Benchmark for monthly ‘healthy’ or ‘robust’ home sales needs redefinition

A 1,000- to 1,500- unit monthly take-up may no longer be an appropriate quantifier for a still "healthy" sales activity.

According to R’ST Research Director Ong Kah Seng, it is essential to note that while a monthly takeup of 1,000 to 1,200 units has been considered the conventional ‘still healthy’ range and 1,000 to 1,500 units per month of takeup is deemed ‘overall healthy’, the benchmark of what constitutes a ‘healthy’ developer sales level may have to be bumped up slightly, especially in months ahead when there are numerous projects with small units to be released.

Mr. Ong noted that he expects an increasing number of projects sold going forward but will more likely be comprised with mostly smaller sized apartments, including shoebox apartments to achieve financial feasibility from high land cost.

As such, the expert warned that “the number of units available for sale or already released can be inflated by smaller apartments, where even if the total sale of smaller units is accumulated and fits into the traditional healthy range, there is actually still a substantial amount of development floor area left unsold.

“A good gauge of sales activity will perhaps be the monthly sales rate, e.g. at least 70%, compared to the units launched in the month,” he added.

The number of private residential units launched in the month of October 2011 totaled 1,337 units, a 46.4% mom reduction compared to September 2011. At 1,337 units, Mr. Ong commented that this seems a moderate level of launch activity and reflected that the release in September was seemingly pentup.

The launches in October were met with encouraging homebuyers’ interest. 1,638 units (including ECs) were sold by developers in October, exceeding the 1,337 units launched. Although this has decreased by 20.6% compared to September, Mr. Ong noted that this is still a fairly healthy level, reflecting overall positive homebuying interest amid the US and EU economic crisis.
In the remaining months of 2011, the launch activity of pure private residential units each according to the expert is expected to total about slightly in excess of 1,000 units, up to 1,400 units per month.

“Takeup for these units launched is expected to exceed 70%, translating to monthly developer sales of about 900 to 1,200 units. In 1Q 2012, launch and sale activity is likely to hover at 1,200 to 1,500 units per month,” he added.

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