Sleepy December Takes The Shine Off Sparkling Year

Source : The Business Times, January 16, 2008

Record 14,826 private home sales in 2007, but only 305 in its last month.

A year that started with a bang ended with a whimper. Developers sold a record 14,826 private homes last year - a third more than the year before. But sales slowed to a trickle in December at only 305, or half the 593 in November. This reflected slower launches amid a cautious buying mood.

Private home purchases by individuals in December were actually much weaker, as almost 32 per cent of developers’ sales that month were accounted for by GuocoLand’s bulk sale of 97 units at Goodwood Residence to Kuwait Finance House.

CB Richard Ellis’s analysis of the Urban Redevelopment Authority’s data on developers’ December private home sales in 2007 shows 90 per cent were in the first nine months, before the market turned wary on factors such as global stockmarket volatility, US sub-prime mortgage problems, escalating oil prices and inflation.

Analysts say other factors that dented the home-buying mood in December were the withdrawal of the deferred payment scheme in October, triggering fears of more cooling measures, as well as a general holiday mood.

Knight Frank’s analysis shows the median price of private homes and executive condos (ECs), a hybrid of public and private housing, sold by developers fell 4.2 per cent to $1,063 psf in December from $1,110 psf in November. Again, market watchers point out that the median price for December would have been much weaker if not for GuocoLand’s sale of the 97 Goodwood Residence units at a median price of $3,200 psf.

Another reflection of the ‘dwindling value’ of units transacted was that developers sold only five in December at more than $4,000 psf, down from 17 in November, said Knight Frank’s director (consultancy and research) Nicholas Mak.

The highest-priced transaction in the primary market in December was $5,146 psf, achieved for The Ritz-Carlton Residences at Cairnhill Road. A check with developer Royce Properties, part of Hayden Properties, showed the price was for a four-bedroom unit on the 31st floor. December’s highest unit price was still shy of the record $5,600 psf set in October at The Orchard Residences.

The lowest transaction in the primary market last month was $571 psf for an apartment at D’Lotus in Lorong Ampas.

Jones Lang LaSalle said the average gap between the highest and lowest transacted prices has been narrowing across all three regions used by URA - the Core Central Region, Rest of Central Region and Outside Central Region - in the past few months. In December, the gap was narrowest in Outside Central Region at just 5 per cent, compared with 12 per cent in November. The gap was 8.2 per cent in Core Central Region and 9.8 per cent in Rest of Central Region last month, again smaller than November’s 11.4 and 25.7 per cent.

‘The more bullish and speculative buyers are, the bigger the gap tends to be, reflecting their willingness to pay higher prices and leading to a bigger disparity between lowest and highest prices in a development,’ said JLL’s head of research (South-east Asia) Chua Yang Liang. ‘When buyers turn cautious, the disparity reduces - which is what we are seeing now.’

Colliers International director Tay Huey Ying said that of the 492 private homes and ECs launched by developers in December, only 47 per cent were sold that same month. This was lower than November’s figure of 70 per cent. ‘With all the uncertainty on the direction of home prices, many potential buyers chose to stay on the sidelines, especially since it was also the holiday period,’ Ms Tay noted. ‘Hopefully, there will be clearer signs on the direction of the market after Chinese New Year.’

The official index for private home prices rose 31 per cent last year, going by an earlier flash estimate. CBRE, which is predicting 10-15 per cent appreciation in the index this year, expects most of this gain to come from the mass-market and mid-tier sectors. It expects developers to launch 12,000-15,000 private homes and to sell some 9,000-11,000.

‘Although the mood seen in Q4 2007 has persisted in January, it is likely that sales momentum will pick up as developers launch more projects to give more choice to potential buyers,’ CBRE said.

Yesterday’s data shows developers launched 492 private homes in December, down 17.7 per cent from November. However, the full-year tally of 14,049 private homes launched in 2007 was up 27 per cent from 2006.