New cooling measures making it harder for developer to clear new housing stocks says Redas chief

New cooling measures making it harder for developer to clear new housing stocks says Redas chief
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The latest round of cooling measures was introduced recently amidst the spike in housing prices. No doubt that a runaway housing prices will result in affordability issue amongst aspiring young couples and upgraders. 
Therefore it is crucial that the government takes appropriate measures to ensure that residents do not overspend on housing, which could potentially affect their retirement adequacy which is another issue to be dealt with.

[THE nearly 46,000 private residential units that could become available for sale in 2019 and 2020 would take about five years to be absorbed by the market - and this is barring unforseen circumstances.

Augustine Tan, president of the Real Estate Developers' Association of Singapore (Redas) said this on Wednesday at the association's annual mid-autumn festival lunch.

"With the new cooling measures, it'll be harder (for developers) to offload new units... as they have become more expensive to buy, especially from the second and third units onwards, and also for foreigners," he told The Business Times by phone after the event.

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At the Redas event, Second Minister for National Development and guest of honour Desmond Lee reiterated the government's rationale for the cooling measures - to "keep prices in line with economic fundamentals".

"As acknowledged by Redas, a large supply of private residential units is coming onstream and interest rates are going up. To avoid a severe correction later, which can have a more destabilising set of consequences, we decided to act earlier to maintain a stable and sustainable property market."]

Easy money cannot be new norm: MAS' Menon, mas mas News & Headlines - THE BUSINESS TIMES

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[He noted that it was sending out two messages: One was that policy has to eventually normalise - an important message, so that people do not think this is the new state of affairs and make investment decisions based on this.

The other message is that normalisation is not coming too soon, and that the pace of this would be dependent on the state of the US economy.

Mr Menon said in the interview that there was no recipe or textbook answer on how to do this and little certainty on how markets will respond to the normalisation of interest rates.

"Some economies, which may not have been as cautious as they should have been during the boom years of easy money, may have a tougher time negotiating the exit of these policies."]

Don’t rejoice yet: Why May’s property sales are not cause for joy

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From URA Website.

From URA website.

[Here’s more from Maybank Kim Eng:

YTD sales of 4,010 units (excluding ECs) were just half of last corresponding period’s. We thus cut our full-year new home sales projection by ~30% to 9,000-10,000 units (from 13,000-14,000 units).

In view of this, we cut our full-year new home sales projection (excluding ECs) by ~30% to 9,000-10,000 units (from 13,000-14,000 units).

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The key catalysts for the expected price decline include:

i) More developers adopting a ‘priced-to-sell’ approach to reduce inventory risks;

ii) Prospective homebuyers holding back in anticipation of the surge in physical completions in 2015 and 2016; and 

iii) Continued weakness in the HDB resale market to negatively impact the wealth effect, reducing upgraders’ demand for mass market private homes.]

Unsold homes big drag on developers coffers.

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Moving forward all hopes are on the government to slowly loosen the cooling measures to prepare for a soft and comfortable landing. Anyway most developers have done very well for the past 8 years.  The cooling measures might had hit them but are necessary to ensure that the housing market's bubbles if it exist, will not explode into a big mess.

[Given that the QCs allow developers up to five years to finish building a project and two more years to sell all the units, the heat is on developers to clear their stock by the deadline.

To extend the sales period, developers pay 8 per cent of the land purchase price for the first year of extension, 16 per cent for the second year and 24 per cent from the third year onwards. The charges are pro-rated based on unsold units over the total units in the project.

Such fees drove luxury residential player SC Global to delist from the Singapore Exchange last year after sales slowed significantly due to the government's property cooling measures.

Analysts warn that more extension charges will kick in. The charges paid up so far are just the tip of the iceberg as projects built from land acquired during the 2006-2007 en bloc fever have just crossed a seven-year mark, they say.

"More developers are caught between a rock and a hard place" as they have to decide whether to pay the extension charges or cut prices to move the units, said SLP International executive director Nicholas Mak.

If they pay for extension charges, there is also the question of whether they can recover these costs later on, he said. This is why some developers of luxury projects are resorting to selling the units in bulk to mega investors.]

Home alone: How Capitaland's Singapore home sales shrunk an amazing 94%

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The usual suspect will be that the developers is holding back launches. The sentiments are still good with strong employment rate and expanding economy. Probably need to wait a little bit longer for the bubble to prick.



[Only 34 units sold in Q1 down from 544.

If Capitaland is the canary in the Singapore new home mine, it's hardly chirping at all. The cooling measures massacred sales and the company is having to slash prices to sell remaining units. According to OCBC, an anemic 34 residential units were sold in Singapore over 1Q14, down significantly YoY from the 544 units sold in 1Q13, due to continued headwinds in the domestic housing segment and a lack of new launches over the quarter.

It has seen 106 units sold in Apr-14, mostly in Sky Habitat, as prices were lowered by an additional 10% to 15% versus initial launch levels.

It is very bleak. Over in China, total residential sales in 1Q14 fell 48% YoY to 1.2k units though we also expect the rate of sales to increase ahead as the group looks to launch about 8k units over the remainder of FY14.]

HDB COV hits zero for first time in 9 years

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[For the first time in nearly a decade, the median cash-over-valuation (COV) for resale public flats hit zero-ground last month as resale and rental volumes weakened, flash estimates show.

Data from the Singapore Real Estate Exchange (SRX) showed that overall HDB COV fell from $3,000 in January to zero in February.

Overall HDB cash-over-valuation (COV) dropped from $3,000 in January 2014 to zero in Feb 2014 - the first time COV hit zero since 2006 when SRX began collecting COV records.

Twelve out of 26 HDB towns saw zero or negative median COV, according to SRX. This marks an increase from eight HDB towns in January that saw zero or negative COV]

Development charge rates up from today

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[The Ministry of National Development, in consultation with the Chief Valuer, revises DC rates based on current market values twice a year - on March 1 and Sept 1. The rates are stated according to use groups across 118 geographical sectors in Singapore.]