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Secondary market deals shrink last year

(2012-01-20 23:12:00) 下一个


Business Times: Sat, Jan 21

THE percentage of private homes purchased in the primary market, that is, from developers, increased last year while conversely the proportion bought in the secondary market declined.

This comes as buyers found a bigger hunting ground at developers' launches arising from the step-up in land sales since 2010.

Analysts also point to another advantage of picking up an uncompleted property from a new project: Payment to the developer is spread over a few years according to the stage of the project's completion, compared with having to fork out the entire purchase price upfront when buying a completed property in the secondary market. This would appeal especially to specuvestors.

Some market watchers also say the seller's stamp duty, which is aimed at discouraging short-term property trading, has shrunk the pool of properties available for sale in the subsale market, again shrinking the secondary market's share of deals.

Credo Real Estate's analysis of URA caveats data shows that out of a total of 29,094 caveats lodged for private home purchases (excluding executive condos) last year, 43.3 per cent were from the primary market, up from a 38.8 per cent share in 2010.

The secondary market - which covers resales (involving sales of projects that are completed, that is, which have received Certificate of Statutory Completion, or CSC) and subsales (involving projects without CSC) - saw the volume of deals shrinking 26.7 per cent last year, and sending the secondary market's share sliding from 61.2 per cent in 2010 to 56.7 per cent last year.

Mapping the primary and secondary market shares against land sales all the way back to the 1990s, Credo concluded that a major reason for increases in proportion of primary market sales is the surge of primary market new supply, especially after active periods of Government Land Sales (GLS) and collective sales.

'In response to the buoyant market in the mid-90s, we saw active GLS and en bloc sales between 1994 and 1997, and this led to increasing primary market share while secondary market proportion declined up to 1998,' observes Credo Real Estate executive director Ong Teck Hui.

'Declining land sales in 1997 and its absence in 1998 reduced primary market share in 1999/2000 but a pick-up of land sales in 1999/2000 caused primary market share to increase in 2001/02.

'Subdued land sales from 2001 to 2005 resulted in falling primary market share between 2003 and 2008.'

For 2008, the proportion of private homes sold in the primary market plunged to a low of 30.2 per cent.

Although land sales picked up in 2006/07, 2008 was a bad year with many launches held back.

'However, a resumption of new project sales in 2009 saw the primary market share increasing. And of course the robust GLS and en bloc sale market recovery in 2010 contributed to a further increase in primary market share in 2011,' commented Mr Ong.

He also offers a reason for property specuvestors to favour buying a unit in a new project from a developer rather than a completed property in the secondary market.

'The revised seller's stamp duty (SSD) imposed in January 2011 could also have led some investors to prefer primary market properties where they minimise their capital exposure due to progress payments. Also by the time the property is completed in about three years, they would be penalised only by a relatively small 4 per cent SSD if they sell in the fourth year, or escape it altogether if they hold a bit longer,' said Mr Ong. This would appeal to someone who does not want to have to find a tenant for a newly completed property, he added.

A developer says the SSD regime has caused the supply of properties available for sale in the secondary market, especially in the subsale market, to shrink.

The SSD is set at 16, 12, 8 and 4 per cent for those who buy a private home from Jan 14, 2011 and sell it within the first, second, third and fourth year of purchase respectively.

The developer reckons the additional buyer's stamp duty (ABSD), which took effect on Dec 8 last year, will also dry up secondary market transactions. 'A foreigner who's not a Singapore permanent resident may not want to give up his existing property here because if he buys another property in Singapore, he would have to pay a 10 per cent ABSD on it,' he explains.

'The ABSD and SSD have changed the dynamics of the willing buyer-willing seller interaction,' he added. 'Shrinking volumes in the secondary market aren't a good thing because interior designers, renovation contractors, agents doing home leasing will all be affected.'

DTZ's Southeast Asia chief operating officer Ong Choon Fah expects the primary market share of private home purchases to continue to increase vis-a-vis the secondary market, pointing to a still substantial quantum of new homes launched by developers on sites acquired from the GLS programme. 'Those who've bought properties (after Jan 13, 2011) will be subject to the SSD, which reduces the availability of properties for sale in the secondary market.'


Source: Business Times

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