Sales of private homes, which account for just under one-fifth of
the total property market, fell to their lowest in more than four
years in January to March, official data showed this week. If the
decline continues at the same pace for the rest of this year,
analysts expect sales to halve from the 15,000 units sold in 2013.
Prices of private residential properties are also expected to fall
this year and the next by between 10 and 20 percent, analysts say.
The drop began at end of last year, due to the government measures,
reducing prices that had increased by around two-thirds since
The weakness in the market is likely to weigh on the sales outlook
of smaller listed developers of premium properties such as Wheelock
Properties (Singapore) Ltd <WPSL.SI>, Ho Bee Land Ltd <HBEE.SI> and
Wing Tai Holdings Ltd <WTHS.SI>.
Larger developers are less affected due to their more diversified
portfolios, but they are also cutting prices. CapitaLand Ltd <CATL.SI>,
Southeast Asia's largest listed property developer, is selling units
at its Sky Habitat condominium for S$1,370 ($1,100) per square foot
compared to as high as S$1,900 when it was launched two years ago,
"It feels like we're back in 2008," said Christine Li, head of
research at real estate firm OrangeTee, referring to the property
slump that affected Singapore during the global financial crisis.
"There's quite a difference between the number of people who express
interest in a development compared to those who are able to commit,"
FEW LOANS FOR HOMES
Singapore is the world's fourth most expensive market for luxury
property according to Knight Frank, with prices propelled by a
scarcity of land and its popularity as an investment destination for
wealthy Asians. Most of the country's 5.4 million people, however,
live in cheaper, government-built apartments.
Private houses and condominium apartments account for about 18
percent of the market, but the value of contracts awarded each year
to build these properties usually outstrips that for public housing.
Last year, contracts worth nearly S$10 billion were awarded for
private residential construction, a figure the building regulator
estimates will fall by as much as a third in 2014 as developers
avoid new longer-term projects in an unfavorable environment.
Wary of a property bubble, the government of this island-state has
initiated seven rounds of cooling measures since 2009. These had
failed to put a major brake on price rises until a new rule last
June took effect, limiting buyers total loan obligations to 60
percent of their monthly income.
This has made obtaining mortgages harder, reducing the overall
number of property buyers, and especially those looking for larger,
expensive homes. Cheaper, smaller apartments are not as badly
affected, as they remain relatively affordable.
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"Definitely at the high-end, the luxury end, the market is a bit
slower because these are the people who are most affected by the
policy measures," said Lim Ming Yan, chief executive of CapitaLand.
Samuel Tsien, CEO of Oversea-Chinese Banking Corp Ltd <OCBC.SI>,
told Reuters last month the bank was extending 40 percent fewer new
mortgages in the first quarter of 2014 versus the same year-ago
Adding to developers' conundrum, and the pressure on prices, is the
threat of government charges on companies unable to sell all units
within two years of completion. Penalties are based on a percentage
of the unit price, and rise each year the home is left unoccupied.
Developers generally start selling properties up to four years
ahead of completion, and in the past, many sell out within a few
weeks of their sales launch. Now things are slowing.
Wheelock Properties is taking a write-down of S$110 million on its
Panorama complex of 698 flats due to be completed in 2017. Of the
120 flats put up for sale so far, only 57 were sold by the end of
Tuan Sing Holdings <TSHS.SI> is also seeing slow sales at its
ultra-luxury Cluny Park Residence, where a four-bedroom ground floor
unit, complete with private pool, costs S$8.5 million.
"Due to the various restrictive cooling measures, investors may feel
no great urgency to buy as they wait for a more attractive entry
point," said Mohamed Ismail, chief executive of estate agents
The dearth of buyers has created a supply glut which is only likely
to worsen within the next four years.
Government data shows 82,575 new, private residential units are
expected to be built between 2014 and 2018. That means an annual
rise in the supply of property of around 20,000 units, around twice
the average of the last 10 years.
"Either the population will need to increase tremendously in the
next few years or else there will be a lot of vacant units," said
Nicholas Mak, executive director at SLP International Property
($1 = 1.2534 Singapore dollars)
(Additional reporting by Himani Sarkar;
editing by Miral Fahmy)
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