2019's healthy home sales mask uneven showing for different projects

Affordable quantum a plus factor while optimistic pricing a dampener for buyers

Fri, Oct 11, 2019

KALPANA RASHIWALA


DEVELOPERS are heading towards healthy home sales this year, with analysts expecting them to move more than 9,000 private homes, surpassing last year's figure of 8,795 units.

Beneath the positive headline numbers, though, is a picture of uneven sales performance among residential projects launched in the first nine months of this year, based on The Business Times' analysis of URA Realis data as of Oct 4. (See table on Page 2)

On the whole, given the high land prices developers paid in the past, most new residential project launches this year have had optimistic per square foot (psf) prices, often at benchmark levels for their respective locales.

This has resulted in either a muted response from buyers, or a seemingly encouraging response in the month of launch, followed by gradual sales thereafter, noted JLL senior director Ong Teck Hui.

That said, some developers have managed to achieve decent sales momentum, for instance by offering a spread of smallish units and thus keeping the median absolute prices within the sweet spot of affordability at around the S$1 million mark. This has been especially the case for mass-market condo projects in the suburbs or Outside Central Region (OCR).

Examples include The Florence Residences in Hougang, Treasure at Tampines, Parc Komo in Upper Changi Road North, and Parc Clematis in Clementi. The median psf prices of these four projects range from S$1,335 to S$1,616 psf.

CBRE head of research for South-east Asia Desmond Sim said: "It is the absolute price quantum, not the psf price, that decides on the loan amount you get and hence, whether you can meet the total debt servicing ratio (TDSR). Sacrificing the unit size may not be too big an issue; people can come to terms with having a good unit, despite it being smaller in size."

In the city fringe and prime areas, where prices tend to be higher, developers have nevertheless banked on niche factors to pull in buyers.

Take the case of Boulevard 88, a 154-unit freehold luxury development that has attracted foreign buyers, especially from China. The large units and ample amenities in the project have been strong plus points among well-heeled purchasers looking for a home for their own occupation. Launched in March, the project had 76 units sold up to Sept 29, at a median price of S$3,656 psf.

In contrast, sales have been slow at some projects in the Core Central Region (CCR). At the 476-unit Fourth Avenue Residences, a 99-year leasehold, District 10 project, 60 units were moved in the launch month, January, at a median price of S$2,418 psf. By Sept 29, the sales tally was 103 units at a S$2,400 psf median price.

The 71-unit, freehold Fyve Derbyshire in District 11 moved five units in its launch month of January, at a median price of S$2,382 psf; as at Sept 29, sales totalled 20 units at S$2,307 psf median price.

The picture is also mixed in the city-fringe or Rest of Central Region (RCR).

Agents point out that last month's launch of Avenue South Residence in Silat Avenue had the Greater Southern Waterfront story going for it, and agents pounced on this as an opportunity to drum up sales.

As at Sept 29, the project's developer, a consortium comprising UOL Group, United Industrial Corporation and Kheng Leong Company, had moved 347 units in the 1,074-unit project at a median price of S$1,934 psf.

Another project in the RCR that has achieved more-than-decent sales is CapitaLand's One Pearl Bank in the Chinatown area. The 774-unit project was launched in July, and as at Sept 29, had sold some 234 units at a S$2,364 psf median price.

For One Pearl Bank and Avenue South Residence, the median absolute price of units sold is around S$1.36 million.

However, in another part of RCR, the Amber and Meyer locales in district 15, sustaining sales at new launches is proving challenging, given the weight of supply from the release of a string of projects there this year: Nyon, One Meyer, Coastline Residences, Amber Park, Meyerhouse and Meyer Mansion.

This highlights the impact of supply-demand dynamics within particular micro-markets on take-up rates for new projects.

A seasoned developer, noting the success of Parc Clematis, said: "Certain locations in the OCR have the demographics for more sales of entry-level private condos. The Clementi area has traditionally been undersupplied for private condos."

Savills Singapore executive director Alan Cheong said another factor for the disparity in sales at new launches this year has been the commissions developers are prepared to pay agents. "Developers who have wooed agents with high commission rates right from the launch have been hitting higher sales numbers than those who did not."

A seasoned developer acknowledged this: "There are so many residential projects vying for attention, but only a limited pool of agents, so they help divert sales to projects with higher commissions."

He also noted that agents tend to gravitate towards bigger projects because those offer more units to potential buyers; the chances of striking a deal are therefore higher.

Indeed, the larger projects launched this year have generally achieved higher sales, including Treasure at Tampines and The Florence Residences. Sales at the latter was also buoyed by its proximity to the Hougang interchange station on the Cross Island Line unveiled earlier this year.

Lee Nai Jia, senior director at Knight Frank Singapore, noted that most of the larger developments that have been launched this year are in the RCR and OCR. "These projects and their price points appeal to the masses."

Mr Ong of JLL said that the optimistic pricing seen at most property launches this year could be due to the high land price or a deliberate pricing strategy. "So far, the primary market has remained resilient in terms of take-up and pricing, despite a significant economic slowdown.

"A positive perspective is that if the slowdown does not get too adverse, the market would probably hold and eventually recover. Sales would then strengthen without prices being sacrificed - which could lead to decent profit margins and possibly avoidance of the ABSD (additional buyer's stamp duty) clawback, if timelines can be met."

Developers must develop and sell all units within five years to qualify for upfront remission of the 25 per cent ABSD on the land purchase price.

Agreeing, Mr Sim of CBRE said: "The pressure of the sales deadline on developers is not apparent yet; they still have time."

Dr Lee of Knight Frank said developers could again adopt the strategy they used between 2014 and 2017 - that of launching projects in small phases, while maintaining prices. "When the market picks up, they will slowly increase prices in tandem."

A head honcho with a major listed property group said: "All of us are keeping our fingers crossed and hoping for the best, that the market will find its equilibrium. Nobody is in panic mode; most developers' balance sheets are still strong because we've had many good years."

Pointing to the positive signs on primary-market sales and the official private home price index for Q3 this year, Mr Ong said: "These factors will be further impetus for new projects to be launched at firm prices, so patchy sales performance could continue."