Mickey Mouse units remain hot

More smaller-sized units being transacted in Q3 according to DTZ

The number of transactions for units below 500 sq ft increased from 349 in Q2 2010 to 625 in Q3 2010. 87% of the 625 units transacted in the third quarter were purchased from developers reflecting the current trend among developers to offer units with digestible quantum.

Ms Chua Chor Hoon, Head of DTZ South East Asia Research commented, "Small units have been gaining popularity among homebuyers since the trend of these 'mickey mouse' units picked up in 2009, The recent cooling measures which increased the minimum cash payment will make such units even more attractive as buyers have to 'downsize' their purchases without having to increase the cash component".

The research report is based on caveats lodged for both new and secondary sales. Caveats lodged are used as a proxy for sales transactions, thus the terms 'transactions' and 'caveats' are used interchangeably in this report.

The proportion of non-landed sub-sales to total non-landed transactions was 11% in the quarter, slightly higher than the 10% in Q2 2010. The level of sub-sales has generally stabilised between 9-12% since the first round of cooling measures in September 2009, which saw the removal of the interest absorption scheme and interest only loans.

According to Ms Chua, the level of sub-sales is expected to remain low as prices are not increasing at a fast enough rate to justify flipping within a year. In addition, the market is flushed with liquidity from the low interest rate environment with many buyers looking to place their spare money in properties. They are purchasing with a longer-term holding time horizon in mind. For uncompleted properties, the buyers will decide whether to sell or hold for rental when the units are nearer completion.

DTZ's analysis also reflected that the proportion of transactions in the prime districts of 9, 10 and 11 have been on the decline from 25% in Q1 2010 to the 16% in Q3 2010. This is a result of both an increase in the number of homes for sales outside the prime areas from Q2 2010 and the lack of new project launches in prime areas.

Signs of increased buying activity among investment funds were also visible as the share of companies' purchases increased from 2% in the previous quarter to 3% in Q3 2010.

Overall among non-Singaporeans, mainland Chinese buyers have grown significantly in number from 2007, recording their highest ever share of 20% in the quarter. This puts them on par with the Indonesians as the second largest group of non-Singaporean buyers after the Malaysians, who topped with 21%.

Landed sales make up about 13% of total transactions in the quarter, similar to the 12% in Q1 and Q2 2010. The Malaysians and British are consistently the leading landed purchasers amongst non-Singaporeans. Indonesians, who form a dominant group in the overall residential purchases among non-Singaporeans, are distinctly absent among the top nationalities involved in landed transactions.

Despite the government measures and the usual slowdown at year end, developer sales could reach around 3,000 units in Q4 2010 due to a number of attractive projects that are/will be launched. Total sales volume for the whole of 2010 is therefore likely to be between 14,500 and 15,500 for new units sold by developers. Judging from the determination of the government to clamp down on property speculation and rising prices, tougher measures are expected if the market continues to be buoyant.