Property-specific re-grooves for private homes
Mixed Signals in Sales Activity
2011 ended with December having the least monthly number of private residential units that were sold by developers in the past 2 years. Only 937 units were launched by developers in December, and only 632 units were sold.
It seems buyers indeed retreated to the sidelines then, including some who felt there could be potential for property re-pricing as the measures were implemented in a challenging economic context. With increasing cautiousness from buyers, it seems the private residential sector had meanwhile lost its groove.
However, sales activity has been fairly encouraging in January 2012, especially after Chinese New Year. 2,077 units (including ECs) were sold by developers in Jan 2012. This was the largest number since Dec 2010.
While the resale market remained quiet, there were brisk sales for selected projects, such as Watertown @ Punggol, Parc Rosewood and The Hillier, and home seekers who are looking for definitive cues probably felt there were mixed signals.
Recent improved developer sales interest
The encouraging buying response has set the tone that there are still ample buying interest, albeit innate and very property specific. As such, there may not be severe hold back in launch ready projects but neither will developers be in a rush to release many units.
Essentially, economic fundamentals have weakened and in any case, may require some time to be revived. The US and EU economic problems persist and is expected to require quite a long while to be resolved or stabilized, notwithstanding the efficacy of only some short term remedies.
The first quarter of 2012 is thus a period where most projects are packaged attractively with incentives, on top of creative project concepts, to really entice homebuyers. All these will be attempts to justify maintenance in selling prices.
It will be a time for developers to put in supernormal efforts to motivate sideline buyers on the rationale of ‘buying now’. This trying period can still be afforded by developers, especially those who have built up sufficient reserves from prior project sales over the past two years.
There may be a dichotomy in property pricing due to the property’s selling points, the financial health and property experience of the sellers.
Some Challenges for Secondary market
The secondary sales market is likely to see significant moderation in sales activity as buyers turn more cautious due to the sombre economic conditions. Also, buyers of secondary sale properties will assume financing almost immediately although they can enjoy the benefits of owning the property instantly.
As the leasing market has overall weakened, with companies trimming expatriate housing allowances and even repatriates some expatriates, this signals immediate investment opportunities may be fairly modest.
The entry level, new property investor will find it challenging to compete with seasoned investors, especially if he buys into an old, larger development comprising many residential units. Current property investors, i.e. those who already owned and leased a property for awhile may already have accumulated sufficient property income reserves to weather the storm.
They can be more competitive in lease renewals or rentals, compared to new property investors. Buying interest for secondary homes may pick up in 2H 2012 if some suitable property re-pricing has materialized, matching buyers expectations and encouraging cost sensitive buyers on the sidelines to make an opportunistic purchase.
Decisive homebuyers exhausted in prior times
It must be noted that the healthy sales activity in 2011 also meant that buyers who were quicker in making up their mind for property purchases have already committed. This leaves behind a larger pool of extra cautious and more opportunistic buyers. Such buyers are usually more risk averse and require stronger justifications or incentives to ‘buy’.
They may have been consistently questioning on ‘the right time to buy’ and needs more efforts to be pursued.
Being risk averse also means such buyers have low thresholds to forget about their heftier purchases if prices fluctuate in the holding period, and these buyers may also be more prone to buyers’ remorse.
Even if prices maintain, they may felt they have illiquid themselves when they see newer choices which fit better into their requirements.
Property Specific Re-groove for Private Homes
Although homebuying interest remain cautious and selective, it is quite unlikely pessimism will persist for long, if there are significant reforms in response to buyers’ requirements. Other factors will be the low interest rates that are set to stay and ample liquidity in the market.
There are still many buyers who are waiting for an opportune time to purchase private residential properties, as housing aspirations and lifestyle requirements have tremendously thickened over the years. Moreover, Singapore’s ‘wow factor’ has significantly been up over the recent years with the development of key lifestyle clusters.
The private residential market, especially the primary market, is expected to see occasional ‘sparks of life’ going ahead, if properties are indeed offered to appeal to two extreme sets of home seekers.
The general cost sensitive buyers who need a roof above all may be able to find some competitively priced least frills properties. The other spectrum is buyers who have more sophisticated requirements, who will enjoy attractive offers from lifestyle projects.
While integrated use lifestyle projects will be pricier than conventional projects, it can still be overall valued propositions, as buying into such property is akin to buying into a holistic, interesting environment.
The buyer will find that being the residential property owner also means ‘owning’ annexed retail and entertainment properties, which are beautifully conceptualized. The livability of such properties also enhance the status of the owner when he ‘mini-host’ in his apartment.
The challenges for developers and sellers means it is a time to continually monitor, study, predict and cater to homebuyers’ interest and preference. There may still be opportunities for properties where intensive efforts have been invested to design to consumer likings and the forthcoming period will be one for continual product innovation.
The push for innovations can lead to discoveries of real buyers’ needs and revisit prior project concepts. The push for continual innovations is healthy for Singapore’s property landscape, as housing products available will be of unique quality, sitting in a place with unparalleled country fundamentals.
On the other hand, the resale market and ordinary designed developer projects will offer practical choices to the buyer constrained by budget. Together with well-designed developer products, these will cater to two diverse sets of homebuyers – the sophisticated and the practical buyers.
The private residential sector can hence find some of its grooves again in 2012, albeit at probably different genres, as creativity, continual product innovations and sales strategies set the stage to mitigate the severe impacts of the challenging economic conditions and ample new housing supply.
Ong Kah Seng, Director, R’ST Research
[email protected]
About R’ST Research
R’ST Research is an independent property market research firm in Singapore, offering a comprehensive range of property research and advisory services. R’ST Research covers all sectors in Singapore, residential, retail, office, industrial, investment, leisure and hospitality research. R’ST Research is not involved in property transactional and agency activities..