Private home sales predicted to slip to 15,000-18,000 units

Should developers start to worry?

According to DTZ Research, it expects developer sales of private homes to moderate from 2012’s record high of 22,197 units to range between 15,000 and 18,000 units this year. The total developer sales this year however could still be higher than the 15,000-16,000 units sold in 2010 and 2011, as developers may attempt to launch more projects to avoid the increased competition from the substantial completions this year.

Here's more:

According to URA’s estimates as at end Q1, around 14,000 units will be completed in the next three quarters of the year. In addition, there are around 35,000 units which can be launched and sold, of which around 10,000 units have received pre-requisites for sale but not been launched yet.

On the other hand, the cap of dwelling units in residential developments by the government could also lead to a decline in sales of shoebox units, defined as units smaller than 500 sq ft, which reached a record high in 2012.

Secondary sales are expected to continue to underperform relative to primary sales as individual sellers in the secondary market are unable to entice buyers with discounts and incentives like developers in the primary market. Some sellers also require a higher selling price due to their increased replacement cost with the ABSD.

Going forward, investment demand from individuals is anticipated to fall due to the higher stamp duties and stricter financing restrictions from the latest round of cooling measures in January.

In addition, we expect rental growth to continue to slow down due to the substantial number of completions this year and lower rental demand as a result of the government’s restrictions on foreign labour inflow.

The resultant slower rental growth could therefore reduce the attractiveness of residential properties to investors.