Demand for new private residential homes has improved in the first half of 2017 as compared to the same period last year, largely driven by the perception that the market is bottoming out, according to analysts.
The Urban Redevelopment Authority’s (URA) second quarter figures for the year showed the sale of new private residential units, excluding executive condominiums (ECs), rose by about 64 per cent in the first half of this year, as compared to the first half of 2016. The number of new units sold in the first half of 2017 was 6,039, as compared to 3,675 units in the first half of 2016
New project launches and showroom flats this year have also attracted huge crowds and strong sales figures.
Most recently, the 450-unit luxury home project Martin Modern sold more units than its initial target during the first launch. It had sold 89 units when it planned to launch “between 50-60 units”, the property’s developer GuocoLand said.
While not all new developments launched this year may have received similar demand, market observers say they have noticed a pick up in private home sales in all market segments – the Outside Central Region, Rest of Central Region, and Core Central Region – as compared to last year.
This is due to several reasons, with one being the belief that the “market is bottoming out soon”, said Mr Ong Teck Hui, the national director of research and consultancy at Jones Lang LaSalle.
Many buyers are drawn to the “fairly attractive prices” today, he said, because prices have fallen for the past 15 quarters and they “hope to take advantage before the market turns around”.
He said that the market could remain active in 2018, as demand has been pent up since 2013.
“BUYING BECAUSE ECONOMY IS BAD”
Alan Cheong, the senior director of research and consultancy at Savills, said investors are turning to residential property as a way to cope amid an uncertain economy.
“This may sound counter-intuitive, (but) people are buying because the economy is bad,” Mr Cheong said. “People are buying now because they have lost a little bit of faith in what are alternative investments, and so they are putting their faith in brick and mortar.”
Bullish bids for government land and attractive offers for collective sale sites this year are also among the reasons that analysts believe have led many buyers to believe that prices will increase next year.
According to a Cushman & Wakefield report, between January and May this year, developers paid 29 per cent more on average for residential plots over comparable sites sold in the past five years. Comparatively, the average premium was only 13 per cent in the second half of 2016.
But as public sentiment continues to improve, the market watchers expect upcoming launches for the rest of 2017 to continue to do well.
Last year, about 7,972 private residential developments, excluding ECs, were sold in the primary sales market, and Mr Cheong predicts that number to hit between 11,000 to 12,000 this year.
He said he expects the positive buying sentiment to continue into 2018, but does not think that sales will increase beyond 2017.
“It all depends on the government land sales programme next year, and also the collective sales sites – when they get launched in 2018. If some get deferred to 2019, and if we don’t have new supply, then primary sales numbers will also come down,” he said.