New Condo Launch: Property Sales News Update
New home sales plunge by half
Source: The Straits Times
Author: Cheryl Lim
15/6/2011
NEW home sales appear to be cooling, with key indicators down by half so far this year from those in the same period last year.
Not only has there been a plunge in the number of new private homes sold, but the total value of sales has also more than halved, according to a new report by property consultancy CB Richard Ellis (CBRE).
Experts attribute this to weaker market sentiment this year, as well as the cooling measures in January, which were the strictest seen in the past few years.
CBRE also highlighted how smaller homes are gaining favour. Median sizes of new homes hovered around 1,200 sq ft in the first six months of last year, but they have shrunk to around 900 sq ft now.
These smaller units, with their lower overall prices, could be partly to blame for the reduced transaction values, said CBRE.
About $5.1 billion worth of new homes have been sold so far this year, less than half of the $12.3 billion in the first half of last year.
CBRE data also show a drop in sale volumes: 3,796 new private homes were sold this year till last week, well down from the 7,189 sold in the first half of last year. This translates to a median price of around $1 million for each home sold this year, compared with about $1.2 million last year.
Analysts say the muted numbers this year could be a sign that the recent cooling measures are taking effect.
One such measure slashed the loan-to-value limit on a mortgage for a subsequent property from 70 per cent to 60 per cent. Buyers taking up a second or third mortgage now need to pay 40 per cent of the purchase price upfront.
Last month's election may also have prompted buyers to adopt a wait-and-see approach, with many expecting new cooling policies, said Ms Chia Siew Chuin, director of research and advisory at Colliers International.
She added: 'Price sensitivity and affordability have set in... as prices continued to escalate. Potential buyers may find it more affordable to commit to smaller units.'
Developers have responded by building more compact units in their projects. But some market watchers argue that even buyers who prefer larger homes have little choice but to opt for smaller units, since these are what developers are pushing out.
Far East Organization's Woodhaven project in Woodlands is one example. Seventy per cent of the 337-unit development consists of one- and two-bedroom units and small home offices, or Soho apartments. The developer has sold 83 of the 152 units released for sale at an average price of $910 per sq ft, it said yesterday.
Small homes look to be here to stay, and may even shrink further.
Dr Chua Yang Liang, Jones Lang LaSalle's head of research, said trends emerging from other mature cities worldwide indicate that less is more.
'Younger individuals who are more prepared to stay out on their own will welcome smaller units. The increase in foreigners who are more familiar with such unit sizes in their home countries is likely to lend further support,' he said.
But OrangeTee's research and consultancy head, Mr Tan Kok Keong, noted that even when buying smaller homes, buyers are becoming more selective.
'Now, developers trying to sell apartments sized between 300 sq ft and 400 sq ft might be facing resistance, especially if their projects are not in good locations.'