Property consultants are preparing to lower their forecast for full-year developer sales, while some are moderating their price expectations. However, most do not expect developers to cut prices soon, considering the promising economy of Singapore.
Consultants are awaiting official data on the number of private homes sold by developers in May before they make any revisions on price and sales forecasts.
According to a survey of developers, as well as consultants’ estimates, property developers could have sold around 1,000 private homes in May. The decline from the bumper sales of 2,207 units two months ago was anticipated considering the lag in property sentiment due to the economic crisis in Europe.
“Some potential buyers have retreated to the sidelines for now, looking for some positive news before they come out again,” said Tan Tiong Cheng, chairman of Knight Frank.
Ong Choon Fah, executive director (consulting) of DTZ, said, “The general feeling is that things are getting more opaque. People are asking again whether there’s going to be a double dip in the global economy.”
However, there is still a strong demand from HDB upgraders who seek to purchase suburban condominiums for their own occupation. Some foreign buyers and investors may take a back seat, except when they buy for other purposes, such as if they want to secure a permanent residence in the country, added Mrs. Ong.
If developers sold around 1,000 units in May, the total primary market sales for the initial five months of 2010 would be around 7,600 private homes.
Having full-year sales of 10,000 units will not likely be a concern as this implies that average monthly sales reach around only 340 units between June and December. However, property consultants, who earlier predicted higher sales figures, now expect to cut the top end of their projections.
Chua Yang Liang, South-east Asia research head of Jones Lang LaSalle (JLL), said that property developers may sell between 13,000 and 14,000 private homes this year, rather than his previous estimates of 13,000 to 16,000 units.
Tay Huey Ying, director for research and advisory of Colliers International, also estimated that full-year developer sales could reach approximately 12,000 units, against her previous estimates of 12,000 to 14,000 units.
“Prices in the mass-market segment are already peakish and sales may slow if developers continue with an aggressive pricing strategy, especially if interest rates also start to rise,” she added.
However, some analysts indicate that the growth in state land sales during the second-half of the year is likely to limit pricing ambitions of developers.
Dr. Chua of JLL expects a slower appreciation of the benchmark overall price index of URA for private homes in the coming months, with a full-year increase of around ten percent, which includes the 5.6 percent gain during the first quarter. Earlier, he had estimated a 10 percent to 12 percent full-year increase. Dr. Chua is moderating his projection for price gain instead of predicting a decline in price since the economic problems in Europe have not directly affected Singapore’s economy, other than jitters in the stock market.
“But if there is a broader economic contagion effect on Asia, there will be implications for Singapore’s property market,” added Chua.
DTZ’s South-east Asia research head, Chua Chor Hoon agreed, saying, “I don’t foresee a price fall in the coming months or full year unless, say, we see a double dip in Europe or the US, and this affects Singapore’s economic growth.”
Mrs. Ong of DTZ suggests that developers will likely be “more reasonable” with pricing. She does not expect them to cut prices of projects that are already in the market, but she believes they may decide to launch towards the mid- or lower- end of their target price range.
A seasoned property agent also agreed and said that property developers are more likely to offer incentives instead of reducing prices. Previous incentives given by developers include stamp duty absorption, furnishing vouchers and rental guarantees.