Data centre warns of 30% plunge in new-house sales

New-house sales this month may decline by 30% from June after the expiry of tax incentives as future demand was already absorbed in the second quarter, says Samma Kitsin, director-general of Real Estate Information Center.

The phenomenon will likely be a repeat of what happened to the housing market in the United States, he said. After the incentives ended on April 30 this year, new-house sales in the US dropped by 33% month-on-month in May.

Mr Samma said buyers of low-rise units hurried to wrap up the deals in the first half while many condominiums rushed to transfer units to be eligible to the tax breaks.

“It is natural that a decrease will happen a month after the incentives end,” he said.

The number of new housing units transferred in March, the original deadline of the incentives before they were extended, were double the figures in January and February. It slowed in April to below a normal level due to the long holidays and the political violence.

It then rose to a normal rate in May and jumped by 50% month-on-month in June, the last month for the incentives, Mr Samma said.

A decrease in the number of transfers after the end of the incentives would last only a month and the market would recover in August and the fourth quarter, the high season of home purchases.

The REIC said new housing unit transfers in the first five months of the year rose by 40% year-on-year, to approximately 84,000.

Of the total, about 36,000 units were condominiums, 24,000 townhouses, 14,000 single houses and 10,000 other residential units. Combined with non-residential properties, transfers totalled about 109,000.

In May, the number of transfers totalled 14,800 units.

“After the end of the incentives, we don’t think housing prices will rise as there will be a large number of new housing supply waiting to be launched,” Mr Samma said.

Another negative factor in the second half would be political problems and the impacts from the European economy, which remain unpredictable.

To avoid an oversupply in the second half, developers should slow down project launches or delay them to the first quarter of next year instead, Mr Samma warned.

Copyright © 2020 Asia Property News.