Virus outbreak, global recession likely to affect developer sales in 2020, which could be 20-30% lower than 2019

DEVELOPERS in Singapore sold 660 private homes in March, down 32.4 per cent from the previous month as buyers of posh homes locked up their cheque books.

April is expected to hit a roadblock and full-year sales are likely to plummet given the current circuit breaker and looming global recession, say consultants. One forecast is for 2020 sales to reach only half of last year’s 9,912 units.

The global economy is expected to contract sharply by 3 per cent in 2020 due to the Covid-19 pandemic, in what is likely to be the worst recession since the Great Depression, said the International Monetary Fund on Tuesday.

Desmond Sim CBRE head of research, South-east Asia, has further revised downwards an earlier full-year forecast. The injection of new units for launch is expected to slow down, from what was originally planned at the start of the year as some developers delay their project launches, he said. “Softer economic sentiments may hold back buyers’ decisions. As such, CBRE Research has made a downward revision to its earlier forecast and expects developer sales numbers to hover between 4,000 and 5,000 units, for the whole of 2020.”

The 660 new home sales in March was down 32.4 per cent from February’s 976 units, as the coronavirus pandemic situation deteriorated. It was 37.4 per cent lower over March 2019’s 1,054 units. The fall was due to the plunge in sales in the expensive core central region (CCR), where 45 units were sold, down 89.1 per cent from the previous month’s 412.

February’s sales were boosted by Wing Tai’s The M, which moved 380 units. The 522-unit project in Middle Road was the top seller for February. Despite the virus outbreak, 73 per cent of its units were sold during the launch month at a median price of S$2,439 per square foot.

Sales in the rest of central region (RCR) and outside central region (OCR) showed healthy gains, up 7.2 per cent to 282 units and 10.6 per cent to 333 units in March respectively. Altogether, 578 units were launched in March, of which 101 were in the CCR, 163 in RCR and 314 in OCR. In February, 933 units were launched, of which 601 were in the CCR, 115 in RCR and 217 in OCR.

Last month, no mega projects were launched in CCR, said Christine Sun, OrangeTee & Tie’s head of research & consultancy. “New home sales in RCR and OCR remained resilient last month as many deals were probably near completion prior to the worsening of the Covid-19 outbreak and before stricter safe-distancing measures kicked in at the end of March,” she said. “Some investors may have also bought properties to diversify their investment portfolios after the stock market rout in March.”

Most of the transactions in March were taken up by previously launched projects in the city fringe and suburbs, which have lower price quantum of S$1.2-1.5 million, said Tricia Song, Colliers International head of research, Singapore.

The figures – which were released by the Urban Redevelopment Authority (URA) on Wednesday and based on its survey of licensed housing developers – exclude executive condominium (EC) units, which are a public-private housing hybrid. Including ECs, developers moved 904 units in March, down 31.3 per cent from February’s 1,315 units.

As consultants revised their full- year projections, some remain optimistic that the appeal of homes as safe haven assets and Singapore’s strong fundamentals will see more buyers emerge when the pandemic is over, hopefully in the second half of 2020.

During the circuit breaker, which will last until May 4, developers and property agents have risen to the occasion to incorporate virtual showflats and digitalise documentation, said Ms Song. But early observations revealed that while virtual showflats have seen increased interest from potential buyers, actual sales have not materialised, she said.

“We expect an impasse in April and possibly into May for developer sales, especially if the circuit breaker is extended. We now expect developers’ sales may fall to 8,000 units for the full 2020, compared to the 9,912 units in 2019, assuming some rebound due to pent-up demand before the year-end,” said Ms Song.

Wong Xian Yang, Cushman & Wakefield associate director, research, Singapore and South-east Asia, said Singapore’s long-term fundamentals remain unchanged.

“Underlying local demand for private residential properties remains strong and Singapore’s perceived status as a safe haven could garner increased interest from foreign buyers during these uncertain times,” he said.

Anecdotally, foreign Chinese buyers are waiting for an opportune time to enter the market, he said.

Developer sales could potentially fall below 400 units in April as developers hold back launches and buyers adopt a wait-and-see attitude, said Mr Wong. Assuming there is no further extension of the circuit-breaker period, developer sales are expected to range between 6,900 and 7,900 units for the whole of 2020, about 20 to 30 per cent lower compared to 2019’s tally of 9,912 units, he said.

Despite the fall in March, sales in the first quarter of 2020 were decent.

Lee Sze Teck, Huttons Asia’s director (research), noted that last month’s sales were the sixth consecutive month that monthly sales volume exceeded launch volume.

“If we compare 1Q 2019 to 1Q 2020, 2020 is a very good year for the market, with sales estimated to be 16 per cent higher than the same period in 2019. Property is proving to be an enduring asset class for many in times of uncertainty and the desire for wealth preservation amid the stock market rout,” he said.

April sales are taking a hit because of the “circuit breaker”, Mr Lee noted. “However, if initial first-week sales are any indication of demand for property, there is cause for optimism. An estimated 150 caveats for new private residential properties were lodged in the first five days of April.”


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