Hot home sales raise odds of govt cooling

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Published December 16, 2010

Hot home sales raise odds of govt cooling

Sales of new private homes in November hit 1,909; analysts expect Dec to stay buoyant

By UMA SHANKARI


(SINGAPORE) Demand for new private homes rose again in November, despite the measures to cool the property market announced barely three months ago.

The number of units sold by developers in the first 11 months of this year has already set a new yearly record - even though there is one more month to go.

Figures released by the Urban Redevelopment Authority (URA) yesterday showed November's sales volume at a strong 1,909 units. This takes total sales volume for 2010 to 15,025 units - more than the 14,688 units sold in 2009 and even higher than the record 14,811 homes sold in 2007.

'It is clear from November's sales figure that the Aug 30 set of measures have been less than effective in taming the buying frenzy. If left unchecked, there is a potential that the current buying fever could put upward pressure on home prices again,' said Tay Huey Ying, Colliers International's director of research & advisory.

'There is now an increased risk for more and stiffer demand-side cooling measures to be announced within the next two to three months,' she added.

In fact, prices may already be on the way up. Jones Lang LaSalle (JLL) noted in an analysis that the pick-up in buying activity is mirrored in the prices of caveats lodged.

Based on data retrieved on Dec 15 for transactions up to Nov 30, the firm found that the island-wide median price for non-landed properties under the 'new sale' category rose by 13 per cent month on month in November after falling by 9 per cent in October.

To ride on the strong demand and anecdotal price increases, developers launched 2,329 new private homes in November - second only to the record 2,878 units launched in July 2009, data from the URA showed.

In particular, developers were especially bullish about the mass-market segment, where the number of new homes launched rose to hit a 16-month high last month. Developers launched 1,638 homes in the outside central region (OCR), which is a proxy for mass-market locations, in November.

Buyers were also particularly keen on mass-market units; 1,229 such homes were sold in November, accounting for 64 per cent of all homes sold in the month. But the continuing strong demand for mass-market homes is surprising as prices in the segment are currently at a peak, analysts noted.

The strong sales in this segment over the last few months could be in part due to investors opting for properties that require a lower capital outlay compared to the high-end homes in order to minimise investment risks, they noted. But the fact that the buying volume was led by mass-market homes means that the total amount spent by homebuyers is still less than what it was in 2007, when the buying spree was led by high-end homes.

An analysis by CB Richard Ellis, based on URA's statistics, showed that the total transaction value of the homes sold up to November 2010 was $16.98 billion, 30 per cent lower than the $24.11 billion worth of homes sold in 2007.

'It is unlikely that the total transaction value of 2010 will be able to exceed the 2007 value even if the volume reaches 15,500-16,000 units for the whole year,' said Li Hiaw Ho, executive director of CBRE Research.

Analysts expect sales in December to stay buoyant at above 1,000 units given that the market is awash with liquidity and interest rates remain low.

The sales tally for the whole of 2010 is likely to be in excess of 16,500 units, putting 2010's sales volume at more than 10 per cent above the historical high seen in 2007.

In the light of this, more demand-side cooling measures could be coming. Said JLL's head of research for South-east Asia Chua Yang Liang: 'The low interest rate environment, coupled with the strong urban regenerative plans and overall market demand in these areas, have encouraged more speculative buying into the market. As such, we believe the risk of further policy intervention has been elevated with the soonest policy to be introduced within a month if not by early next year.'

Nomura analyst Tony Darwell said that one area that the government may want to curb is property purchases by foreigners.

'While the representation of foreign private homebuyers declined for the second consecutive quarter (albeit slightly) in Q3 2010, the representation is still high relative to historical levels. Foreign buyers also appear to have been buying more in the mass and mid-market segment during Q3,' he said.

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http://www.straitstimes.com/PrimeNew...ry_614237.html

Dec 16, 2010

New home sales surpass 2007 peak

Analysts predict that more cooling measures could be introduced

By Esther Teo


THE private property market showed signs of defying gravity last month with an unexpectedly large number of new homes sold.

Top-selling projects such as The Lakefront Residences near the Lakeside MRT, Waterview in Tampines and Spottiswoode Residences helped raise the total to 1,909 units sold.

The November tally brings the total number of new homes sold so far this year to 15,025, surpassing the previous record of 14,811 in 2007.

The numbers show that sales of mid- to mass-market suburban homes made up the bulk of the transactions. If executive condominiums such as The Canopy and Esparina Residences were included, last month's figure moves even higher to 2,084 units.

Experts said last month's figures highlight an unusual buzz in a traditionally quiet month and are surprising coming within three months of the Government's Aug 30 cooling measures.

These included reducing the amount banks could lend for second mortgages from 80 per cent to 70 per cent of the valuation.

Jones Lang LaSalle (JLL) head of South-east Asia research Chua Yang Liang suggested that projects in good locations could be a factor attracting buyers.

For example, The Lakefront Residences is near an MRT station as well as the Jurong Lake District, which is being developed into a major regional centre.

Another factor could be the current low interest rates, which leave investors looking for alternatives in which to park their cash.

However, Dr Chua reckoned that the strong sales numbers increased the risk of further cooling measures from the Government. He even predicted that the Government could act as early as within a month.

Ms Tay Huey Ying, Colliers International research and advisory director, echoed his sentiments, though she expected stiffer measures within the next two to three months.

She said the November sales showed the recent cooling measures to be 'less than effective in taming the buying frenzy'.

'If left unchecked, there is a potential that the current buying fever could put upward pressure on home prices again,' she said.

Among government leaders who have said that they are watching the market closely was Prime Minister Lee Hsien Loong. He said last month that the Government was watchful of a bubble forming.

National Development Minister Mah Bow Tan last month flagged a number of concerns, such as low interest rates and an abundance of investor liquidity elsewhere, which could push up real estate prices.

Anti-speculation measures in Hong Kong, Taiwan, mainland China and South Korea could also result in more funds heading here.

He said the Government would introduce more measures to curb property prices if there was a need to do so.

But given that the Aug 30 measures had only just been implemented, the Government would monitor the market for now and was 'watching it like a hawk', he said.

Home prices for the July-September quarter saw some moderation with a 2.9 per cent increase, down from 5.3 per cent the quarter previously, suggesting that the measures had an impact in September.

Analysts expect that new cooling measures, if introduced, might include reducing the loan-to-value ratio and having a higher stamp duty for those who make more than one property purchase within a year.

Meanwhile, the strong sales numbers may spur developers to launch their projects as soon as possible in order to avoid being caught by a possible new round of cooling measures, said Mr Ong Kah Seng, senior manager of Asia-Pacific research at Cushman & Wakefield.

Still, the strong demand, however, might be an indication that there are many genuine buyers with deep pockets, said Ms Christine Sun, senior manager at Savills Research & Consultancy.

Also, while the volumes are strong, they do not tell the entire story.

According to CB Richard Ellis, the total value of homes sold up to last month was $16.98 billion. This is still some 30 per cent lower than the $24.11 billion notched up in 2007.

One factor is probably due to the shoebox-sized units sold in many of the new launches.

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