June of despair for private home sales
THE World Cup and long mid-year school holidays might have caused private home sales to drop in June, but they don't explain why this particular June had the lowest sales for the month since 2007.
Developers sold just 482 condominium units - excluding executive condominiums - last month, a 73.3 per cent drop from June last year, according to data released by the Urban Redevelopment Authority yesterday.
Sales figures were also much lower compared to May, when 1,488 units were sold, leading to a 67.6 per cent fall.
Basically, a perfect storm brewed in the market last month. Developers focused on clearing a backlog of unsold units; buyers waited for prices to drop and foreign properties - whose buyers can find their way around the cooling measures - took demand away from Singapore.
"The huge drop month-on-month was the result of a surge in new home launches and sales in May, when developers were able to overcome the slowdown in buying momentum with downward price adjustments," said Chia Siew Chuin, director of research and advisory at Colliers International.
Only two projects were launched last month - The Crest located in Prince Charles Crescent and Trilive in Kovan - and these were the major contributors to the 418 units added to the property market. This was a 77 per cent fall from the 1,819 units launched in May.
The top-selling project last month was again Coco Palms in Pasir Ris that was launched in May and sold 55 units at a median price of $1,014 per sq ft.
"Coco Palms is one of the few projects where the price quantum is relatively manageable," said Savills Singapore research head Alan Cheong.
But the buying momentum has slowed, said Ms Chia. Commonwealth Towers, which sold 275 units in May, sold only 24 last month.
Mr Cheong noticed that buyers are holding back on purchasing new homes because of "all the talk in the market that prices are going to come down".
But developers have held firm and the launch prices are, in fact, higher than last year's. "Buyers are asking the wrong people for their views on the real estate market," added Mr Cheong.
This means buyers are not looking for the best offers which would suit their pockets.
The cooling measures that have been in place since 2011, such as the loan framework - or the Total Debt Servicing Ratio (TDSR) - and the Additional Buyer's Stamp Duty, continue to deter buyers and investors. They have also changed the nature of the market.
Buyers prefer to purchase affordable smaller units, leaving larger units unsold and "creating dead pools in the market", said Mr Cheong.
"With the cooling measures, serial real estate buyers would rather spend their money elsewhere, even though they can afford it," he added.
More are looking beyond Singapore's shores, where a similar-sized property can cost much less and TDSR is not an issue if buyers were to borrow from foreign banks, said Chestertons Singapore managing director Donald Han.
"There is more leniency when it comes to getting loan approval overseas... There is a greater inclination to look abroad so that investors won't come under the tight loan restrictions here," said Mr Han.
The TDSR stipulates that banks must take into account a borrower's total debt obligations, including other mortgages, car loans and credit card debts, before a new loan can be granted. It restricts a borrower's monthly debt repayments to at most 60 per cent of his gross monthly income.
"By curbing the property market here, the Government thinks that it has solved the problem... but then another issue has come up," said Mr Cheong.