Updated: 06/20/2014 00:00

Week in Review - 19 June 2014

Surge in May new private home sales, Homebuyers selective and sensitive, Iskandar remains an attract...


Surge in May new private home sales, Homebuyers selective and sensitive, Iskandar remains an attractive industrial site
Expat Guides
Surge in May new private home sales
May proved to be a record breaking month for new private home sales, with 1,470 units sold, a 96 percent increase compared to the 749 units in April. Data from URA indicate that this is the highest number since the Total Debt Servicing Ratio (TDSR) was introduced last June. Despite sales volumes nearly doubling, the number of private homes launched in May was up threefold compared to April. Mr Nicholas Mak, Executive Director of Research and Consultancy at SLP International Property Consultants, said in a Today interview "the market is still quite soft and buyers are still price-sensitive, because the projects that have sold well are perceived by the buyers as attractively-priced."
940 units in the Outside Central Region were sold; 64 percent of May's sales. Coco Palms in Pasir Ris was the best performer, selling 590 out of 600 units at a median price of $1,018 psf. The Panorama by Wheelock Properties in Ang Mo Kio also did well, with 100 units sold at a median price of $1,241 psf, after lowered prices. Units sold in the Rest of Central Region and Core Central Region were 494 (33 percent of sales) and 32 (2 percent of sales) respectively.
With developers launching their projects at discounted prices, analysts maintain that the price war anticipated by home buyers is unlikely to happen. Mr Mak commented that of "the few developers that are cutting prices, their projects tend to be a bit isolated. For example, there are no other new 99-year launches near The Panorama ... I don't think we've reached a situation where there's a price war." Mr Colin Tan, Director of Research and Consultancy at Suntec Real Estate Consultants, added that "developers will not participate in a price war until interest rates start rising. At the moment, there's no indication that prices will collapse in a big way ... Many developers are doing okay financially, they just have to nudge it, offer a little discount, to keep their income stream."
For the Core Central Region, high-end properties popular among foreigners are moving very slowly - 203 units bought in January to May this year compared to 1,017 units in the same period last year. In an interview with Channel NewsAsia, Mr Ku Swee Yong, CEO of Century 21 Singapore, attributed this to the ABSD, which is discouraging foreigners from buying homes in the city area, in addition to size of the units - typically around 1,500 to 2,000 psf - that significantly raises costs.
Meanwhile, Bidadari has been attracting attention lately due to the high take up rate of seven under-construction projects in the area - bounded by Bartley Road, Upper Serangoon Road, Sennett Estate, Mount Vernon Road and Woodleigh. These projects have sold 80% - 100% of the launched units, with all but one - Nin Residences - selling at healthy rates of above $1,000 psf.

Homebuyers selective and sensitive
Despite the strong performance of the primary market in May, analysts maintain that it will continue to soften for the remainder of the year and the surge in May is unlikely to be repeated. A report by P&N Holdings concludes that the various cooling measures have effectively curtailed demand from all groups of homebuyers. Demand by HDB upgraders is also expected to soften as resale prices continue dropping. Moreover, the market will increasingly favour buyers, as the pipeline supply of new homes continues to grow.
A Maybank Kim Eng report suggests that home buyers will remain "highly selective and price-sensitive" and the key catalysts for the expected price decline include: "more developers adopting a 'priced-to-sell' approach to reduce inventory risks, prospective home buyers holding back in anticipation of the surge in completions in 2015 and 2016, and continued weakness in the HDB resale market." In a Singapore Business Review article, Mr Mohd Ismail, CEO of PropNex, concluded that "for the whole of 2014, we envisage that sales volume will be between 11,000 to 12,000 units in all. This is about 20% shy of the 15,000 units in 2013."
High-end properties in city areas are unlikely to have further price cuts, as "for most developers who are holding on to their stock, paying the penalty (stipulated by the Qualifying Certificate) is still worthwhile compared to giving a discount. Once you (developers) have given a discount on one unit, it hurts the valuation of the remaining units that are unsold. When the market turns, the value of the project is maintained and preserved," said Mr Desmond Sim, Head of CBRE Research Singapore in an interview with Channel NewsAsia.
Iskandar remains an attractive industrial site
Nusajaya Tech Park will be joining the economic cluster in Iskandar in 2016 with the completion of its first stage. In a Today interview, Mr Manohar Khiantani, Chief Executive of Ascendas, commented that the industrial estate is already drawing strong Singapore interest and that "40 percent have been pre-committed - a large proportion of them by Singapore-based companies." He adds that "the tech park takes advantage of the relative strengths of Singapore and Malaysia. Singapore is a small country with scarcity of land, but the Asian market is still growing. It makes sense for Singapore companies to have a location close by that can accommodate the space and scope for expansion activities." Minister for Trade and Industry, Mr Lim Hng Kiang, highlighted the potential of Iskandar and encouraged Singaporean businesses to consider developing their operations there.
Yet concerns remain over issues of lack of skilled labour, incomplete infrastructure and poor security. Mr Philip Tan, ASEAN Vice-President of Singapore based YCH Group, agreed that it may take a while for Iskandar to gain further traction with Singapore companies, but felt that it will eventually fulfil its potential as an important business hub.

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