Private residential units sales volume fell by 9% month-on-month in February 2011

The URA monthly sales volume fell to 1,101 units last month.

According to Jones Lang LaSalle, this is despite the increase in developers launches, with 1,710 units launched this month, up 37% m-o-m. From the headline numbers, we see there has been a marginal correction in the sales volume in February following the punitive government policies in January 13, 2011.

Taking out ECs from the equation, the decline of 9% is marginal considering the annual Spring Festival also fell in February. Based on historical evidence, transaction volume tends to drop by some 10% during this period.

To better analyze the pre and post policy effect, we have used the Jones Lang LaSalle - Weighted Transaction Volume (JLL WTV) model. Based on the results from JLL WTV, transaction volume in the first thirty days of this latest round of policy has declined by a mere 5%. Compared to previous market responses (-33% drop for the 15 September 09 policy and another -24% for the 30 August 10), this recent market reaction has been marginal, considering there is also the seasonal slowdown from the Spring Festival effect.

Nonetheless, in newly launched projects, demand is less than 50% take-up this month. Overall market take-up has dropped from 96% to 64% - suggesting market sentiment has moderated and the bullish demand environment has cooled.

Sales volume was driven by the Outside Central Region (OCR) which saw a 23% m-o-m increase in sales in February. This increase was mainly due to sales of units at Waterfront Isle, where 282 units were sold of the 350 units launched this month, a take-up rate of 81%. Take-up was also boosted by the success of Palmera East, which was newly launched this month, securing sales of 31 of the 32 units at the development and also the continued popularity of Keppel Land’s The Lakefront Residences where 34 units were sold this month despite only 31 new units being launched.

In the Core Central Region (CCR), sales volume fell by 30% m-o-m despite a 36% increase in the number of units launched. While smaller boutique developments in this area remain popular with buyers, larger developments are struggling to secure sales. Loft @ Stevens was newly launched this month and achieved strong take-up, as 43 units were sold from the 44 at the development while another 14 units were sold at The Holland Collection meaning all units at this development have now been sold. However, sales were slower in the larger development with a further 150 units being released at D’Leedon but only 38 units sold, and 69 more units launched at Altez but no sales were secured at this development in February.

The Rest of Central (RCR) region also recorded a drop in sales volume this month, falling by 45% when compared to January, and take-up rates at developments are below 50% for the majority of units launched in February. The only new launch this month was The Cape at Amber Road, which sold just 10 of the 76 units at the development, a take-up rate of only 13%. This was not an unusual pattern for the RCR this quarter, with several major development struggling to secure sales including The Interlace (250 units launched, 25 units sold), Concourse Skyline (122 units launched, 3 sold) and Okio (97 units launched, 3 sold).

Dr Chua Yang Liang, Head of Research South East Asia observed “In our opinion, the policy is effective in removing the speculative buying. The numerous policies set in motion previously, including this latest round, have eradicated much of the speculation leaving largely the genuine home buyers and the long term investors at play. The fairly resilient nature of the market suggests that there could be a larger fundamental market demand than we have assumed or even understand. The structural shift in population base since 2003 saw population growing at an estimated 3% per annum was met by a much lesser increase in housing stock (both private and public) over that same period. This mismatch in demand and supply could be balancing itself out in the market at the moment. We should continue to see a moderate and steady demand over the course of the year assuming the market faces no major external shock, and we expect the full year demand of new launches to remain between 13,000 and 14,000 in 2011.”