Analysts still unimpressed even as new home sales hit 10-month high

Buyers remain selective and cautious.

A disappointing truth lurks beneath the surprisingly strong new home sales figure in May. Although private condo sales jumped 41.2% to 1,056 units during the month, analysts caution that the sales surge should not be taken as an indication that the property market is finally on its way to recovery.

“While May’s sales may be the highest in 10 months, to put it in perspective, it is in fact the lowest 1H peak in the last three years,” said Tay Huey Ying, Head of Research & Consultancy at JLL.

Tay noted that home sales have been observed to peak around April and May in the first half before the June holiday lull. The 1H peak in 2014 and 2015 were 1,488 units in May 2014 and 1,167 in April 2015 respectively.

These were both higher than the 1,056 units sold in May 2016 – which is likely to be the 1H peak in 2016, given that June is likely to be a slow month due to the mid-year school holidays.

“Hence, it appears that potential buyers have remained cautious and selective amid the uncertain economic environment. Nonetheless, given that developers’ sales in the first five months of 2016 has already surpassed that for the first five months of 2015, barring unforeseen circumstances derailing the improvement in market sentiment seen in the last three months, developers’ sales for 2016 look poised to exceed that of 2015,” she said. 

“While the increase in sales is encouraging, the current trend of buying smaller units may be a concern in the future. As the market recalibrates, we may see more developments of smaller apartments, and investors who rely on rental income to finance their purchase,” she noted.

“Those developments that are further away from business clusters and MRT stations will face challenges finding tenants in the short term, especially if growth in foreign labour remains subdued,” Lee warned.