Here’s a possible reason why the authorities are not inclined to remove any property cooling measures just yet: There was an across-the-board increase in caveats lodged for private home purchases in the second quarter compared to the previous quarter.
DTZ’s analysis of URA Realis caveats database shows a 37.1 per cent quarter-on-quarter increase in the total number of private homes transacted to 3,369 units in Q2.
A segmental breakdown showed that the number of units picked up in the resale market climbed nearly 41 per cent or 386 units to 1,328 units in Q2 from 942 units in Q1 – ending three consecutive quarters of decline.
New sales by developers too rose by 511 units or 36.8 per cent to 1,898 units. In the subsale market, 143 units changed hands in Q2, up 11.7 per cent from Q1.
Resales refer to transactions of completed properties. Subsales refer to secondary market deals involving uncompleted properties.
Across buyer segments, too, there were increases. Singaporeans, PRs and foreigners all bought more homes in Q2 than they did in Q1.
Purchases by Singaporeans rose nearly 45 per cent quarter-on-quarter to 2,491 units in Q2. The number of private homes picked up by Singapore permanent residents climbed 24 per cent to 574 units, while purchases by non-PR foreigners rose 2 per cent to 260 units.
Those with HDB addresses bought 1,629 units in Q2, up 41.3 per cent from Q1. The number of private homes acquired by those with private addresses climbed 33.4 per cent to 1,740 units.
Despite the recovery in Q2, the 5,826 total private homes sold in the first-half of this year is not even half the 13,651 units transacted in the first-half last year – reflecting the dent on transactions created by the Total Debt Servicing Ratio (TDSR) framework since its introduction in late-June 2013, notes Lee Lay Keng, regional head (SEA), research at DTZ.
Still the pick-up in the Q2 caveats would give the policy makers a reason to pause and reflect, amid calls by developers and other parties urging the authorities to start rolling back cooling measures such as the additional buyer’s stamp duty and the seller’s stamp duty, she added.
Most industry watchers accept that TDSR is here to stay for the long term. Under the framework, banks granting new property loans to individuals have to ensure a borrower’s total monthly debt obligations (including car loan and credit card repayments) do not exceed 60 per cent of gross monthly income.
“The reason caveats have recovered in Q2,” said Savills Singapore research head Alan Cheong, “is that demand is extremely price elastic or price sensitive. Even a slight price decline would lure many potential buyers back to the market”.
“In 2012 and 2013, the market was fixated with new property launches. In 2014, the genuine upgraders and even investors who are not overwrought by new-fangled small-format homes have started to look at the resale market where more habitable, larger apartments are to be found, and they have started to plunge into the market.
“And the sellers of such properties being individuals, unlike developers, have little bargaining power and acceded to the buyer’s price offers. Hence, prices in the resale market have gone down.”
DTZ’s Ms Lee said the strong new home sales in Q2 was amid an increase in launches by developers.
“Based on preliminary monthly numbers, developers launched 2,843 private homes in Q2, compared with 1,964 units launched in Q1. Big projects were released in Q2 in good locations and at attractive prices – such as Commonwealth Towers, Lakeville, Coco Palms and The Sorrento – resulting in relatively good sales,” said Ms Lee.
“Moreover, some previously launched projects saw renewed interest after new units were released at lower prices in Q2. For instance, the developers of The Panorama and Sky Habitat sold another 149 units and 153 units, respectively in Q2 after median prices were reduced by 10-15 per cent since these developments were first launched in Q1 2014 and Q2 2012, respectively.”
DTZ’s caveats analysis also showed that because Singaporeans’ share of private home purchases rose at a faster clip in Q2 compared with the more modest increases in buying by PRs and foreigners, the proportion of units bought by Singaporeans rose four percentage points quarter-on-quarter to 74 per cent.
Conversely, PRs saw a two percentage point retreat in their share to 17 per cent in Q2. Foreigners too posted a three percentage point fall in their share to 8 per cent.
Another finding is that 58 per cent of private homes picked up by Singaporeans in Q2 were new sales by developers. Among foreigners, the figure was 62 per cent. For PRs, however, it was a roughly equal split of the source of units between new sales and resales. Of the 574 units PRs acquired in the second quarter, 47 per cent comprised new sales, and 46 per cent resales, with the balance 7 per cent involving subsale transactions.
“It appears that a higher proportion of PRs are buying for owner occupation and hence want a completed property they can move into immediately,” suggests Ms Lee.