Private home resales up 8.4% in H2 from H1

But new sales by developers and subsales continue to fall, down 36% and 9.4% respectively, according to DTZ analysis

By Kalpana Rashiwala

[email protected]@KalpanaBT

20 Jan

IN what could be a ray of hope for a recovery in resale volumes of private housing transactions, the number of units transacted in this segment rose 8.4 per cent to 2,528 in the second half of last year from 2,332 in the first half, according to DTZ's analysis of caveats data from URA Realis.

Resales refer to transactions of completed properties.

In contrast, new sales by developers and subsales (secondary market deals involving uncompleted properties) continued to fall. New sales by developers slipped 36 per cent to 2,520 from H1. Over the same period, subsales eased 9.4 per cent to 260.

DTZ head of Singapore research Lee Nai Jia attributed the pick-up in resale deals to sellers willing to give bigger discounts to move their properties. "Some investors are finding that the erosion in housing rentals, arising from the ramp-up in new completions, has clipped their ability to meet monthly mortgage payments and this has increased their need to dispose of their properties. These investors have also had to take into account that in the current down market, buyers have more bargaining power than sellers and are deciding to bite the bullet."

For the whole of last year, 4,860 private homes changed hands in the resale market, down about 27 per cent from 2013. This was a smaller drop compared to the 56 per cent fall in new sales to 6,460 and a 50 per cent slide in subsales to 547.

DTZ SE Asia chief operating officer Ong Choon Fah expects resales to continue to outperform new sales. "Ownership in the resale market is more fragmented and those who need to sell will be more willing to negotiate and price realistically.

"Developers, on the other hand, have better pricing control; moreover, those that have bought land say in the past year, have paid high prices and lack flexibility to price their projects more competitively to move stock."

While developers have in the past slashed prices to move stock such as in 1998 during the nadir of the Asian Financial Crisis, Mrs Ong argued that "the pain has to be deep enough before developers would do that".

"Over the years, they have built up enough reserves to withstand periods of low sales."

DTZ also noted that private home purchases by Singaporeans fell about 22 per cent to 3,706 in H2 from the preceding half-year. Buying activity among Singapore permanent residents (PRs) slowed 14 per cent to 985 units while purchases by foreigners eased 17 per cent to 485. However, purchases by companies rose 97 per cent to 132.

"This was even higher than the 105 units purchased by companies in H1 2013, before the Total Debt Servicing Ratio framework was implemented," pointed out Dr Lee.

He said that the increased buying activity by companies was partly due to some developers that come under the Qualifying Certificate rules setting up fully owned vehicles to mop up unsold units in completed projects within the two-year deadline after Temporary Occupation Permit is obtained - to avoid paying hefty extension charges to the authorities. An example would be Hiap Hoe, for its purchase of the remaining unsold units at Skyline 360 condo along St Thomas Walk and Signature at Lewis.

While the absolute number of purchases by non-Singaporeans (PRs and foreigners combined) decreased in H2, they made up 28 per cent of the total private home buying pie for the period. This was higher than their 25 per cent share in H1 2014 and H2 2013.

Nationality-wise, DTZ found that the number of purchases by Indonesians slumped 58 per cent to 392 last year, from 941 in 2013. This was a bigger decrease than those for the other major nationalities - mainland Chinese (down 39 per cent at 949), Malaysians (down 35 per cent at 917) and Indians (down 25 per cent at 355).

The more pronounced decline in purchases by Indonesians was attributed partly to the weaker Indonesia rupiah against the Singapore dollar.

"Moreover," said Mrs Ong, "the Indonesian residential property market has been doing better than Singapore's in the past few years, so Indonesians would have felt more confident about investing at home; a lot of Indonesians who have wanted to buy high-end homes in Singapore have already done so."

In all, 11,867 private homes were transacted last year, down 47 per cent from 2013. DTZ found that 19 per cent of the total units sold last year fetched above S$2 million each - up slightly from an 18 per cent share in 2013 and 16 per cent in 2012.

Mrs Ong suggests that this could be due to some high-end project launches last year such as Marina One Residences. "In the secondary market, the smart money has been going for distressed sales in good locations such as Sentosa Cove and Districts 9 and 10 - as investors know that prices will recover in the medium term."

Added Dr Lee: "There's a pool of well-heeled investors on the sidelines who are waiting for the ABSD (additional buyer's stamp duty) to be removed before they re-enter the market."