Published March 17, 2009

Developer home sales hit 18-month high

By ARTHUR SIM

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(SINGAPORE) Developers sold 1,323 new housing units in February - eleven times more than in January.

Two new launches accounted for the spike in February. 'Take those two projects out and you have a good idea what is happening in the broader market.'

Urban Redevelopment Authority figures show sales hit their highest level since the previous peak of 1,723 units in August 2007, leading some to say that market momentum has returned.

Colliers International's director for research and advisory Tay Huey Ying said that if developers stick with current pricing and product strategies, 'this trend will stay'.

'We have always said there are buyers waiting to buy,' she said, adding that smaller units at lower prices 'are within a buyer's risk appetite'.

DTZ senior director Chua Chor Hoon said: 'Despite the credit crunch there is still plenty of liquidity in the market. Many people have not committed to purchases in the past two years, and savings interest rates are so low now.'

Barclays Capital economist Leong Wai Ho also reckons low interest rates could be a factor in the sales spike, saying 'abysmally low loan and deposit rates remove the incentive to keep idle balances in cash'.

Still Mr Leong does not think February's momentum is sustainable. 'The risk going forward is that HDB upgrader demand is likely to unravel as the pain from rising joblessness and lower wage payouts starts to bite,' he said.

He also noted that two new launches accounted for the spike in February. 'Take those two projects out and you have a good idea what is happening in the broader market,' he said.

The two projects are the 712-unit Caspian at Jurong and the 293-unit Alexis @ Alexandra, which sold 517 and 293 units at median prices of $603 and $1,083 psf respectively.

Other significant transactions in February were at the 625-unit The Quartz, with 168 units sold at a median price of $591 psf; the 38-unit Palmeria Residence with 22 units sold at a median price of $775 psf; and the 31-unit D'Chateau @ Shelford with 21 units sold at a median price of $1,000 psf.

PropNex CEO Mohamed Ismail believes more than 50 per cent of February's sales involved HDB upgraders, as 70 per cent of the units sold were under $1,000 psf.

'Developers have slashed prices, accepting minimal profits,' he said. 'This makes it irresistible for serious buyers, be they investors or HDB upgraders.'

Jones Lang LaSalle's local director and head of research (South-east Asia) Chua Yang Liang said all regions registered strong take-up rates, with 102 units sold in the Core Central Region, 840 sold in the Outside Central Region and 381 units sold in the Rest of Central region.

But he doubts the rally can be sustained. 'The strong market showing in February is likely to be a short-term blip in the overall larger scheme of things,' he said.

While February sales were healthy, returned units from speculators without the means to hold could become a dampener. Already, classified advertisements have appeared for sub-sales at Caspian and Alexis.

DMG Research analyst Brandon Lee thinks speculation is still 'subdued', with most buyers either Singaporeans or permanent residents purchasing units to occupy.

'Volume in the sub-sale market remains tepid, at less than 100 units transacted in February,' he said.

Selling 1,000 units a month will be hard to achieve, he feels. 'A more reasonable figure would be 500-600 units for the next three months. After that, the picture would possibly revert back to a normal 200-300 units as the economy worsens and the HDB resale market softens.'

March sales have already hit about 300 units, with 210 sold at the 646-unit Double Bay at Simei, as well as about 25 at the 104-unit Domus in Novena. It is also understood that the 60-unit Kembangan Suites project is fully sold.

Knight Frank's director of research and consultancy Nicholas Mak said that leaving aside Caspian and Alexis, February's sales of 513 units were the strongest in seven months.

But he cautions that there is a 'limited' pool of buyers for small units, and says HDB upgraders could become more discerning. 'If an HDB upgrader moves from a four or five-room HDB flat to a one or two-bedroom condo, it's not really upgrading,' he said.