Property sales up, but market not in recovery yet

SINGAPORE — Recent real estate statistics have showed buyers returning in greater numbers to snap up homes in both the new and resale segments, but pundits have refrained from using the term “recovery” to describe the current state of the housing market.

This is because the recent jump in transactions is mostly seen in those with low overall dollar quantums and in developments with particularly attractive attributes — indicating that buyers remain cautious amid the continued enforcement of cooling measures and loan curbs.

Mr Ku Swee Yong, CEO of property agency Century 21 Singapore, said it is also crucial to look at factors driving transactions at “extremely low prices” while assessing the health of the market. Such sales, especially those in the Core Central Region (CCR), indicate the presence of distressed sellers who are forced to exit the market. “Through caveats lodged, we see sales done at even lower (prices) than their launch prices a few years ago, which shows that there are people in trouble and having to get out. So while we see additional buying activity, this came about due to a reduction in prices, and the rental market is still weak. We are not out of the woods, for sure,” he said.

Dr Lee Nai Jia, regional research head, Southeast Asia, at property firm DTZ said that buyers’ preference for smaller units may also lead to high competition for tenants in this segment, especially among investors who rely on rental income to finance their purchases. “More buyers are looking at the property market because bonds and stocks have been very volatile, but the quantum that they can afford is constrained so they go for the one-, two-bedders of S$2 million and 
below. Sales of three- and four-bedders are actually still very slow in new projects,” he said.

At the other end of the spectrum, the luxury market is experiencing signs of distress. A Knight Frank House View report on the auctions segment in Singapore noted that out of the 25 prime residential properties put up for auction in the first quarter this year, 12 were offered under mortgagee sales, as highly-leveraged owners found it difficult to service their loans.

Meanwhile, developers have also been more aggressive in clearing their unsold inventories. OUE dangled 
attractive schemes, including one that allows buyers to defer payment balances by two to three years. That helped to shore up sales for its Twin Peaks project and helped lift overall transactions last month, according to the latest non-landed private residential resale market report by SRX Property.

Released on Tuesday (June 14), the report estimated a 36 per cent month-on-month and 35 per cent year-on-year jump in resale volume to 840 units in May. A day later, official data from the Urban Redevelopment Authority showed a 41 per cent month-on-month and a 64 per cent year-on-year increase in new home sales to 1,056 units during the same period.

Seasonal factors played a big part in May, as developers ramped up marketing activities to move units before the lull typically experienced during the June school holidays and Hungry Ghost Festival in August.

“Activity always inches up during these few months, so we are looking at what is very normal historically. 
Another observation is that after three years of price corrections, there are buyers who now decide to commit. I would say the market is bottoming out and stabilising, but it will probably remain flat from here,” said Mr Chris Koh, director of property company Chris International.

And “stable” appears to be the preferred choice of word to describe the market, given the lack of influences to sway it. “In the law of averages, everything becomes stable,” said Dr Lee.