nine months of this year, developers will have to sell an average of just 614 units a month from October to December this year to match the full-year record of 14,811 units set in 2007.

    The drop in September sales, which was the second consecutive month-on-month decrease, is seen by some property consultants as evidence of price resistance setting in after rapid price hikes in recent months.

    Colliers International's director for research and advisory Tay Huey Ying highlighted an increase in the proportion of transactions at or below $1,000 psf to 54 per cent in September from a 49 per cent share in August. 'This is a reversal of the downward trend since April 2009,' she added.

    Yet another sign of price-resistance setting in could be the pretty mixed bag of results obtained by analysts who studied URA's data and compared prices achieved by developers between August and September.

    Market watchers say another factor for slower sales last month could be the government's move on Sept 14 to scrap the interest absorption scheme (IAS), which some blamed for oiling the wheels of property speculation.

    Last month's drop in private housing sales was also supply-led, said Real Estate Developers Association of Singapore CEO Steven Choo. The number of units launched by developers slipped 12.4 per cent from 1,613 units in August to 1,413 units in September.

    This drop, however, was much less than the nearly 37 per cent decline in units sold. And that meant the ratio of units sold to units launched fell from 111.8 per cent in August to 80.9 per cent last month - the lowest since February this year - as buyers became more selective, observed DTZ's South-east Asia research head Chua Chor Hoon.

    'Suburban projects and developments with small units continued to be favoured,' she added. The Outside Central Region was the only segment which posted an increase in units sold, from 531 in August to 560 in September - against month-on-month decreases of 72 per cent and 40 per cent respectively for the Core Central Region and Rest of Central Region.

    September's top selling projects were Hundred Trees (327 units sold at a median price of $941 psf), followed by The Interlace (243 units transacted at $1,047 psf median price), and Elliot at the East Coast (65 units; $947 psf), CB Richard Ellis noted. Hundred Trees and Interlace made up about half of September's sales.

    Colliers' analysis showed that whereas the highest price achieved in August was the 'above $4,000 to $4,500 psf range' with two transactions, the highest price band in September was the 'above $3,000 to $3,500 psf range' with seven units sold.

    These comprise six units sold at Seven Palms Sentosa Cove at between $3,091 psf and $3,353 psf and an apartment at Nassim Park Residences that fetched $3,268 psf.

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