RESIDENTIAL PROPERTY | Krisana Gallezo-Estaura, Singapore

Will there be a sustained home buying demand in the coming months?

Prices seen to be under pressure.

The number of private residential units sold by developers surged 41.2 per cent m-o-m to 1,056 in May 2016, the highest monthly sales volume since July 2015 when 1,655 units were sold. This brought the total new private homes sold in the first five months of 2016 to 3,223 units, 3.3 per cent higher than the same period last year.

Will the positive trend continue?

Here's what analysts had to say:

Lock Mun Yee, analyst, CIMB

Whilst there were no new EC launches in May, absorption from ongoing projects accounted for 24% of total sales. The latest data has boosted 5MTD total homes sales to 3,536 units or 3,274 ex EC, which is 2.8% higher yoy. Annualising the data, would bring us to close to our volume expectation for 8,000-9,000 units for 2016, and in tune with the long-term average. Hence, we leave this assumption unchanged Prices continue to be under pressure

Private home prices have corrected an average 9.1% from the 2013 peak, with city fringe prices retracing 9.8% and suburb prices correcting 8% over the same period. This is due to financing restrictions and higher transaction costs that were put in place, which heightened supply and increased vacancies. With above-average new inventory coming onto the market over the next 2 years, we expect prices to continue to correct. As at Mar16, there were 20,516 and 12,760 new homes to be completed between 2Q16-2017.

 The near term build-up in unsold inventory facing Qualifying Certificate and Additional Buyers Stamp Duty penalties by developers are likely to intensify in 2017. Hence, we think selected projects may see a heavier drag on selling prices as developers start to clear inventory. We are projecting residential prices to correct by 5-8% this year.

Vijay Natarajan, analyst, RHB Securities

Weexpect the trend of price discounts to continue for rest of the year, attracting more buyers into the market. Overall, we expect the private home sales (excluding executive condominiums (ECs)) to range between 7,000-10,000 units and prices to decline by 3-5% in 2016. YTD private home sales (May) stands at 3,271 units with prices declining by 0.7% in 1Q16.

With recent healthy demand seen in some of the new and existing projects post price adjustments, we believe the Government would take a more cautious approach in relaxing any of the cooling measures. We also note that overall property prices have fallen by only 9% (Urban Redevelopment Authority property price index) since peaking in 3Q13 and are still 48% higher than recent
Global Financial Crisis trough (2Q09). As such, any premature withdrawal of cooling measures could result in a spurt in the property prices. 

Tay Huey Ying, Head of Research & Consultancy, Jones Lang LaSalle 

While May’s sales may be the highest in 10 months, to put it in perspective, it is in fact the lowest 1H peak in the last three years. Developers sales have been observed to peak around April and May in 1H before the June holiday lull. The 1H peak in 2014 and 2015 were 1,488 units in May 2014 and 1,167 in April 2015 respectively. These were both higher than the 1,056 units sold in May 2016 – which is likely to be the 1H peak in 2016, given that June is likely to be a slow month due to the mid-year school holidays.

Hence, it appears that potential buyers have remained cautious and selective amid the uncertain economic environment. Nonetheless, given that developers’ sales in the first five months of 2016 has already surpassed that for the first five months of 2015, barring unforeseen circumstances derailing the improvement in market sentiment seen in the last three months, developers’ sales for 2016 look poised to exceed that of 2015.”

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