Tuesday, March 22, 2011

Singapore private property unsold unit supply by February 2011

When February 2011 Singapore private property sales data was released in early March 2011, people tried to find out whether Singapore Government property cooling measures of January 14th 2011 were taking effect or not. Although sales figures were strong, London based independent global property consultancy Knight Frank thinks that "cooling measures are taking effect":

"Notwithstanding the cooling measures and lower sales in January, launches increased by 38.1%. In a
bid to catch the still positive sales momentum, developers  are  launching new projects  offering
incentives and early bird discounts to attract buyers.

Developers’ sales contracted for the third consecutive month, indicating the softening market sentiments. Take-up rate fell to 64% in February, against the  average monthly take-up rate of 99% in 2010. The fact that activities in the CCR and RCR slowed down the most (sales dropped by 30% and 44% respectively) shows the weakened sentiments among investors. Only 43% and 33% of the units launched were sold in the CCR and RCR regions.  Greater sales were observed in the mass market (103% take-up rate), as proxied by OCR, partially due to more initiatives offered by the developers. In light of  the new measures and record-low interest rate, affordability remains the main demand driver; hence houses of smaller price quantum are more popular. Based on data collected on 15 th March 2011, we also observed that only OCR properties saw decrease in the average transacted prices in February (6.5% drop).

Although the low figure  can be attributed to the traditional Chinese New Year; on a year on year basis,
sales in February 2011 are also lower compared to the same period in 2009 and 2010.

Source: Knight Frank"

This analysis is very important if your question is "will the property prices in Singapore go up or fall in 2011 and beyond?". The price depends on the supply versus demand not only the absolute supply and demand numbers. If there are 500 of an item sold and 1,000 people demands it the price tend to go up but if there are 2,000 of that item sold and 1000 people demands it the price tend to fall. In Singapore there are several signs that the supply is increasing in a way to put pressure on the private property prices.

There are several reasons for supply increase:

  • Number of launched but unsold units are increasing
  • Developers, scared with the uncertainty of the global economy and property cooling measures, are rushing to launch more projects
  • Singapore Government is rumping up land sales for development
According to Business Times, ratio of units unsold to units launched dipped to 64 percent in Feb 2011:

"The ratio of units sold to units launched by developers in February was 64 per cent - well below the 82-113 per cent between January 2010 and January 2011 and the lowest since January 2009 (when the ratio was 53 per cent) during the global financial crisis.
Looking ahead, there should be no dearth of new private homes launched for buyers to choose from, thanks to the government ramping up land sales since last year.
The concern developing in some circles now is whether this may create a glut later.

Private property units launched but unsold.
The trend in the unsold to launched units is an up trend. And given the fact that slightly panicked developers are rushing new projects these numbers are destined to increase more:

Property developers in Singapore are racing to launch as many as 15 new projects over the next few weeks. 
Some real estate analysts said this array of offerings could face the uncertainty that lies ahead for the market, including the unknown impact of the recent disasters in Japan. 
Ms. Chua Chor Hoon, Head of DTZ Southeast Asia, said the number of units from residential projects released in February increased 45 percent from the past two months. Ms. Chua noted that if the cooling measures implemented in mid-January take effect ahead of the government’s expectations, developers will likely sell units early, as they will expect sales to decline.
So what does all these mean? If the trend continues and there is no increase in demand, there will be an oversupply of unsold private properties. According to BT, "DTZ head of South-east Asia research Chua Chor Hoon predicts that developers would sell 9,000-12,000 private homes excluding ECs this year, down from the record 16,292 units in 2010". This would pull down the prices to earth from current ultra hights, which is fueled by the opposite trend up to now, undersupply.

Terms of use
This blog article is to provide general information only and should not be treated as an invitation to buy or sell any property or as sales material.  Users of this report should consider this report as a one of the many factors in making their investment decision. Users should make reference to other sources of information and specific investment advice to obtain a more objective view of the property market. Asia Singapore shall not be responsible for losses suffered.

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