Sales of new private homes dropped 32 per cent in first half of 2018, compared with 2017

SINGAPORE — Sales of new private homes excluding executive condominiums tumbled by almost a third in the first six months of this year compared to the same period last year, according to preliminary data from the Urban Redevelopment Authority (URA) released on Monday (July 16).

The number of units launched also fell, with 3,518 rolled out in the first half of 2018 compared with 4,330 in the same period last year.

In June, sales dropped by 20.2 per cent year-on-year despite developers launching almost five times as many units than in the same month last year.

The data reinforced some property analysts’ stance that the market was moderating even without the Government’s cooling measures that kicked in on July 6, but others said a decline in new-home sales does not necessarily reflect a decline in demand.

Mr Nicholas Mak, executive director of ZACD Group, said the sales-to-launch ratio in June dropped below 100 per cent for the first time since April 2017. The ratio was lower in June at 90 per cent, compared to 106 per cent in May. Similarly, the sales-to-launch ratio in the second quarter of this year – estimated to be 102 per cent – is lower than the same period last year (153 per cent), he said. 

“This indicates that the homebuying demand is starting to moderate even without the Government implementing the new market cooling measures in July,” he said.

Other analysts said the drop in number of new homes sold does not reflect a decline in the demand, but is an effect of fewer new launches by developers.

“If developer don’t have new launches, there is nothing to sell,” said Mr Ku Swee Yong, chief executive officer of International Property Advisor.

Mr Lee Sze Teck, head of research at Huttons Asia pointed out that the number of sales of new private homes is just one single data point, and that it is difficult to conclude if there is “euphoria” in the property market – a term used by Mr Ravi Menon, the managing director of the Monetary Authority of Singapore.

Developers could have held back launches in the first half of this year as prices are still going up, said Ms Christine Li, senior director and head of research at Cushman & Wakefield.

Buyers could have been deterred by the 9.1 per cent increase in private home prices between the second quarter of 2017 and the second quarter of this year, said other analysts.

CBRE’s head of research for Singapore and Southeast Asia, Mr Desmond Sim, said unsold inventory was reduced last year with sales of new homes outstripping the number of new units launched. But unsold inventory is set to increase this year with more launches in the pipeline and the latest round of property cooling measures in place.

With the measures that took effect from July 6, analysts expect new private home sales for this year to decline by as much as 20 per cent compared to 2017.

The latest measures include an increase in Additional Buyers’ Stamp Duty (ABSD) rates by 5 percentage points for all individuals, and 10 percentage points for entities. An additional ABSD of 5 per cent that is non-remittable was introduced for developers buying residential properties for development.

Loan-to-Value limits were tightened by 5 percentage points for all housing loans granted by financial institutions. The revised LTV limits do not apply to loans granted by the Housing and Development Board.

Ms Tricia Song, head of research for Singapore at Colliers, expects new private home sales, excluding condominiums, to come in at between 8,500 and 9,000 units this year.

Mr Sim estimates that around 8,000 to 10,000 new homes will be sold for the whole year.

In June, a total of 706 new private residential units including executive condominiums were sold, with about 60 per cent of the transactions for developments located in the Outside Central Region.

 Ms Song said new launches formed the bulk of transactions, with those at Margaret Ville in Queenstown registering the highest median price of S$1,873 per square foot (psf).

Sales at The Garden Residences and Affinity At Serangoon saw the next highest median prices of S$1,662 psf and S$1,584 psf, respectively. 

However, both developments only managed to sell about 10 per cent of the total number of units on offer.

“The relatively weaker performance of Affinity At Serangoon and The Garden Residences could be attributed to the close proximity and similar launch timing of both sites, which led to stiff competition for demand,” said Ms Li.

Observers expect new home sales to jump in July, bolstered by the flurry of last-minute deals the night before the cooling measures took effect. But developers and buyers are likely to shun the Hungry Ghost month which starts on Aug 11, said Ms Song.

Mr Mak expects a similar “slump” in September.

With demand for new homes expected to be dampened due to the latest round of cooling measures, analysts said developers may phase their new launches to see how the market reacts and adjust their pricing accordingly.

Colliers’ Ms Song expects home prices to hold steady after rising by 7.4 per cent in the first six months of this year.

Projects that are already launched are unlikely to see a downward trend in actual transacted prices, she said. For those yet to be launched, developers are likely to trim average selling prices to current achieved levels “instead of a continuously increasing trajectory”.