The cooling measures aimed at avoiding the formation of a real estate bubble in Singapore have had a dramatic impact on the property market, with property sales dropping 26 percent in November to their lowest level since January.
Figures from the Urban Redevelopment Authority show that there were only 600 recorded transactions in November, the fourth straight monthly slide since its peak sale in July.
According to analysts, sentiments of investors were suppressed due to the cooling measures of the government, followed by warnings from the Monetary Authority of Singapore (MAS) about the formation of a speculative bubble.
“These are signs that mass market buyers are exercising greater caution,” said PropNex CEO Mohamed Ismail.
“The mass market is cooling off to the government’s recent persuasive announcement,” said Southeast Asia head of research for Jones Lang LaSalle, Chua Yang Liang.
Property sales in November were driven primarily by properties situated in prime areas as developers had run out of projects in the mass market by Q3. This forced them to release high end developments.
CB Richard Ellis said that about 60.3 percent of properties sold in November were made up of units in projects from prime areas. In comparison, only 38.2 percent of 815 units sold in October comprised of projects from prime areas.
“The higher number in November was mainly supply-led as 671 new homes were launched in the core central region compared to only 339 units being launched in October,” said CBRE Executive Director Li Hiaw Ho.
He also said that it was not a surprise to see high-end properties dominating the market as the present property market favours only the wealthy individuals. Investors entering the market are capable of paying all its obligations, including initial down-payments and progress payments. They also have the ability to absorb market shocks.
The MAS has cautioned that property owners could either pay more for their monthly installments if the recovery of the economy remains on course or suffers losses if economic growth proves to be weaker than expected.
Analysts are expecting sales of properties in prime areas to maintain their momentum, though with some caution. “The activity in the core central region is likely to maintain given the overall improvement in the regional economic conditions. We think the market is likely to remain cautious going forward into February 2010 where we may see a return of buying interest again,” said Chua.
“We expect the same levels of transaction in the first quarter of 2010,” said Mohamed Ismail.