New Private Home Sales Dip in October after Option Restriction

Marina One Residences View

Developer purchases of new private homes plummeted 51.7 percent from the previous month in October, placing the brakes on a five-month purchase binge after new curbs were placed on the re-issue of purchasing options (OTPs).

According to estimates from the Urban Redevelopment Authority (URA) yesterday, buyers took up only 642 units last month, less than half of September’s more than two-year peak of 1,329 units.

Year on year, prices of private homes dropped 31.1 percent from 932 units last year in October.

The URA statistics exclude executive condominium (EC) units, which are a combination of public-private housing.

New rules implemented by the URA on Sept 28 prohibit developers from re-issuing OTPs to the same purchaser for every unit within 12 months of the expiry of the previous OTP. They are therefore prohibited from supplying purchasers with upfront contracts to re-issue OTPs.

The step seeks to limit the practice of the housing industry, which is alleged to have distorted private home sales statistics, thus promoting financial prudence in home purchase in the middle of a poor economy and an unstable environment of jobs.

In the past, private home buyers may make agreements with a developer to have their OTPs repeatedly reissued upon expiry, through a property representative, without any forfeiture of the booking charge.

This could take up to one year – or perhaps up to 18 months – from the date of the first OTP. The plan was for example, to allow the buyer time to sell his actual house.

Last month’s 68.4 percent decrease in the amount of new private home units released to 423 was also likely to lead to the drop in revenue, down from 1,340 in September. This was also smaller than the amount of units released during the April (640 units) and May (615 units) circuit breaker months, and was the lowest since December of last year. Just one new project was unveiled last month – the 319-unit Hyll in Holland.

If ECs are included, last month 682 new homes were sold, down 50.8% from September and 28.9% from a year earlier, URA data shows.

The latest OTP curbs triggered a knee-jerk reaction that culminated in a temporary decrease in sales volume, Ms Christine Sun, OrangeTee & Tie’s head of analysis and consultancy, said.

“The pull-back in housing demand is unsurprising as the property sector is extremely sentiment-driven. Some investors may be sitting on the fence, anticipating developers can stabilize rates in reaction to the downturn in sales,” she said.

The pull-back in housing demand is unsurprising, as the property sector is strongly sentiment-driven. Any customers may be sitting on the sidelines, anticipating that in reaction to the sales downturn, developers would stabilize costs.

Research Director Lee Sze Teck of Huttons Asia acknowledged that customers were waiting last month to see whether developers would change their costs.

Mr Nicholas Mak, head of analysis and consulting for ERA Realty, said the latest OTP constraints are reiterations of current regulations rather than cooling steps for land. “It is also likely to be just a speed bump on the path to recovery from Covid-19’s effect on the property market.”

In view of upcoming releases such as The Flagship, Clavon and Ki Residences, PropNex chief executive Ismail Gafoor expects new home sales to perform better in November and December than last month.

“We plan that developers’ revenues will hit 9,500 units for the whole of 2020, just below the 9,912 units transacted in 2019.”

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