New home sales fell 58% in December 2021, but will that last? , Silver News

As a fitting conclusion to a rollercoaster year, December 2021 ended with new private home sales down more than half (58%) from the previous month.

In some ways this was expected, with further cooling measures being implemented – but with demand at a peak, will we continue to see more subdued sales?

The opinions of real estate agents and investors are quite divided for the moment:

Private new home sales fell by more than half, following further cooling measures

The government announced new cooling measures on December 15, 2021. The new policy increases the Additional Buyers Stamp Duty (ABSD) for certain buyers and imposes stricter limits on home loans; you can read more about the full range of measurements in this article.

In the past, announcements of cooling measures could sometimes cause a spike in sales volumes; indeed, show apartments would extend opening hours and buyers would rush to close deals before midnight when new measures come into force.

This time, however, the government made it a point to publish the announcement at 11:30 p.m., so it was too late for buyers to react.

December 2021 finally ended with only 650 new private home transactions (excluding Executive Condominiums), compared to 1,547 transactions the previous month.

In the community market, there were 69 new transactions, with around 125 new community units still on the market.

In a broader context however, new private housing transactions amounted to around 13,372 for the whole of 2021; it is still the highest number since the last peak in 2013.

Some estate agents disagree with cooling measures being responsible

A real estate agent pointed out that the number of December transactions is not a useful indicator. She says that:

“For December, a lot of sales take place in the first half of the month. Buying tends to slow down as the Christmas period approaches, so a lot of transactions would have already taken place before the 16th.

Based on that, I think if you’re only relying on second half of December trades, then that’s too small to be an accurate reflection, isn’t it? Maybe after the first quarter of this year, based on the numbers, we can draw conclusions about the impact of the cooling measures.

A few other real estate agents felt that the drop in volume was not due to cooling measures, but simply to fewer new launches. We were told that there were only 383 new private homes launched in Singapore for the whole month of December 2021, compared to around 1,283 units in November.

It was also pointed out that no new units were launched outside of the Central Region (OCR) for December, which is important as properties in OCR tend to be the most affordable, and therefore also the most popular.

On the other hand, some estate agents felt that the cooling measures will have an immediate impact

Some other estate agents have had personal anecdotes of buyers pulling out as a direct result of the chilling measures. A real estate agent said that:

“A lot of people think homebuyers aren’t affected, but some are. Because the ABSD has increased by 5%*, and some still have to pay cash first, this has raised cash flow issues and set them back.

Another real estate agent felt that whatever the actual numbers, we can’t ignore the emotional response of the market. Historically, cooling measures have always been followed by short-term “wait-and-see” effects as buyers try to gauge sellers’ responses.


“Most buyers prefer not to be the first to buy, in the first weeks after a cooling measure. They think the cooling action is because prices are too high – so if they buy now, they buy high before prices fall. We’re trying to explain that the developers won’t drop prices like that, but that’s how some buyers think.

Another real estate agent felt that the cooling measures would reduce transaction volumes, but this is due to a combination of bank interest rates and the measures:

“Buyers have a lot of leverage in the real estate market, so they’re not as discouraged by ABSD alone. In the end, if they only deposit 5% cash** and the interest rate is less than 2%, it can still be a good deal, even with 17% ABSD.

It’s actually a combination of the higher ABSD tax, plus a likely rise in interest rates, which combine to make it less palatable.

For most of 2020 and 2021, interest rates were around 1.3% per annum, half that of HDB loans.

*To clarify, this refers to the ABSD increasing by five percentage points, from 12 to 17%, for Singapore citizens purchasing a second residential unit.

**To clarify, the minimum down payment is at least 25%, not 5%. But only the first five percent of your property has to be paid for in cash. The next 20% can be in any combination of species or CPF.

It’s unclear whether lower supply or cooling measures will have a bigger impact on new home sales

Most real estate companies forecast a drop in the number of new homes for 2022. ERA expects 6,000 to 7,000 new units, while PropNex estimates 7,000 to 9,000 new units; OrangeTee is expecting 9,000 units (including ECs).

For all of 2021, there were only about 10,800 new homes.


Moreover, none of the upcoming projects appear to be big mega-developments, as we saw in Treasure at Tampines (in 2019) or Normanton Park last year; so we don’t expect to see the same huge trading volumes.

We believe that one of the underestimated issues regarding the drop in new home sales is also the attractiveness of the condo resale market.

Resale condos have significant advantages over new launch counterparts right now; and we think more home buyers will be attracted to these, rather than new homes.

Resale condos will not suffer from potential construction delays due to Covid-19, for example; they’re ready to move in as soon as the deal closes, which is vital for some people working from home.

From an investment perspective, resale condos can be rented out immediately – and the rental market is at its highest level in six years.

Coupled with the lower amount of resale condos, investors will likely wonder if a three- to four-year construction period (during which they have nothing to rent) is even worth an early bird discount.

So while the cooling measures may reduce transaction volumes across the board, it is possible that new private homes, rather than the resale market, will bear the brunt.

But will new private homes be cheaper?

Those looking for a discount should temper their expectations. Even with falling transaction volumes, private home prices are still expected to rise (although many analysts are now forecasting a 3% rise across the board, down from the previous 9%).

Most developers are unable to give deep discounts. They have faced higher land prices due to scarcity, and are already on low margins. Now, with the increased ABSD rates for developers, they’re even tighter.

In light of that, we wouldn’t hold our breath for super cheap discounts or deals (except maybe at the luxury end); not even with the new cooling measures. The resale condo market may still be the smartest choice for new home buyers on a tighter timeline.

READ MORE: 5 property types that could be most affected by new cooling measures

This article was first published in Stackedhomes.

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