Urban Redevelopment Authority recently released a directive to all delicensed projects developers to submit their sold units’ net prices. This they did after concerns were raised that the projects might have overstated the Property Price Index by URA, due to discounts and other benefits being omitted from the caveats.
For a project to be delicensed, it must first pass two checks, the attainment of Certificate of Statutory Completion in addition to the buyers being issued with individual strata titles. Ardmore Three at District 10 and the OUE Twin Peaks at District 9 are two of such projects that no longer fall under the housing developers rules.
The majority of delicensed projects sales were in the high-end segment or the Core Central Region.
From the available information, it is estimated that these delicensed projects have a great impact on the Core Central Region prices of non-landed private homes that represented about 25 percent in the second quarter of 2016 and 22 percent in the third quarter that ended in mid-September. Due to lack of official data, these figures were estimated from delicensed projects’ resale transactions for units with no previous caveats of new sale.
Based on the Property Price Index by URA, non-landed homes’ prices in the CCR have risen by 0.3% for two quarters consecutively, by the second quarter of 2016, on q-o-q.
So the question that still begs is whether the prices of high-end homes have really risen. This is because the prices of some of the delicensed projects do not show the incentives or discounts that the buyers are currently enjoying.
Market sentiment clues can be provided by resale transactions since these are by individual sellers. Quarter 2 showed mixed signals. When Q1 and Q2 resale transactions of 23 projects in CCR were paired, 13 projects showed a price increase or unchanged price in q-o-q while 10 projects recorded a price decline.
When resale transactions in Q2 were paired with Q3 for 15 projects, 10 showed a price increase or unchanged prices on q-o-q while 5 showed a price decline.
However, buyers are advised not to be too fixated on small percentage price changes. A 0.5% price change q-o-q should be taken as mild. Buyers should instead focus on other variables that can impact price indices such as rental indices, vacancy rates and macroeconomic indicators.
Delicensed projects also affect the calculation of unsold units since when a project is delicensed, it is removed from the unsold stock official record. Therefore, the unsold stock may reduce due to the removal of a project from the records and not because they have been sold.
For instance, the unsold units of private homes that are incomplete were 30,409 units in 2Q2015 and 26, 085 in 2Q2016, giving a reduction of 4,300 units. However, 2,600 could be from delicensed projects.