Few buyers for new units, data shows

New high-end homes are proving hard to shift, but the resale market is in far better shape.

There were 192 non-landed resale caveats lodged in the first quarter, yet developers managed to sell only 30 new units.

This ratio is the most lopsided in at least eight years.

An analysis of caveats lodged with the Urban Redevelopment Authority also shows that total transactions in general have been falling for the past three quarters, due to general market uncertainty and cooling measures.

Some experts said the sales gap is high simply because there have been few launches of new high-end projects and there is a larger stock of secondary units for sale, so transactions will be higher as well.

Lower prices in the high-end resale market could be enticing more investors into that segment instead, experts added.

The resale segment could also be picking up more because foreigners are buying homes for immediate occupation rather than waiting two to three years for a new one to be built, said experts.

Analyst mentioned that high-end resale prices are likely to continue weakening in the short-term. This is because many homes were launched when the deferred payment scheme (DPS) was still being offered. This allowed the buyer to make a down payment of 20 per cent of the purchase price and then defer repayments until the apartment was completed. Resales become necessary for investors who do not wish to hold on to their units to rent.

Since rentals are still decent enough to cover very low borrowings costs, the incentive to sell is still not very strong and investors may hold it vacant for some time.

Still, the greater supply as more high-end condos get built will lead to increased competition and gradually declining prices. The price decline will stabilise once most completed properties entering the market are no longer on the DPS.

Source: The Straits Times – 13 April 2012