Perception of a slowing resale market post ABSD misguided: analysts

Around 1,017 transactions were already registered at SRX database as of June 11 while April data surprisingly far exceeded 800-unit forecast.

"In early May when I last looked at the SRX database on resale transactions for ALL types of residential properties (i.e. both landed and non-landed), it looked as if April’s numbers could at best hit 800. That was down on March’s 1,022 resale transactions (both landed and non-landed private residential), leading one to opine that April may have been a slower month than the one before," said Allan Cheong, a property analyst at Savills.

However, a month has passed and being now in June, armed with a more complete set of April and part of May’s resale transaction numbers, Savills discovered that April had surprisingly achieved 1,075 transactions just for non-landed properties alone.

"Previously on 24th April when we trawled the SRX database for ALL private property resale transaction (both non-landed and landed), it only registered 585. That was why it lead us to infer earlier on that for the whole of April, it would at best achieve 800 transactions. Going through the SRX database, at this very moment (2.30 pm 11 June 2012), there were 1,017 SRX registered transactions for non-landed properties alone," noted Cheong.

According to Cheong, the figure mentioned above meant that between the 24th of April 11th of June, a lot more transactions entered the SRX database, but on 24th April, these were only partially captured.

"April and May data showed that perceptions of a slowing resale market post-ABSD were misguided. With lots of underlying strength, the market still had legs," he said.

Based on the data in the SRX report, the private residential resale market has rebounded in 2Q2012. The number of resale units sold island wide has increased from 1,871 units in 1Q212 to 1,975 units in 2Q2012.

Outside Central Region recorded the highest number of units sold in 1Q2012 (55%), followed by Rest of Central Region (28%) and lastly Core Central Region (17%).

Kok Keong Tan Director for Research & Consultancy at Orange Tee said that the upswing in resale numbers is ‘surprising ‘as it came about on the back of deteriorating economic conditions as 2Q2012 has been largely marred by Eurozone's debt crisis and a volatile stock market.

What explains the strong demand in the resale market?

Thomas Tan, Executive Director of RE/Max Singapore noted that since the introduction of cooling measures, namely Seller Stamp Duties on 20 Feb 2010, 30 Aug 2010 & 14 Jan 2011 & Additional Buyer Stamp Duty on 8 Dec 2011, volumes in the resale market has been trending downwards due to (1) the holding-period requirements (up to 4 years) and (2) foreign buyers (10% ABSD) sitting on the fences.

In the past year though, Tan said that some developers were able to neutralise the effects of the Stamp duties through rebates with some even reported record prices for their launches.

In view of the recent high prices at the launches, meanwhile, investors feel that it is over-priced/overheated to go into new launches now, and thus, attention has now switched to the resale market, which presents itself as a ‘value-for-money’ product now, he said.

Lee Sze Teck, Senior Manager for Research and Consultancy at DWG concurred with Tan adding that there is some spillover demand from the primary market. The fall in median COV for HDB resale flats in 4Q 2011 and 1Q 2012 prompted some buyers, he said, to commit to a purchase in the resale market rather than wait for a BTO flat.

“This enabled HDB median resale prices to stay firm and register a small rise in 2Q 2012,” he added.

Orange Tee’s Tan meanwhile explained that the the strong sales could be a reflection of strong underlying demand for homes for own use.

“This is further substantiated with a 3.4% increase in average prices of secondary units sold island wide to $1,088 psf in 2Q2012 as compared to a 2.0% decrease in the previous quarter,” he said.

Among the three regions, the Rest of Central Region recorded the highest price increase of 5.3% compared to 1Q2012.

Nevertheless, Tan cautioned that the upswing in sales may not persist going forward.

“ We expect sales volume to hover around 2,000-3,000 units per quarter for the rest of the year, which is comparable to a more normalized resale number. Despite the increase in prices across all segments, we also expect this rebound to be short-lived given the murky global economic conditions,” he added.