Friday, March 16, 2012

Resale market takes a dive after cooling measures

Straits Times: Fri, Mar 16
SALES of new homes might be defying gravity and shattering records, but the story is vastly different for home resales.


Experts say both the resale of finished homes, and the quick resale - or subsale - of homes bought but not built yet, to earn easy profits, have taken a dive.


They feel last December's property cooling measures played at least some part in causing the slide in what is known as the secondary market.


In addition, the bumper supply of state land led to more new launches and a plethora of choices for home buyers, who flocked to that segment instead.


A check with the Urban Redevelopment Authority found only 376 caveats lodged for secondary transactions in January. Lodging a caveat is common practice when buying a home.


More caveats are likely to stream in over the coming weeks, but early indications suggest that the resale market is increasingly slowing. However, January's subdued numbers could also be due to the Chinese New Year festivities.


The latest resale figure is sharply down from the 1,012 posted in December - when the segment was hit by cooling measures that introduced an additional buyer's stamp duty of up to 10 per cent. There were 1,296 resale transactions in November.


Experts say December's cooling measures are likely to have further dampened the resale market. For instance, foreigners looking to buy a resale flat for immediate occupation might choose to rent instead, to avoid paying the additional buyer's stamp duty.


In any case, the secondary market has been trending down since April last year, when it peaked at 2,002 caveats.


Agents whom The Straits Times spoke to had noted a drop in secondary market activity. This dip seems unusual because the robust primary market set an all-time record last month - 3,138 new private homes, including executive condominiums, were snapped up by buyers.


ERA Realty key executive officer Eugene Lim said the subdued secondary market could reflect a 'stalemate' - a mismatch of price expectations between sellers and buyers.


'Most sellers are unwilling to drop prices yet because Singapore is not in a recession and holding costs are also relatively cheap... But buyers have a different mentality - they try to bargain, so it takes longer to close a deal,' he said.


Mr Tan Kok Keong, OrangeTee's research and consultancy head, said some buyers might prefer new homes as they can enjoy a progressive payment plan whereby the purchase price of the home is paid in instalments as the developer completes the different stages of construction. Buyers can thus spread out their payments, rather than service a housing loan on the full purchase price of a resale unit.


'Prices have come down slightly, but I don't expect them to come off by a large margin,' Mr Tan said. 'The transaction volume is quite low, and it's not enough to move prices down for the entire secondary market.'


Overall prices for non-landed resale homes fell 0.4 per cent in January, after a 1 per cent drop in December, according to the monthly residential price index compiled by the National University of Singapore Institute of Real Estate Studies...

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