Developers' November sales jump but challenges lie ahead

The 1,198 private homes they moved was 2.5 times the 487 units in October 2018 amid surge in launches

 Kalpana Rashiwala

NEW sales of private homes jumped last month to nearly two and a half times that of the previous month as developers revved up launches to make up for lost ground when some of them held back launches in October.

That pause was partly to ruminate about the impact on sentiment after the authorities announced revised guidelines to increase the average unit size for non-landed private residential developments outside the Central Area from early next year.

The change is expected to disrupt the popular business model of residential developers minting smallish units to drive up average per square foot prices in their projects, while keeping the absolute prices affordable.

That said, with a significant launch pipeline for 2019, developers felt some pressure to release their projects this year rather than risk facing a worsening supply situation next year.

As JLL’s senior director of research and consultancy Ong Teck Hui said: “Developers were reasonably confident that there would be fairly good response from buyers for them to proceed with their launches. They sized up the market pretty well.”

It would be hard to deny developers’ performance last month was remarkable. The 1,198 private homes they moved in November was 2.5 times the 487 units they sold in October 2018 and about 1.5 times the 788 units they moved in November 2017.

Last month, developers launched seven new projects which helped to boost the units launched to 1,341. This was 6.6 times the 202 units they launched in October and almost thrice the 450 units released in November 2017, according to figures released by the Urban Redevelopment Authority on Monday.

The seven new projects that were launched – 3 Cuscaden, Arena Residences, Belgravia Green, Kent Ridge Hill Residences, The Woodleigh Residences, Parc Esta, and Whistler Grand – accounted for 830 units or 69 per cent of the new private home sales last month, said Tricia Song, head of research for Singapore at Colliers International.

CBRE’s head of research for Singapore and South-east Asia, Desmond Sim, said: “Hoping to catch the last gust of wind for 2018, and also in light of expected economic headwinds, developers raised their spinnakers in November to catch as much sales as possible with the seven projects launched.”

The top-selling project last month was Parc Esta along Sims Avenue, with 348 units sold at a median price of S$1,699 per square foot (psf).

This was followed by Whistler Grand in West Coast Vale, with 219 units sold at S$1,352 psf median price; and Kent Ridge Hill Residences in South Buona Vista Road, with 126 units sold at S$1,715 psf median price.

The strong launch and sales take-up figures for November came at a time when property market activity typically tends to wind down due to the start of the year-end holiday season.

However, this November saw the strongest monthly launch and sales figures for 2018 – disregarding the 2,239 units launched and 1,724 units sold in July which were an aberration due to the sudden launch of several projects to beat the start of the July cooling measures, argued Mr Ong of JLL.

In the first 11 months of this year, developers launched 8,655 private homes. Over the same period, they sold 8,644 private homes.

Most property consultants expect developers to end this year with sales of at least 9,000 private homes. The figure for last year was 10,566 units.

Huttons Asia head of research Lee Sze Teck estimates that for 2019, an estimated 17,000 to 19,000 units from en bloc sales and state tenders may be ready for launch.

Analysts’ estimates of developers’ sales next year range from 8,000 to 12,000 private homes.

Putting things in perspective, JLL’s Mr Ong: “November was a good month for developers but challenges still lie ahead given the substantial launch pipeline of private housing units for sale, demand affected by the cooling measures and expected Singapore economy slowdown in 2019.”

The market is also entering into a higher interest-rate environment.

Contrary to the view of some of his peers, Knight Frank Singapore research head Lee Nai Jia argued that the surge in launches in November is not reflective of a genuine recovery of the private housing market sentiment.

“Around the same time last year, developers’ strategy was to take a relaxed approach and watch how their competitor’s project fares and then try to use that as a benchmark to launch their own project at a higher price – capitalising on rising land prices.

“Post the July cooling measures, however, the game has changed. The idea now is to try and launch your own project as soon as feasible to get a first-mover advantage over the competition.”

With an estimated launch pipeline of over 40,000 private homes following developers’ land-buying spree at collective sales and state tenders, the crunch time for some of them could come as early as the second half of next year, by some accounts.

Some may come under pressure to lower prices or slow down launches further. Meanwhile, the clock continues to tick to the five-year sales deadline.

This article first appeared in The Business Times on 18 Dec 2018.