According to a recent report by Maybank Kim Eng, fewer homes were sold by property developers here in the first five months of 2018 compared to last year. The report further said that developer stocks in Singapore fell 4 per cent even as home prices rose by 7 per cent year-to-date.
The banks report reference Urban Redevelopment Authority’s data which showed that there was a deluge of new launches in May that saw 1,121 private home sales; and said this brought new home sales by property developers for the first five months of 2018 to 3,431 units. This is 38 per cent down when compared with the same period last year,
Maybank Kim Eng analyst Derrick Heng said that the lower sales numbers by property developers for the first five months of this year were not a sign of market weakness, but could be due to lack of new launches by property developers.
The demand-supply data supports the view that property market here is on the mend with the share-price divergence offering an opportunity to raise sector exposure.
Maybank Kim Eng said property developers should take heart that the housing demand remains strong (as evidenced by healthy overall volumes, including secondary market transactions) and that the net supply for 2018 to 2020 should reach upwards of 5,300 units compared to the long-term average absorption of 11,400 units.
Heng said: “Replacement demand from the 6,000+ households displaced by en bloc deals announced since 2017 will soak up a large part of this supply. Given this, we expect lower vacancy over the next few years.”
He added that the bank maintains its “new-home sales forecast of 12,000 units for this year, expecting a stronger 2H2018 to provide re-rating catalysts”.
The prevailing share-price-weakness is an opportunity for those that are home-hunting to buy, the bank suggests.
And with the recent home price hike expected to continue, Maybank Kim Eng sees buying opportunities for home hunters during the present share-price weakness.
With the recent home price hike expected to continue, “speculative buying is near its historical low whilst existing measures continues to ensure financial prudence amongst property buyers,” noted Heng.
The home price hike in the past few quarters is attributed mainly to the positive residential property market sentiments. The sentiment is reflected in the largest collective sale in more than 10 years – with the sale of Pacific Mansion for S$980 million. This sale marked the largest sale since Farrer Court was divested at $1.34 billion in 2007.
Even the the recent hike to the top marginal rate for buyer’s stamp duty (BSD) is not expected to dent the market optimism. Augustine Tan, president of the Real Estate Developers’ Association of Singapore (Redas), said the new revised BSD “may add some friction to transaction volumes as buyers remain price-sensitive (but) it is unlikely to derail the recovery (of the property market).”
However, in an environment of rising interest rates, buyers of investment properties should exercise more caution with the type of mortgage loan they require to buy their private residential property. You could save thousands if you are guided by an experienced mortgage broker.
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