How disappointing were the January home sales, really?

Analysts are still keeping their hopes up for next month.

According to Colliers International, market activity stayed subdued in the lead up to the traditional Lunar New Year lull period, despite improving from December 2013. Developers launched 549 units (excluding ECs) in January 2014. While this was more than 4 times the 118 units launched in December 2013, it was 69.7% lower than the 1,814 units launched a year ago.

The number of units (excluding ECs) sold by developers also increased 118.1% month-on-month (MoM) to 565 units. Nonetheless, this was 72.1% less than the 2,028 units sold in January 2013 when market activity remained buoyant despite the implementation of the seventh market cooling measure.

Developers adopted a cautious stance in January, launching only three new projects in the lead up to the festive Lunar New Year holidays.

Singapore Business Review compiled analysts' insights on the latest sales figures.

Donald Chua & Tan Xuan, analysts, CIMB:

As expected, new home sales and launches improved from Dec but stayed weak. The bulk (51%) of the sales came from The Hillford, a 281-unit 60-year lease retirement village, which was fully sold on the first day at a median price of S$1,105 psf. Response for the 99-year leasehold Panorama, located in Ang Mo Kio, was lukewarm, with only a 48% take-up rate for the 120 units launched.

The contrast between the response for The Hillford and Panorama is yet another demonstration of the buyers’ price sensitivity and preference for
affordability, in our view. Aside from being more centrally located, The Hillford units are smaller in size (398-657 sq ft) and priced lower than Panaroma units
(474-2,411 sq ft).

We believe these are key attributes that attracted buyers to accept development's shorter lease of 60 years against 99 years for Panorama. The trend of smaller units and lower prices should continue. We maintain our expectation of lower volume and prices as physical completions begin to escalate in 2014. We continue to expect 10-15% decline in property prices in 2014-15. 

Knight Frank:

With the Chinese New Year season last month, a total of 549 units were launched in January 2014. This is 365 per cent higher compared to December 2013. 62 per cent of total units launched are in the Rest of Central Region (RCR) and 38 per cent in the Outside Central Region (OCR).

A total of 565 units were sold in January 2014. Although this is 118 per cent higher compared to December 2013 where only 259 units were sold, January 2014’s sales volume recorded the weakest performance for month of January since the last low at January 2009 when sales volume was 108 units.

There were only three project launches in January 2014, with The Hillford as the best selling project (fully sold), followed by The Panorama where 58 units were sold, out of 120 units launched. However, Floraview sold only 1 unit out of 90 units launched.

The existing TDSR ruling and ABSD measure continue to keep homebuyers and investors at bay, with price quantum of private homes remaining a key consideration in order to secure mortgage loans.

New private home sales could improve in the next two months with a couple of upcoming projects potentially being launched within 1Q 2014 period. With increasing competition amongst developers in light of current market conditions, developers are likely to deploy more aggressive marketing strategies to move sales, as well as pitching their projects at the right prices.

Given the current property cooling measures, we envisage private home sales in 1Q 2014 to decrease further by around 20 to 35 per cent compared to 4Q 2013, with sales volume potentially ranging from 1,700 units to 2,000 units.

High-end market in CCR is likely to remain sluggish at least for this month, as there has been no major new project in the pipeline following the launch of Duo Residences in November 2013, which is being sold at competitive prices compared to other projects in CCR or even RCR.

New sales performance in the mid-tier segment in RCR is likely to remain at current levels for the next couple of months, as new projects in good locations near to city centre will continue to receive fairly healthy interest from buyers, provided that the price quantum is pegged at a 'sweet spot' level.

Mass market in OCR could see better sales performance in the next two months, with upcoming project launches that could attract a fair level of interest from potential homebuyers. However, any further price increase from current levels could receive market resistance particularly from middle-income buyers amid the TDSR ruling and recent cooling of HDB resale prices.

Chia Siew Chuin, Director of Research & Advisory, Colliers International:

In the Outside Central Region (OCR), developers launched 120 units in the 698-unit The Panorama and the 90-unit Floraview was fully launched. In the Rest of Central Region (RCR), developers launched Singapore’s first retirement resort, 281-unit The Hillford. There was no new project launch in the Core Central Region (CCR), only one additional unit was released from the previously launched Novena Regency. The units launched in the OCR, RCR and CCR took up 0.2%, 61.6% and 38.2% of islandwide launches (excluding ECs), respectively.

Developers’ sales was generally slow moving in January 2014 and only selected projects with unique selling points were popular with homebuyers.

Developers’ sales in the OCR remained low with only 162 units sold in January 2014, although the sales tally improved 29.6% MoM. In particular, The Panorama sold 58 units and Floraview moved only 1 unit. Due to the lack of major launches in the region, homebuyers picked up units from previously launched projects. These include La Fiesta (16 units sold), Jewel @ Buangkok (15 units sold) and Q Bay Residences (8 units sold).

Sales in the RCR showed a marked improvement, supported by overwhelming response to the launch of The Hillford. The development was fully sold out on the day it was launched as price-sensitive buyers were attracted to the affordable and relatively low price quantum of one- and two-bedroom units in the 60-year leasehold project. All 281 units were sold at a median price of $1,105 per sq ft, the lowest achieved for new projects in the region in January 2014. Sales in other previously launched projects remained relatively slow. Projects which continued to move units include Bartley Ridge (15 units sold), Guillemard Suites (12 units sold) and Sant Ritz (5 units sold).

In the CCR, besides Duo Residences which moved 11 units, the other previously launched projects such as V on Shenton and Leedon Residence sold less than 5 units each.

Units sold in the CCR, RCR and OCR constituted 7.1%, 64.2% and 28.7% of islandwide new sales of private homes in January 2014, respectively.

Notwithstanding the improvement in launch and sales volume in January, the subdued market performance shows that the market may be reaching a state of stability following the implementation of the Total Debt Servicing Ratio (TDSR) in 30 June 2013, cooling off from the exuberance seen in 2012 and 1H 2013.

Homebuyers, whose home-buying budgets have been affected by the mortgage restriction, are expected to remain price-sensitive and selective in their purchases. Although well-located projects with reasonable pricing are expected to be well-received, buying decisions could be stalled on the back of downside risks and buyers’ tendency to hold back for price corrections.

Meanwhile, the review of the TDSR framework on 10 February 2014 will offer some reprieve to owner-occupiers and those who are looking to refinance their loans. Under the revised rules, a borrower will be exempted from the 60% TDSR threshold in refinancing a residential property, so long as it was purchased before the introduction of TDSR rules and it is owner-occupied. However, this exemption is not expected to boost home sales for now, as the TDSR threshold still holds for those who bought homes and who are intending to purchase a property after the effective date of TDSR. Additionally, this does not indicate a policy change and the Government is not expected to loosen the reins completely on the property market in the short term.

With developers expected to launch more projects after the Lunar New Year lull period, primary sales volume is expected to improve to the region of 600-900 units in February.