Summary
(1) The 208 private housing units sold by developers last month is the lowest monthly sales volume for any month of August in the past 17 years.
(2) The main reason for the low sales volume in the primary market is weak demand for uncompleted homes. Homebuyers have alternatives and substitutes to buying uncompleted homes from developers. New uncompleted homes sold by developers are usually smaller in size and more expensive than older resale homes in terms of dollar per square foot ($ psf) in price.
(3) The Ghost Month has not stopped developers from launching their projects and homebuyers from opening their cheque books in the past. If property developers believe that there is healthy demand for their products, they will launch their projects. And if the market conditions are right, homebuyers will snap up the properties, regardless of whether the Gate of Hell is open or close for the Ghost Month.
(4) The expected interest rate reduction in the coming months could moderately increase housing demand. However, any sharp rise in sales or prices in the private housing market would only invite further government intervention which is typically more devastating than any Ghost Month.
Introduction
The Singapore private residential primary market had a quiet August this year and the Hungry Ghost Month is not the main cause of the slow demand. The Ghost Month falls on the seventh lunar month of each year. In most years, the Ghost Month mostly overlaps with the month of August. This year, the Ghost Month started on 4 August and ended on 2 September.
Those who adhere to the traditions of the Ghost Month would avoid major decisions, such as launching a new business or project, sign a contract, move their home, make a major purchase or hold a wedding during the Ghost Month.
The sales and launch numbers in August 2024
In this August, real estate developers released 272 private housing units for sale and sold 208 private housing units and 36 Executive Condominium (EC) units. No new private housing project or EC project was launched last month. Hence, the 272 units were released from the remaining units in residential developments that were previously launched.
Lowest monthly sales for August in record
Although the Ghost Month as often been cited as the reason for the low primary property sales volume each year, the 208 units sold last month is the lowest monthly sales volume for any August since such URA record was made available in 2007.
Chart 1: Private housing monthly sales volume Aug-2007 to Aug-2024
The second lowest monthly sales for the month of August was in 2008, when developers sold 325 units in that month. However, sentiments in the real estate market was adversely affected by the 2008 Global Financial Crisis, which was a strong contributing factor to the evaporating housing demand than ghosts and demons.
Third lowest monthly launch volume for August in record
The 272 units launched by developers last month was the third lowest monthly launch volume for August. The lowest monthly launch volume for the month of August was in 2022, when developers released 134 private housing units and still managed to sell 438 units in that month.
Chart 2: Private housing monthly launch volume Aug-2007 to Aug-2024
Hence, the relatively low number of private homes launched in August 2024 was not the main reason for the record low number of private homes sold for the month of August.
What’s really haunting the property market
The main reason for the low sales volume in the primary market is the weak demand in the primary market which is influenced by the property market curbs. Buyers of private residential properties face tighter loan restrictions, Additional Buyer’s Stamp Duty and Seller’s Stamp Duty, depending on the buyer’s citizenship and resident status.
Another contributing factor is that homebuyers have alternatives and substitutes to buying uncompleted homes from developers. New uncompleted homes sold by developers are usually smaller in size and more expensive than older resale homes in terms of dollar per square foot ($psf) in price. Therefore, resale homes may be more attractive to homebuyers.
While the private primary housing market sales decreased by 63.6% to 208 units last month, 1,076 resale private housing units were sold over the same period, which was only 13.9% lower than the 1,249 resale units sold in July 2024.
It begs the question: If the Ghost Month was the main reason for the 63.6% contraction in the primary residential market sales, then why was the resale housing market not adversely affected by the Ghost Month?
Profit motivation has always been stronger than Ghost Month
Based in past record, past Ghost Months have not stopped developers from launching their projects and homebuyers from opening their cheque books.
There have been a few Ghost Months when developers did brisk business and sold more than 1,000 private homes in the month of August. In the Augusts of 2019, 2020 and 2021, developers sold 1123, 1258 and 1216 private homes respectively, which were impressively high monthly sales volume.
If property developers believe that there is healthy demand for their products, they will be driven by their profit motive to launch their residential projects. And if the market conditions are right, homebuyers will snap up the properties, regardless of whether the Gate of Hell is open or close for the Ghost Month.
Outlook for the property primary market
The monthly residential primary property sales is positively correlated to the number of housing units launched in the given month. Although there are potentially about 20 residential developments that could be launched in the next six months, most developers are not in a hurry to push their projects into the market.
Instead, they are waiting for homebuyers’ enthusiasm and more risk appetite to return to the property market before they launch their products. In other words, real estate developers are waiting for the buyers’ “animal spirit” to return.
The expected interest rate reduction in the coming months could moderately increase housing demand. However, any sharp rise in sales or prices in the private housing market would only invite further government intervention, which is typically scarier and more devastating to the Singapore property market than any Ghost Month.
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