Slowdown in private market spells end of en bloc fever
http://www.todayonline.com/articles/262740.asp
Wednesday, July 2, 2008
Brake on home prices
Slowdown in private market spells end of en bloc fever
Cheow Xin Yi
[email protected]
IT ROSE to fever pitch just 12 months ago, but as the latest property market figures roll in, the en bloc charge could be all but over for property owners and developers alike.
Price growth in the private residential market slowed for the third straight quarter to 0.4 per cent, even as Housing Development Board resale prices grew strongly by 4.4 per cent between April and last month.
This petering off in the private home market comes after 6.8-per-cent growth in the last quarter of 2007 moderated to3.7 per cent in January to March, as the sub-prime crisis and global uncertainties took their toll, and developers lowered prices.
For would-be en bloc sellers, this spells weakened bargaining powers. One Pacific Mansion owner said residents of the River Valley condominium are trying to revive the en bloc process “at a much lower reserve price” than that set by the sales committee last year — then a record price of between $3.3 million and$3.5 million per unit at about $2,400 psf.
Cushman and Wakefield managing director Donald Han said that in such a weak market, it would be futile for sellers to wait for their right price. “In some cases, you are better off making a decision to sell your unit directly on the open market.”
At the height of the en bloc frenzy in mid-2007, Koh Brothers bought freehold Lincoln Lodge in Newton with Heeton Holdings, KSH Holdings and Lian Beng Group for a record $1,449.30 psf per plot ratio.
Mr Nicholas Mak, Knight Frank director of research and consultancy, said some developers who bought during the high face the challenge of waiting out weak market sentiment — although different developers will have different holding strength.
Mr Han said: “A small developer who is over-geared and has to sell may have to take a cut in pricing. But one that sold more than50 per cent of its projects last year would be quite comfortable holding on to whatever it has left until the market returns to normal.”
The worst-case scenario – where a developer has to sell at less than cost, resulting in a write-off on the balance sheet – will only happen in a recessionary scenario, such as during the Asian Financial Crisis or Sars period, said Mr Mak.
For now, some are temporarily leasing their acquired en bloc properties – such is the case with Lincoln Lodge, as well as Guocoland-acquired Sophia Court at Adis Road and Leedon Heights off Holland Road.
But even as developers have clearly lowered prices in recently-launched new properties, analysts are mixed on whether the mass market will bite.
For example, although prices for 122 units of the 348-unit Dakota Residences released recently averaged around $970 psf – lower than the $1,100 psf a year ago – research head of Chesterton International, Mr Colin Tan, thinks prices are still too high for the genuine HDB upgrader and owner-occupier.
“The addresses of most buyers for Dakota Residences are still private addresses, suggesting they are investors,” said Mr Tan.
But Mr Han thinks it boils down to clever strategy – “developers combining a package of pricing together with banks offering favourable mortgage rates” might succeed in luring buyes.
The slowing property prices should also bring good news on the rental front, especially to expatriates for whom this forms a large part of living expenses.
Already, rentals appear to have moderated, having risen just 10 per cent since the beginning of this year. Over the course of last year, private rental rates grew almost 40 per cent.
Mr Han attributed this moderation to recent completed projects “and some developers leasing out en bloc sites instead of tearing down – effectively not taking stock out of equation but putting it back”.
