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Property sales set for big drop in Q4

Early numbers show Q4 private property deals at $2.9b, nowhere near Q3’s $15.6b

(SINGAPORE) Weakening market sentiment could have a bigger impact on property sales if early numbers for the Q4 2007 transactions are anything to go by.

In a preliminary analysis of caveats lodged by DTZ Debenham Tie Leung (DTZ), the value of all private property transactions for Q4 to date is about $2.9 billion.

This figure does not represent the full fourth quarter. There is also a time lag between a transaction and the lodgement of a caveat. Still, doubling or even tripling this figure will not bring it close to Q3’s figure of $15.6 billion and Q2’s record breaking figure of $24.2 billion.

DTZ executive director Ong Choon Fah also pointed out that apart from the continuing effects of the US sub-prime crisis, the property market was also jolted by the withdrawal of the deferred payment scheme in October. ‘It made people understand that there were risks involved,’ she added.

Signs of poorer market conditions were already apparent in the third quarter. In DTZ’s analysis for Q3, transactions for all private homes fell 36 per cent to 8,416 units. But this was attributed to seasonal market activity marked by the Hungry Ghost Month, as well as the reduced number of developer launches.

Mrs Ong believes that fewer launches in Q4 could be the culprit if sales do fall.

According to its report, the number of developer sales in Q3 reflected a 41 per cent quarter-on-quarter (q-o-q) drop to just 1,956 transactions with developers apparently monitoring the market for possible sub-prime impact.

Now, well into the fourth quarter, new launches still appear to be on hold. Mrs Ong believes that there are ‘genuine buyers’ in the market but developers could nevertheless be choosing to take their time to decide on pricing, or, launch developments in phases to test the market.

But she said that there is no evidence that developers or sellers are prepared to accept lower prices. ‘Prices are still inching up even though the activity level has dropped,’ she added.

Mrs Ong said that the recent strong performance of the private residential market has allowed many developers to accumulate financial reserves and most are not in need of immediate revenue. ‘Developers don’t feel the need to launch immediately. They can still launch next year, while some may even be considering waiting until the opening of the integrated resorts creates more buzz,’ she added.

The number of transactions in Q3 was bolstered by the high number of deals in the secondary market which saw 6,434 homes change hands. This represents a q-o-q drop of 34 per cent, but the decrease is of a lesser magnitude compared with that of developer sales.

And although collective sales slowed in Q3, DTZ says apartments in the secondary market in the prime districts continued to perform, largely due to price increases.

The number of secondary market apartments sold in Q3 fell 33 per cent q-o-q to about 5,300 units with foreigners accounting for 1,590 or 30 per cent of these transactions. DTZ noted that this was among the highest since 1995.

The strength of the secondary market was partly due to the buoyant leasing market which also encouraged foreigners to buy homes ready for immediate occupancy.

Bucking the downward trend of all category of buyers were corporate or institutional buyers.

In Q3, transactions attributed to companies actually rose by 11 per cent with 958 homes changing hands. DTZ said this was the largest number of units purchased in a quarter.

Apart from the reported acquisition of a block at Costa Del Sol by the Ong Beng Seng family, DTZ highlighted the sale of 49 out of 58 units in Duchess Crest, registered as company transactions. DTZ executive director (residential) Margaret Thean added that unlike the bulk sale at Costa Del Sol, the Duchess Crest transactions were not done by a single company either.

She added: ‘This reflects that foreign investors and property funds still have confidence in the Singapore market.’

Ms Thean also said: ‘With the sub-prime crisis in the US, some of these funds may also be increasingly looking outside the US to invest.’

 

Source: Business Times 3 Dec 07

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