Apr 16, 2009 - The Business Times
Emilyn Yap
(SINGAPORE) A ray of hope dispelled some gloom in the private home market yesterday when new data showed developers selling 1,220 new units in March. This brings the number sold in Q1 2009 to 2,660 - the best quarterly performance since Q3 2007.
But could this be a false dawn? Citing weak economic fundamentals, several industry watchers believe that it is still too early to say if a nascent recovery has begun.
According to Urban Redevelopment Authority (URA) figures from developer submissions, private home sales held up in March and dipped just 8 per cent below the 1,332 units sold in February. Both months' showings were markedly better than in January, when buyers took up just 108 units.
In fact, the number of units sold in Q1 2009 has already reached around 60 per cent of that for the whole of 2008.
'Most of the demand in the first three months of the year was from Singaporeans and permanent residents, a significant proportion of whom comprised HDB upgraders,' said CBRE Research executive director Li Hiaw Ho.
Indeed, new launches in mass-market to mid-tier projects contributed to the bulk of sales in March. The most popular was Double Bay Residences in Simei - developers UOL Group and Kheng Leong sold 264 units at a median price of $659 psf.
Far East Organization also sold 101 units at its Mi Casa condominium in Choa Chu Kang at a median price of $617 psf, while 90 units at City Developments' The Arte fetched a median price of $874 psf.
There is 'strong demand for lower-range properties in the outer areas that are priced below $1,000 psf,' observed PropNex CEO Mohamed Ismail.
The mass-market and mid-tier sectors also dominated recent launches. DTZ senior director of research Chua Chor Hoon noted that 95 per cent of all launches in Q1 09 were outside the prime districts 9, 10 and 11. Developers brought out 832 new units in March, down 22 per cent from the 1,072 in February.
In contrast, activity in the Core Central Region continued to lag behind in March. Reception to The Mercury at Shanghai Road was the strongest, with buyers taking up 62 units at a median price of $1,148 psf.
The retreat of foreigners from the luxury property market could be one reason for the weak performance, said Knight Frank's director of research and consultancy Nicholas Mak. 'Preliminary figures suggest that the percentage of foreign transactions stood at 16.8 per cent in Q1 2009, settling at levels observed in Q2 2003 when the Sars outbreak badly affected the market.'
On the whole, most observers BT spoke to believe that the property market still faces downside risks - the coming months may see prices stay flat or fall and the number of units sold may decrease.
'Historically, economic recovery precedes property market recovery,' said DTZ's Ms Chua. 'Right now, there is no economic fundamental to support a bottoming of the property market.'
Just on Tuesday, the government cut its 2009 economic growth forecast again to a range of minus 6 to minus 9 per cent.
Already, there are signs of developers lowering prices to push sales. For instance, 6 units in Kovan Residences went for $782-$865 psf in February, achieving a median price of $809 psf. By March, 56 units were sold at a median price of $705 psf, with overall prices ranging from $597-$823 psf.
In fact, price cuts and the relatively affordable costs of smaller units could have spurred demand in the last few months, said DMG & Partners Securities analyst Brandon Lee. CIMB analyst Donald Chua also expects more price adjustments to happen at projects that have not been fully taken up.
In terms of new units that can be sold in the next nine months, few market watchers were confident of seeing the 1,000-a-month mark being crossed often. Some estimate that the transaction volume this year may range from 6,000-8,000 units in total. This would still be an improvement on 2008, when 4,264 units were sold.
Still, it's not smooth sailing. Even some popular projects are taking back units. URA data indicates that buyers returned 20 units at the Caspian and 10 units at the Alexis between February and March.
URA will release more concrete data on home sales on April 24. Among other factors, its real estate statistics for Q1 2009 will take into account options on units sold that subsequently lapsed later.
