Apr 06, 2012
The Business Times
Big launch of properties in uncharted territory
By Mindy Tan
The race is on as developers try and ride the wave of robust demand for primary sales by churning out projects as quickly as possible. Ku Swee Yong, chief executive of International Property Adviser (IPA) said: "Developers know this trend cannot be sustained, especially when you have HDB launching (so many units)."
Some of the projects released in March alone include the 193-unit Natura at Hillview Terrace, 679-unit Ripple Bay condo, 276-unit Seletar Park Residence, and 429-unit Palm Isles condo at Flora Drive.
The large number of new homes on the market this year can be attributed in part to the government's effort to push out more land for residential development, say market watchers.
In 2011, enough state land was put on sale to build 17,510 homes, up from the record 13,945 homes in 2010, according to government estimates. The number could be higher still given the recent trend for more smaller flats to be built.
Added Mr Ku: "Developers are now trying to reduce their risks by shortening the cycle between the day they win the bid and the day they launch the property to sell."
Turnaround time has been crunched back from 12 to 18 months to around 9 to 12 months, he said. The time frame is tight because of lead time needed after winning the bid to appoint the architect, seek various approvals, design showflats and undertake marketing. "It's doable, but everybody has to run parallel," he said.
The recent popularity of shoebox units - which are up to 500 sq ft in size and tend to cost under $1 million - is also potentially problematic. Industry watchers worry that tenants will be hard to come by once these units are released.
That small apartments in the suburban regions are increasingly claiming a larger share of the market is a "source for concern", says Nicholas Mak, executive director of research and consultancy, SLP International.
"It means that some retail investors are buying into units in unproven markets," said Mr Mak.
"(While) there may be some rental demand for small apartments in suburban areas, it won't be excessive. If developers continue trying to maximise sales by building small units even if the location is far away from the city centre, then I'm concerned: What will happen to these developments after they receive the TOP (Temporary Occupation Permit)? Will there really be people who will rent it?"
Analysis by R'ST Research says that buyers snapped up a record of 2,037 new shoebox units last year. Including resales and subsales, the figure grows to 2,400 - also a record. This level of sales is more than seven times the numbers recorded in 2008, and 20 per cent more than in 2010.
"We will feel the impact, especially when a big supply of high cost-psf small-sized units start to come onstream, rentals don't match up, and people feel disgruntled," said IPA's Mr Ku.
Still, Lee Sze Teck, senior manager of research and consultancy at Dennis Wee Group suggested that developers are becoming more discerning about their site choices.
"Developers are being selective (and) we don't see the same kind of interest generated for every GLS site rolled out," he said.
That being said, some consultants argue that the bids received at GLS tenders are indicative of developer optimism.
Credo Real Estate executive director, Ong Teck Hui, said: "Recent bids reflect fair optimism on the part of developers and this is reflected in tender participation as well as bid levels."
Added Chia Siew Chuin, director of research and advisory, Colliers International: "It is telling that developers are encouraged by the land supply available and are still on the look-out for development sites . . . Additionally, those seeking a representation in the local residential market have also been aggressive in their quest for sites."
Figures released by the Urban Redevelopment Authority on the number of transactions in February further fanned talk of more cooling measures.
Excluding executive condominiums (ECs), 2,413 private homes were sold in the month of February, a 29 per cent month-on-month jump; this figure is more than double the number of units sold in the same period last year. If ECs are added to the mix, the number of units sold is 3,138 - up 51 per cent from January's 2,077 units.
Another push factor lies in a series of proposals put up by the Urban Redevelopment Authority, in consultation with the Real Estate Developers Association of Singapore (Redas) and other stakeholders, in a bid to help purchasers make more informed decisions.
Some of the proposals include: developers may have to publish prices early and more frequently; build accurate showflats; provide drawn-to-scale plans for a project's location; site and units; share track records; and abide by controls for online advertisements.
BT understands that URA is finalising the proposed guidelines which will come into effect later this year.
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