Private home sales hit 2413 units in February

At the current rate, total sales for the year could reach up to 20,000.

According to Alan Cheong, Director, Research & Consultancy at Savills, the Feb sales numbers show very clearly that January’s numbers were not a flash in the pan, as the market had earlier believed. Excluding ECs, Feb’s numbers (2,413) were only 2nd to July 2009’s 2,772 units.

Sales as expected, focused mainly in the OCR region where HDB up-grader demand has been strong and likely to remain strong. EC sales will also be strong in the coming years as more GLS sites have been awarded for this category of housing. Barring additional measures, we expect March numbers to also remain strong.

The majority of transactions (46.5%) were in the S$1,000 – 1,500psf range. This puts it mainly in the price range of OCR non-landed offerings.

Many would be wondering why sales could have been so strong even after a seemingly draconian round of ABSD measure and after 5 rounds of property cooling measures that began in 2009. We offer a reason that it could be that Singaporeans have an innate desire to own properties. This desire, built up over a generation of public housing policy is evidenced by the fact that 87% of Singaporeans own their homes.

The Feb run up in the stock market may also have been instrumental in boosting sentiment.

However, the main demand driver has been low mortgage rates which is generally below 1.5%.

Short of having an interest rate policy of some sort, administrative measures have not been effective in reigning in the buying penchant. On the contrary it may run the risk of distorting the market. Unless interest rates rise very significantly, it would have little impact on demand.

We have observed that after each round of cooling measure since 2009, new home sales rose the following quarter. The Feb release does not contrad this observation.

With developers launching more and more projects in the coming months, demand should chase supply and this phenomenon will likely to continue for the rest of the year. This would whet the appetite for developers to bid for Government Land Sales and also see the return of en bloc sales.

At current new home sales rate, this year’s total new sales could surpass not only last year’s 15,904 and 2010’s 16,292 units by a mile, but may well exceed 20,000 units.

We would expect foreigner and PR demand to start returning because of the flood of liquidity in the region.