New home sales to struggle with double-digit declines

Sales are likely to drop significantly in the second half of 2013, says Savills.

According to Savills Research, no surprises that May’s numbers were substantially below April’s. The main reason we believe was that there were no major launches.

"Our view is that if you supply, demand will materialize. The reason for this is that for any new large-sized developments, say those over 400 units, the first 30-40% of the project are easier to clear because of good orientations e.g. facing the pool, good numerological play on unit number and floor levels e.g. those with the numbers 8 and 6, right bite sizes both in terms of floor area and dollar quantum," says Alan Cheong.

Riversails, with 920-units, and Leedon Residence, with 381-units, did not launch in May. There are 1,051 units in these 2 projects. Assuming 30-40% total unit sales within the first 2-3 weeks of launch, these 2 projects, by not having made it to the starting block, could possibly have deprived May of at least 400 – 520 new home sales.

Moving forward, developers will have perhaps a small window of opportunity to launch from the period about the end of the June school holidays to the start of the voracious ghosts fete beginning Aug 17. We may likely see record sales for the month of July.

New home sales for 2012 and 1H2013 should stay strong. However, moving into 2H2013, when the 2H2012 GLS supply gets launched, given that there are only an estimated 3,940 non-EC units, new home sales will likely drop significantly. In percentage terms, we would expect double digit declines given the high sales base in 2012.