Ghost Month Sneaks Up On Slow Market

Source : The Business Times, August 16, 2008

Home sales volume in July down 35% year-on-year, but does better month-on-month with 12% rise

One year after the onslaught of the US sub-prime mortgage crisis, the Singapore property market is still looking weak. And property consultants are expecting sales to slow further, exacerbated by the start of the Chinese Hungry Ghost Month.

According to developer sales figures from the Urban Redevelopment Authority (URA), new home sales fell about 35 per cent in July to 897 units on a year- on-year basis. This is also sharper than the 30 per cent year-on-year fall in June.

However, on a month- on-month basis, the July volume increased 12 per cent, largely attributed to the 1,322 new home units launched in the month - the highest since August 2007, when 1,885 units were launched.

The number of units launched in July was also 1.4 per cent higher compared to a year ago and about 20 per cent higher compared to the previous month.

But Knight Frank director of research and development Nicholas Mak notes that the ratio of new home sales to newly launched units increased to 1:1.47 compared to 1:0.9 a year ago and 1:1.33 in the previous month. He said: 'As a result, the stock of unsold homes in the developers' inventory will gradually increase.'

That the 897 new homes sold in July exceed the 10-year monthly average of about 680 units should bode well for the market. But Mr Mak says the ratio of new home sales to newly launched units suggests that take-up is not that healthy. 'It's like whether you choose to judge someone's health by his blood pressure or his temperature,' he added.

At end-December 2007, there were about 4,000 units of new homes ready for sale that had not been launched. This increased to more than 6,500 units in March and about 7,000 at end-July.

Still, Mr Mak points out that the healthy sales volume for July does suggest that 'there is underlying demand from owner-occupiers'.

This demand came for the Outside Central Region (OCR). Knight Frank notes that the 636 units launched in the OCR accounted for 48.1 per cent of launches in July.

The Core Central Region (CCR), in comparison, saw launches fall 40.7 per cent month-on-month and accounted for 9.9 per cent of all launches in the month.

Jones Lang LaSalle local director and head of research (South East Asia) Chua Yang Liang believes that looking at the islandwide take-up may not be an accurate reflection of the market.

Looking at the lowest price band of reported monthly median prices - 'because it is more reflective of the underlying market sentiment' - Dr Chua noted that in July, the CCR and OCR registered declines of 7 per cent and 23 per cent respectively (excluding projects with single transactions).

Dr Chua said the Rest of Central Region (RCR) appeared stable, registering a marginal increase of 2 per cent month-on-month in July to $560 per square foot.

The major launches in OCR include Livia, which sold at a median price of $671 psf while Kovan Residences sold at a median price of $882 psf. 'We reckon the price of $650-$850 psf is what the market is comfortable with at this point,' added Dr Chua.

CB Richard Ellis Research executive director Li Hiaw Ho reckons prices are still holding in some areas. 'In suburban areas such as Serangoon, Sengkang and Jurong, prices are observed to be holding at $800-$950 psf at The Florentine, Kovan Residences, Woodsville 28, $700-$800 psf at The Quartz, and $800-$900 psf at The Lakeshore,' he added.

Mr Li also noted that five units in The Hamilton Scotts transacted at $3,000-$3,676 psf and seven units in Nassim Park Residences were done at $2,600-$3,650 psf. Mr Li said: 'This shows that there are people who are willing to pay a premium for projects in very good locations and/or with strong attributes.'

Savills Singapore director of marketing and business development Ku Swee Yong believes that developers are also likely to continue with a 'wait and see' strategy regarding launches. 'Every month that a developer waits, there are new buyers entering the market,' he said.

Mr Ku was pleasantly surprised by the take-up in July too. He said: 'I think developers launching a total of between 1,000 and 1,500 units per month is sustainable.'