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News Release

Singapore

Jones Lang LaSalle’s Perspective: URA Private Residential Property Transactions for January 2009

Affordability- A key factor in this market


SINGAPORE, 16 February 2009 – The potential demand from HDB upgraders have prompted developers to release more supply, particularly in the OCR, leading to total islandwide new launches in January to increase by 30% m-o-m to 204 units.

Nevertheless, on a year-to-year comparison, the number of new launches in January 2009 is half of the 410 units that were recorded in January 2008. The lacklustre global demand and weakening domestic confidence in the real economy continue to over shadow the local residential market. Furthermore, with two major holidays (New Year and Chinese New Year) in January, buyers were largely delaying their consumption.

Table: Total Launches (Landed + Non Landed)

 

Jan-08

Feb-08

Mar-08

Apr-08

May-08

Jun-08

Jul-08

Aug-08

Sep-08

Oct-08

Nov-08

Dec-08

Jan-09

CCR

141

31

108

17

179

221

131

82

258

74

200

7

0

OCR

232

205

394

246

119

236

636

10

139

63

99

37

116

RCR

37

107

140

12

178

612

555

102

370

22

83

113

88

Total

410

343

642

275

476

1069

1322

194

767

159

382

157

204

Source: URA/Jones Lang LaSalle Research

Table: Total Units Sold (Landed + Non Landed)

 

Jan-08

Feb-08

Mar-08

Apr-08

May-08

Jun-08

Jul-08

Aug-08

Sep-08

Oct-08

Nov-08

Dec-08

Jan-09

CCR

105

38

87

28

163

165

83

106

70

14

63

64

13

OCR

162

72

123

222

190

181

541

103

82

71

102

34

45

RCR

53

64

91

38

100

455

277

111

224

27

28

33

49

Total

320

174

301

288

453

801

901

320

376

112

193

131

107

Source: URA/Jones Lang LaSalle Research

Based on this latest URA data, the number of units sold (take-up) in January 2009 is the weakest monthly performance since the series started in June 2007. Take-up has declined from December 2008 by 18% to 107 units, with CCR recording the lowest monthly sales with only 13 units sold.

Sales in RCR and OCR were fairly decent in comparison. Both submarkets recorded improvements in sales from December 2008, albeit marginally. In the landed market, the only new supply came from OCR with 27 units launched. Take-up was weak with only eight units sold i.e. 26%. Overall demand in landed properties continues to remain weak with only nine units changing hands in the remaining two submarkets – CCR and RCR.

The bulk of supply and demand came from the non-landed segment of the private residential market. Strong take-up rate in December 2008 has encouraged some developers to release more units in January 2009. However there is no new supply in the CCR as developers continue to focus their attention on the mid-tier and mass markets – RCR and OCR where demand has been more robust. This month’s launches for these two submarkets are fairly similar at 88 units and 89 units respectively.

Overall take-up in the RCR has remained fairly consistent. A total of 46 units, just three units below the 49 units recorded in January 2008, were sold in January 2009. The bulk of the take-up was mainly from developments located in the East.

Projects that reported fairly good sales include The Aristo @ Amber by AG Capital, where 14 units were sold out of the 10 units (there are some unsold units left from previous months being taken up in January, hence causing take-up rate to surpass 100%) launched in the month of January 2009. Similarly, Nova 88 by Roxy Homes Pte Ltd sold 16 units out of the 40 units launched. The stronger demand could be attributed to the improved affordability of these projects where median prices have eased slightly. For example median prices in The Aristo @ Amber have reportedly eased 1.2% from the previous month of $1,002 psf to $990 psf. The estimated quantum for this development based on the typical unit size of 610 – 800 sf would be $600,000 - $800,000.  Alongside, Nova 88 too saw its median pricing softened 4.2% from $988 psf to $947 psf. The absolute quantum is estimated based on a typical unit size in this development of 710 sf – 910 sf at $670,000 to $870,000. However this analysis does not take into account price differentiation as a result of differences in the apartments’ orientation, floor levels and sizes etc.

Overall median prices for most developments have eased over the last 1-2 months as developers were more realistic in their pricing in the hope of maintaining demand. Rosewood Suites by EL Development (Rosewood) Pte Ltd saw median price contract by 16.7% m-o-m to $545 psf. Using a typical average unit type in this development – 670 sf to 1,100 sf, the estimated quantum required to pay will be around $370,000 - $600,000.

On the issue of buyers demand, Dr Chua says, “Buyers today are not necessarily looking at unit prices but rather the total quantum sum i.e. the total amount that they need to pay for the purchase. By keeping the total sum of the units at an affordable level, developers should be able to move their stock accordingly. For example, though not reflected in this month’s database, the stunning take up for Alexis @ Alexandra at average estimated $1,000 psf and Caspian at $580 psf were two launches which have more smaller units, hence buyers commit less than $1 million for their housing purchases.”

To add on to the attractive pricing factor, these developments offer interest absorption scheme which is similar to the deferred payment scheme. The slight difference is that buyers are required to sign up for a mortgage loan after they make the purchases though they only need to start servicing their mortgage after TOP.

Going forward, we can expect more of such mortgage schemes as developers attempt to entice more buyers into the market. There has been a growing demand for smaller unit types and this trend is already spotted in HDB new sales market, where the government planned to release some 4,000 units of smaller unit types. It will not be surprising if this new trend filters into the private residential market.