New Home Sales Slump To 9-Month Low In Feb

Source : The Business Times, March 18, 2008

URA sees slowest sale of 170 units since start of its data releases in June ‘07.

The number of new homes sold by developers dropped to just 170 units in February - the lowest since the Urban Redevelopment Authority (URA) began releasing monthly sales data in June 2007.

And CB Richard Ellis executive director Li Hiaw Ho estimates that new home sales could be just 700-800 units for the first quarter of 2008 - even lower than the 894 units sold in the fourth quarter during the Asian financial crisis in 1997.

In an analysis of the data released yesterday, Jones Lang aaLaSalle (JLL) said, however, that prices were comparatively stable.

The firm’s head of research (South-east Asia) Chua Yang Liang said that using the ‘lowest median prices’ category of the URA data, median prices declined 0.7 per cent for units sold in the Core Central Region (CCR) and 5 per cent in the Outside Central Region (OCR) on a month-on-month basis.

For units sold in the Rest of Central Region (RCR), the lowest median price increased 14.2 per cent from $765 psf in January to $874 psf in February.

Colliers International said 107 units were launched in the RCR and 64 were taken up. In the CCR, 31 units were launched and 35 were sold, while in the OCR, 205 were launched and 71 were sold.

Colliers International director of research and consultancy Tay Huey Ying pointed out that although the units launched in the RCR accounted for 60 per cent of all new units launched in February, the number of units sold in the OCR accounted for a much smaller 42 per cent of all purchases.

On the other hand, while the number of new units launched in the CCR accounted for only 9 per cent of all units, sales accounted for a much larger 21 per cent of all units sold.

‘On a deeper analysis, it is estimated that the sales take-up of new units launched in the month of February was strongest for CCR and weakest for OCR,’ Ms Tay said.

She also noted that sales of new units launched in the CCR improved from an estimated 53 per cent in January to 58 per cent in February, while sales in the OCR are estimated to have declined significantly from 49 per cent in January to just 22 per cent in February.

‘This could indicate the resilience of demand for high-end and luxury properties even in the wake of global economic and financial sector uncertainty,’ she said.

Another concern could be the increasing number of new homes ready for sale that have not been launched. At end-December 2007 there were 4,000 such units. But the number has since swelled to more than 6,500 units from 92 unlaunched projects.

Ms Tay said that assuming the US recession is ‘mild and short-lived’, market activity could pick up towards the end of 2008 or early 2009. ‘Based on this scenario, developers may launch a total of some 6,500 to 7,500 units in 2008,’ she said.

However, if the US falls into a prolonged recession, she reckons 5,000 to 5,500 units could be launched, with the mass-market likely to continue to dominate new launches.

With developer sales falling, the secondary market appears to be taking up some of the slack.

According to a DTZ Debenham Tie Leung report, the volume of developer sales of non-landed freehold and leasehold homes fell a sharp 60 and 74 per cent respectively in Q4 2007 quarter-on-quarter. However, secondary market freehold and leasehold transactions fell 47 and 43 per cent respectively for the same period.

Foreigners bolstered sales figures. URA said that they accounted for 31 per cent of all non-landed secondary market transactions in 2007.