Saturday, June 16, 2012

Singapore new private residential property sales down 32 % in May


Singapore’s property bubble took a breather last month as new private residential property sales in Singapore has plunged 32% in May from a month earlier. Although the numbers fell from 2500 units of April to 1702 units of May (excluding the Executive Condominiums), the numbers are still record high compared to the last year. [1]

One of the interesting highlight from the numbers is that only 13% of the new sales last month were shoebox apartment units, significant fall from 27 % in April. It seems like extensive state media coverage of these units with some hint of new cooling measures targeting them made both developers and buyers hold back for a while.

According to Singapore Business Review, “new launches are unable to sell more than 50% of their units in the initial launch phase”:

According to a release, new private home sales (excluding ECs) look to be taking a respite as May saw a plunge of over 31% M-on-M to 1,702 units transacted.

“The private housing market seemingly took a breather last month due to the anticipation of more new launches in the road ahead, which caused buyers to hold back their home purchase decisions”, states PropNex CEO Mr Mohamed Ismail, “May was also not a bumper month in terms of new launches, thus resulting in the drop of new private property sale.” 

These days, it is common for new launches to not be able to sell more than 50% of their units in the initial launch phase—which is unlike the past where there usually is a ‘rush’ to grab new units,” continues CEO Mr Mohd Ismail, “this is because buyers are more cautious and price sensitive than before, but however, projects that are priced reasonably will still continue to enjoy high take-up rates.”[2]
Although the drop is significant, experts have pointed out that only one month of decline does not show a trend and the coming months will show the direction of any trend. Even with this decline, developers has sold 10,880 private residential properties in the first 5 months of 2012, exceeding full year’s sales of 2000-2005 period and year 2008!

Since the western governments will obviously and stupidly respond to Europe Debt Crisis and Greek polls with another round of huge money printing, there will probably be enough fuel to feed the global asset bubble in Asia for a while. On the other hand it can also end at a bang event like 2008 Lehman Brothers collapse and if this (also likely) scenario happens, the asset bubbles, including Singapore property, will probably burst. So there is a huge uncertainty in the air and this may affect the buyer’s sentiment at the moment.     

Although there seems to be a big demand for property in Singapore fuelled by ultra-low interest rates, high inflation and “prices cannot go down” sentiment, more than 40% (44% exactly) of private homes in the market remained unsold according to URA figures released this month:

“There is a large supply of about 86,000 private housing units (including about 7,000 EC units) in the pipeline, of which about 38,000 units (including 1,800 EC units) are still unsold. However, demand for private housing remains strong.”[3]

People also look resistant to some unrealistic prices. For example much hyped Sky Habitat, a 509 unit condominium project in Bishan, was priced at a record for a sub-urban project at  $1,700 psf. And the project has sold 125 units in its initial launch week in mid-April and then sales stalled and only 4 more units were sold until end May.[4]   On the other hand another overpriced Singapore condominium project, 20-storey freehold development 8M Residences at  Margate Road could only sell 4 of its 68 overpriced units since their launch on May 25. The units are overpriced at $2000 to $2300 psf while an observer said that price psf for 8M Residences should not go beyond $1,600:

"Estimated price for the smallest unit at 527sft of 8M Residences is $1.1m but an industry observer who requested anonymity commented that it should only be $700,000."

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