Ghost Month sneaks up on slow market

August 16, 2008
Ghost Month sneaks up on slow market
Home sales volume in July down 35% year-on-year, but does better
month-on-month with 12% rise
By ARTHUR SIM

(SINGAPORE) One year after the onslaught of the US sub-prime mortgage
crisis, the Singapore property market is still looking weak. And
property consultants are expecting sales to slow further, exacerbated
by the start of the Chinese Hungry Ghost Month.

According to developer sales figures from the Urban Redevelopment
Authority (URA), new home sales fell about 35 per cent in July to 897
units on a year- on-year basis. This is also sharper than the 30 per
cent year-on-year fall in June.

However, on a month- on-month basis, the July volume increased 12 per
cent, largely attributed to the 1,322 new home units launched in the
month - the highest since August 2007, when 1,885 units were launched.

The number of units launched in July was also 1.4 per cent higher
compared to a year ago and about 20 per cent higher compared to the
previous month.

But Knight Frank director of research and development Nicholas Mak
notes that the ratio of new home sales to newly launched units
increased to 1:1.47 compared to 1:0.9 a year ago and 1:1.33 in the
previous month. He said: 'As a result, the stock of unsold homes in
the developers' inventory will gradually increase.'

That the 897 new homes sold in July exceed the 10-year monthly
average of about 680 units should bode well for the market. But Mr
Mak says the ratio of new home sales to newly launched units suggests
that take-up is not that healthy. 'It's like whether you choose to
judge someone's health by his blood pressure or his temperature,' he
added.

At end-December 2007, there were about 4,000 units of new homes ready
for sale that had not been launched. This increased to more than
6,500 units in March and about 7,000 at end-July.

Still, Mr Mak points out that the healthy sales volume for July does
suggest that 'there is underlying demand from owner-occupiers'.

This demand came for the Outside Central Region (OCR). Knight Frank
notes that the 636 units launched in the OCR accounted for 48.1 per
cent of launches in July.

The Core Central Region (CCR), in comparison, saw launches fall 40.7
per cent month-on-month and accounted for 9.9 per cent of all
launches in the month.

Jones Lang LaSalle local director and head of research (South East
Asia) Chua Yang Liang believes that looking at the islandwide take-up
may not be an accurate reflection of the market.

Looking at the lowest price band of reported monthly median prices -
'because it is more reflective of the underlying market sentiment' -
Dr Chua noted that in July, the CCR and OCR registered declines of 7
per cent and 23 per cent respectively (excluding projects with single
transactions).

Dr Chua said the Rest of Central Region (RCR) appeared stable,
registering a marginal increase of 2 per cent month-on-month in July
to $560 per square foot.

The major launches in OCR include Livia, which sold at a median price
of $671 psf while Kovan Residences sold at a median price of $882
psf. 'We reckon the price of $650-$850 psf is what the market is
comfortable with at this point,' added Dr Chua.

CB Richard Ellis Research executive director Li Hiaw Ho reckons
prices are still holding in some areas. 'In suburban areas such as
Serangoon, Sengkang and Jurong, prices are observed to be holding at
$800-$950 psf at The Florentine, Kovan Residences, Woodsville 28,
$700-$800 psf at The Quartz, and $800-$900 psf at The Lakeshore,' he
added.

Mr Li also noted that five units in The Hamilton Scotts transacted at
$3,000-$3,676 psf and seven units in Nassim Park Residences were done
at $2,600-$3,650 psf. Mr Li said: 'This shows that there are people
who are willing to pay a premium for projects in very good locations
and/or with strong attributes.'

Savills Singapore director of marketing and business development Ku
Swee Yong believes that developers are also likely to continue with
a 'wait and see' strategy regarding launches. 'Every month that a
developer waits, there are new buyers entering the market,' he said.

Mr Ku was pleasantly surprised by the take-up in July too. He
said: 'I think developers launching a total of between 1,000 and
1,500 units per month is sustainable.'