Singapore Home Sales Seen Slumping To 5-Year Lows

Source : Reuters, Tuesday, March 18




Singapore homes sales in February almost halved from the previous month, and could slump this quarter to the lowest since the SARS epidemic in 2003 as surging inflation and global economic fears keep buyers at bay.

The government on Monday said 170 private homes were sold in February, less than a tenth of the homes sold last August when Singapore was still in the midst of a two-year property upswing.

The abrupt slowdown this year is hitting shares for property developers but could take some pressure off inflation that is at the highest level in 25 years.

Top property firm CapitaLand fell 3.7 percent on Monday to take losses for the year to 11 percent, while rivals' shares have fared even worse.

City Developments lost 3.9 percent for 30 percent losses this year and Keppel Land slid 4.8 percent to take its drop since December to 31 percent.

After January saw 316 homes sold, property analysts are predicting that total sales for the first three months of this year will be between 700-800 units, the weakest in five years.

"The only two other periods when the Singapore residential market experienced such low sales volume were during the SARS period in the first quarter of 2003 when 427 new homes were sold, and during the Asian financial crisis in the fourth quarter of 1997 when 894 units were sold," said Li Hiaw Ho, research director of property consultancy CB Richard Ellis.

So far the jury is out on how much the drop in demand has hit home prices. Private home prices in Singapore surged 31 percent last year to their highest in over ten years and near the peak of mid-1996 just before the Asian financial crisis.

High-end homes, typically those priced at above S$1,800 per square foot, saw the greatest jump, while the increase was more moderate for homes in the mass market segment.

But the price increase slowed in the fourth quarter as steps taken by the authorities to curb real estate market speculation took effect, including a move in October to bar developers from selling uncompleted homes on a deferred payment scheme.

"The sales figures for February were stunningly low... Buyers are becoming very conservative, although prices seem to have held up," said Jones Lang LaSalle research head Chua Yang Liang.

LAUNCH DELAYS

Reflecting the cautious mood, some developers have delayed their property launches, evident in the 343 units put up for sale in February, against 410 units in January and 445 in December.

KepLand, which is building the 221-unit Marina Bay Suites luxury apartments with Hong Kong Land and Cheung Kong , said in January that it would delay the project until the end of the Lunar New Year holiday in mid-February.

"We're still waiting for instructions to launch," said Margaret Thean, executive director of property agency DTZ, which has been appointed to market the project.

There have also been newspaper reports of property speculators who bought units last year with hopes of a speedy sale for a quick profit, but who are now being forced to sell at steep discounts due to the drop in demand.

But it may not to be time to go bargain hunting just yet.

"While anecdotal evidence of lower transacted prices from desperate speculators looking to liquidate their positions have yet to be fully recognised by the entire market, the risk of a downward spiral effect in residential prices remains," Morgan Stanley analyst Melissa Bon said in a report this month.

"In addition, the bottoming out of private rental vacancies and likely peaking of rentals may put downward pressure on residential prices," she said.

The U.S. brokerage has downgraded CityDev to "underweight" for its exposure to the Singapore home market, and expects prices in the mid to high-end sectors to drop 15 percent this year, compared to its previous expectations for a 15 percent rise.

ABN AMRO analyst Fera Wirawan said homes catering to the mass market could still rise at least 5 percent as prices in this segment had not run up as much.

"It's all about sentiments now. Buyers are holding off in anticipation of a price cut. Even if developers refuse to decrease the price, especially in the high end, they can't hold out for long if the volumes stagnant like this," she said.