Sotheby’s says they won’t swamp market if developers time launches strategically
Up to 29 developments could be launched from this quarter to the end of this year, putting as many as 14,200 private homes on the market, says a report issued by property agency List Sotheby’s International Realty Singapore.
The firm, however, says the market should be able to digest the volume, but this critically depends on whether developers are able to time their launches strategically.
Sotheby’s reviewed the recent government land sales (GLS) sites as well as those from successful collective sales and made the assumption of a period of nine to 12 months for the GLS sites to obtain all planning approvals before being launched for sale, and 15 to 18 months for the collective sale sites.
Based on these assumptions, the firm has identified 29 sites acquired by developers between mid-2016 and August last year that could be launched later this year.
These new projects can result in an estimated 14,200 units being launched. Six of these sites are in the core central region, which are areas such as Orchard Road, 13 are in the rest of central region that includes areas like Tanjong Rhu, and 10 are in the outside central region, which refers to the suburbs.
While these volumes may seem high, they are not unprecedented.
Sotheby’s pointed out that during the three years of recovery from 2009 to 2011, following the sub-prime crisis in 2008, developers launched an average of 15,400 units a year, based on Urban Redevelopment Authority statistics.
The unsold inventory under construction (launched and unsold, and unlaunched projects with planning approvals) held by developers was around 35,000 units. When demand picked up last year, this helped reduce the unsold inventory to 18,900 units by end-2017.
Sotheby’s associate director for research Han Huan Mei said that “for developers to launch around 15,000 units (in) the remaining part of this year may be possible for the market”. With the market still on a recovery track, this level may not be too much for it to digest. Also, developers have sold many of the units from existing projects.
Ms Han said “developers will also likely pace their launches, depending on their business strategies”.
The report noted that most of the developers have built up a substantial land bank in the past two years. With land prices on the rise, more developers are becoming increasingly selective in collective sales.
Demand will continue to be supported by liquidity and low interest rates. While cooling measures will cap demand, there may be additional demand from some of those who sold in this latest round of collective sales.
However, with the cooling measures still in place, overheating is unlikely to occur. On the buyers’ part, they are likely to be managing their finances so as to avoid paying various additional taxes.
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