Despite economic headwinds and the Hungry Ghost Festival, developers in Singapore sold 1,256 private homes in August, 16 per cent higher than July’s take-up.
This is the fourth consecutive month of increase in monthly sales since the circuit breaker in April this year, analysts noted. The buoyant recovery has led to upward revisions by analysts with some even projecting that 2020 transactions may even exceed 2019’s 9,912.
“It appears to be a paradox that despite a bad recession, the private residential market is keeping well afloat with fairly cautiously optimistic sentiments,” said Ong Teck Hui, JLL senior director of research and consultancy.
This could be due to bright spots in the economy where some businesses are stable or even growing, he added.
The sectors that have been reported to be doing better include technology, digitalisation, biomedical, healthcare, electronics and precision engineering.
Those in more stable employment would have greater confidence in purchasing a property despite the recession, he said.
Other keen buyers may be HDB homeowners who have recently completed their five-year minimum occupation period (MOP) in Built-to-Order Flats, could have sold their units and used the gains to upgrade to new condominiums, said Leonard Tay, Knight Frank Singapore’s head of research.
There were 25,138 flats sold in 2014 and 23,445 flats sold in 2015, according to the HDB. Those flats sold in 2014 would have completed their five-year MOP by now, while those who got their HDB flat keys in 2015 would complete their MOP sometime this year.
“Another factor is homebuyers’ perception that, at worst, prices may just soften slightly and it may not be worthwhile to wait and hope for a major price correction,” said Mr Ong.
The 0.3 per cent increase in the URA private residential price index in the second quarter would have contributed to such a reading of the market by homebuyers, he noted.
In the first eight months of this year, developers sold an estimated 6,198 new private homes, just 4.5 per cent lower than that in the same period last year.
“Based on current trends, new private home sales from September to November could still remain fairly positive while December sales could be better than in previous years if travel restrictions keep homebuyers on the market. We may then see full-year sales of new private homes close to the 9,912 units sold in 2019 or perhaps even exceeding it,” said Mr Ong.
Noting that the Hungry Ghost Month ends on Sept 16 and major condominium projects, such as Penrose and Verdale are to be launched this month, Nicholas Mak, ERA Realty head of research and consultancy, said that these new launches are expected to benefit from the current buying momentum. “As long as sentiments in the real estate market remains buoyant, the primary market sales this year could range between 9,000 and 10,000 units, which is about the same sales volume in 2019, before Covid-19 and coronavirus became household words,” he added.
The larger number of units launched by developers in August also offered buyers more choices. Last month, 1,582 units were released, of which 109 were in the Core Central Region (CCR), 821 in Rest of the Central Region (RCR), and 652 were in Outside the Central Region (OCR), for example Sengkang Grand Residences.
In comparison, 82 per cent fewer units were launched for sale in July as Singapore progressively emerged from the “circuit breaker”. There were also about 56 per cent more units released in August compared to the corresponding month a year ago when 1,015 units were released.
The figures – which were released by the Urban Redevelopment Authority (URA) on Tuesday based on its survey of licensed housing developers – exclude executive condominium (EC) units, which are a public-private housing hybrid. Including ECs, developers moved 1,307 units in August, up 14 per cent from 1,142 units in July and 12 per cent higher than the 1,168 units sold in August last year.
Christine Sun, head of research at OrangeTee & Tie, said: “The property market bucked the trend with higher new home sales inked in August, (as) market activity typically tends to slow during the seventh lunar month. New home sales rose ‘higher and quicker’ than expected after the ‘circuit-breaker’ period, which upended sales in April and May (when there were) show flat closures.”
The robust market also saw more foreigners and permanent residents buyers. According to Ismail Gafoor, CEO of PropNex, the number of foreign buyers rose by 74 per cent from 31 in July to 54 in August. The 54 transactions in August is also the second highest monthly sales to foreigners this year, since 56 new units were sold in January 2020.
“With the gradual re-opening of the economy and the setting up of fast lanes for essential travel, we would anticipate a slow and measured recovery in foreign demand for private homes in Singapore. However, downside risks persist, including a resurgence of Covid-19 cases,” he said.
Mr Ismail was also circumspect that as the pent-up demand from the “circuit breaker” is absorbed, sales may moderate. “With Penrose and Verdale launching this month, we anticipate that September’s transaction volume should stay fairly elevated,” said Mr Ismail.
That said, as the pent-up demand from the “circuit breaker” gets absorbed into the market, new home sales may start to moderate slightly in the months ahead, he felt.
“Based on our projection, new home sales could reach between 9,000 and 9,500 units in 2020 – or about 4 per cent to 9 per cent lower than the 9,912 new homes sold in 2019,” said Mr Ismail.
“We now expect 2020 developer sales to fall about 15 per cent to 8,400 units from the 9,912 units in 2019,” said Tricia Song, Colliers International head of research, Singapore. Ms Song had in June projected a fall of 29 per cent to 7,000 units.
“With home prices highly correlated to household income and job security, we expect private residential prices could decline 5 per cent in 2020, in line with the economic contraction,” she added.
Buyers remain price sensitive with the sweet spot of homes sold between S$1 million to S$1.5 million. “We note that OCR buyers are most price sensitive, with nearly 75 per cent of units purchased in that sub-market being priced at below S$1.5 million in August,” said Wong Siew Ying, PropNex head of research and content.
Meanwhile, the pricing sweet-spot for RCR homes was in the range of S$1 million to S$2 million, which accounted for 70.4 per cent of transactions in the RCR last month. In the prime CCR market, units priced at S$1.5 million to S$3 million made up 60.5 per cent of the new home sales in the CCR in August, said Ms Wong.