New homes take up bigger share of private housing market

Singapore’s private property sector looks set to undergo even more massive changes, as new homes eat up a bigger portion of the private housing market.


(Property investors now prefer new private homes over their secondary market counterparts. Image courtesy of Thinkstock.)

The private homes market consists of primary market sales and secondary market sales.  Primary homes include executive condominiums, which accounted for 46% of all transactions lodged with the Urban Redevelopment Authority last year—the highest number of caveats lodged since 2003.

Meanwhile the secondary market, consisting of resale and subsale homes, made up the remaining 54% (or 17,405 units sold) in 2011. Subsales are those made before completion, and involve projects yet to receive a Certificate of Statutory Completion (CSC). Resale homes, on the other hand, are developments with the CSC.

Experts tell The Straits Times that a declining trend in the secondary sales market has emerged over the past few years, as authorities push out a bumper supply of land to lure property prices down. And with the recovery of the collective sale market in 2010, more new launches have diverted the buzz away from the secondary segment.

The secondary market reached its peak in 2008 with an overwhelming 71% of all transactions that year, as the global financial crisis forced developers to withhold their new launches. However, fast-forward two years and things look quite different.

Credo Real Estate research and consultancy head Ong Teck Hui revealed to The Straits Times that the proportion fell to 61% in 2010, and suggested the property cooling measures could have also played a part in the change. One such measure that could have repelled some investors toward the primary market is the up-to-16% sellers’ stamp duty imposed in January 2011.

Ong also noted that minimal land sales from 2001 to 2005 also contributed to the fall of the primary market share from the 2003 to 2008 period.

Other experts the paper spoke to said that now, while new private homes are kept stable at about 16,000 units each year for the past two years, secondary market sales are down 26% in the same period.

SLP International research head Nicholas Mak also told The Straits Times the recent additional buyer’s stamp duty will probably cause a “mismatch in price expectations between buyers and sellers”, and result in a further decline of the lower secondary sales market over the coming months.

These sellers are usually individuals with weaker finances than developers, said Savills Singapore associate director of research and consultancy Alan Cheong. He told The Straits Times the upcoming months should not only see lowered asking prices from this group of sellers, but at the same time flat lined prices of new launches in anticipation of even more new homes in the pipeline.

But for now, property investors like marketing executive Tan J. H. will likely remain more attracted to the new homes market. Tan told The Straits Times his decision to purchase a new unit instead of a resale one last year was because of the condominium’s concept.

Speaking of his Upper Bukit Timah unit, Tan said, “The show flat was very nice, and we thought that the product offering was much better than some of the older resale homes we were seeing. The newer condos seem to have better concepts or themes and good furnishings […]. Older condos are more simple and plain, they don't come with all the frills like the facilities and amenities.”