URA private residential property sales down 28%

Jones Lang LaSalle expects full year’s sales volume to be higher than its previous projection to 14,500 units.

The URA monthly sales volume fell by 28% m-o-m to 911 units in September following state intervention in the previous month. Compared with the earlier two sets of measures introduced on 15 September 2009 and 20 February 2010 respectively, the recent measures fell short of the first in moderating sales volume. Based on our analysis on the weighted sales volume 30 days before and after the date of intervention, the latest measures led to a drop of 24% in sales volume to 921 units compared with the first set of measures which resulted in a decline of 33% to 966 units, ceteris paribus.

“The numbers suggest that the initial shock of government policies is over as the market adjusts to a stricter regulatory environment each time. In contrast with the first set of measures which are aimed at cooling the overall market, the latest measures are targeted specifically at the “double-barreled speculators” who form only a small part of the universe as shown by the smaller drop in sales volume. Nevertheless, we welcome the soft-handed policies rather than the hard-handed approach in sustaining a healthy property market,” Dr Chua Yang Liang, Head of Research South East Asia commented.

Based on the URA numbers, sales volume in the Outside Central Region (OCR) unexpectedly rose by 10% m-o-m to 601 units, confirming our case that the target group forms a small part of the universe. Three major launches – comprising NV Residences (380 released units), Vacanza @ East (144 released units) and The Minton (100 released units) – accounted for 624 units or 92% of the launches in OCR.

Amongst these projects, The NV Residences located at Pasir Ris Grove, saw the best sales with 347 units sold (take-up rate: 91%) despite the higher pricing. NV Residences was sold at a median price of $859 per sq ft while the Oasis @ Elias, located in the vicinity, was sold at $660 per sq ft when it was first launched in July 2009. In terms of sales, the latter sold 69 out of 142 units (take-up: 49%) in its initial launch.

In the Central Region where foreign buying is prevalent, the dip in foreign buyers has put a double whammy on September’s sales volume. Foreign investors tend to remain at bay following a policy announcement as they take time to comprehend the extent of the impact on the local market and returns before making an investment, according to a Jones Lang LaSalle report.

For the Core Central Region (CCR), sales volume fell by 49% m-o-m to 84 units in September – the lowest since January 2009 – as the market remained generally quiet without major launches following a poor showing in August, when only 68% of the 244 units released were taken-up. The released units in September were mostly from subsequent phases of project launches; and, the largest release came from Twin Peaks located along Leonie Hill Road/Grange Road where 16 out of the 58 launched units were sold (take-up: 28%) at a median price of $2,763 per sq ft which is rather encouraging considering the steep pricing.

In the Rest of Central Region (RCR), developers are careful not to flood the market either by launching smaller projects or releasing units in phases for larger projects as there are a considerable number of launched but unsold apartments in the region . Developers typically require around 3 to 6 months for preparation works on project launches. On the back of this, launches fell by 40% m-o-m to 273 units, of which 226 units were sold. By end-3Q10, the launched but unsold units should reach 1,312 units and we can expect future launches in the RCR to remain soft going forward.

The latest URA numbers would bring the total sales volume for the first three quarters of 2010 to 12,307 units; this is just 6% below the volume achieved during the same period in 2009. “The strong sales in the first three quarters of the 2010 are unlikely to be carried into 2011 as the state’s close monitoring of the market is expected to moderate total returns that sales volume weighs on. As total returns compress, interest rates are expected to play a bigger role in influencing buyers’ decisions. The impact of state intervention on home demand and prices may thus be cushioned in light of today’s falling interest rates,” Dr Chua commented.

“Based on the better-than-expected sales reports, we can expect the full year’s sales volume to be higher than our previous projection and close the year with around 13,500 to 14,500 units,” he added.