Developers' housing sales: Another dismal month in July with worse expected in August!

Latest official statistics showed that developers' housing sales continued to languish last month, but the focus now is on the likely launches for the rest of the year and how much room developers have to price them attractively to get potential buyers into making a commitment.

Many developers paid high prices for 99-year private housing sites at state tenders in the past couple of years as they sought to replenish land following strong home sales at the time.

"Those with a high breakeven cost but who need to launch a project are likely to adopt a "Star Buy" strategy for inferior stacks of units in the development to draw out initial take-up to drive confidence in the launch," a seasoned developer told BT yesterday.

There will be heightened competition for buyers as more property launches are expected by developers who had bought residential land after December 2011. These developers are required to complete the projects and sell all units within five years, otherwise they would have to pay a hefty additional buyer's stamp duty on the land prices with interest, said Chia Siew Chuin, director at Colliers International.

Even amid weak July developers sales released yesterday by URA, evidence is surfacing of developers successfully drawing out buying demand through attractive prices, highlights SLP International executive director Nicholas Mak.

The number of new homes sold last month was about 10% more than the 434 units that went on the market, indicating that buyers could have been lured by price cuts to projects launched earlier.

"For instance, Wheelock released The Panorama in Ang Mo Kio in January this year, posting a median price of $1,343psf for sales in that month. But since it reduced prices in May to the $1,200-plus psf level (median price), this project has been among the top sellers every month," Mr Mak said.

"This goes to show that developers can revive sales at existing launches with meaningful price cuts. What remains to be seen, however, is whether this will result in a price war, which could be triggered, for instance, if one player were to sharply cut prices relative to other projects in the vicinity."

URA's July data also revealed that the remaining 37 units at The Vermont on Cairnhill, which was completed last year, were sold at $2,113psf median price in July. This is 8.6% below the $2,313psf median price, based on caveat data, for all previous sales in the project by its developer, said OrangeTee research head Christine Li.

"Vermont's brisk sales show many high-end buyers are on the sidelines waiting to enter the market once prices become attractive," she noted. "In the private housing market as a whole, a 10 - 12% price cut is typically enough to draw buyers in droves."

Developers sold just 484 private homes excluding ECs in July.  This was a paltry 0.4% higher than the 482 private condominium and apartment units moved in June - which was a 68% drop from May. In July last year, the figures was also 482 units.

There were only four new launches last month - of which three were in the city fringe. The city fringe also accounted for the lion's share of new sales last month, at 46%. The suburbs made up 36% and the city centre, 18%.

The top seller was City Gate on Beach Road, with 89 units transacted at a median price of $1,809psf. Near Kitchener Road, the developer of The Citron Residences found buyers for 23 units at $1,585psf median price. In the West Coast, 11 units were sold at Bijou at $1,969psf.

Analysts said last month's poor showing  was likely to drag on into this month.

"As the Hungry Ghost Festival falls in August this year, developers are generally expected to continue to hold back on their project launches," said Ms Chia of Colliers.

She expects new home sales to come in at between 200 and 500 units this month, before picking up again towards next month.

 

In the first seven months, developers sold 4,839 private homes and 354 EC units. For the whole of last year, the figures were 14,948 private homes and 3,588 ECs.

Some market observers expect genuine buyers to increasingly head for the resale market to pick up a completed property, including units in newly completed projects.

Source: BT, ST