High-End Home Launches To Take A Breather

Source : The Business Times, December 14, 2007

The frenzy of 2007 is expected to give way to a more sedate pace, slower price rises

Launches of high-end homes are set to shrink in the coming year - even though developers will push more units across Singapore.

The Core Central Region (CCR) - which comprises prime districts 9, 10 and 11, Sentosa and the Downtown Core (which includes the existing financial district and Marina Bay locale) - could see only 4,600 private homes being launched next year.

This is just 26 per cent of the total 17,800 private homes expected to hit the market islandwide.

In contrast, this year saw 5,700 private homes being launched in the CCR, according to CB Richard Ellis (CBRE). This works out to 38 per cent of the total 15,000 homes launched by developers in 2007.

Market watchers like Knight Frank managing director Tan Tiong Cheng feel that the dwindling new supply in the CCR could provide price support to the high-end market, which has soared steeply but is expected to hit a blip next year.

Developers and property consultants polled by BT earlier this month had expected high-end home prices to appreciate by less than 10 per cent in 2008 compared to mass-market homes - which they thought could climb between 10 and 20 per cent.

In contrast, CBRE estimated that high-end home prices have risen nearly 50 per cent in 2007, while the mass-market segment appreciated only by around 25 per cent.

Among the high-end projects expected to be launched next year are Marina Bay Suites, Sentosa Quayside, Goodwood Residence in Bukit Timah and The Hamilton at Scotts Road.

Still, DTZ Debenham Tie Leung executive director Ong Choon Fah did not expect developers to be in any hurry to push out high-end launches in 2008, given the substantial price rise in this segment this year.

'The high-end market is very exclusive. Very often, sales take place by invitation and viewings by appointment. Developers will not flood the market with upmarket projects. They will want to manage their supply pipeline for the high-end very carefully,' she said.

'I suppose also that for developers, their view is that with the opening of the integrated resorts in 2009/2010, there is perhaps an opportunity for them to sell their projects at that stage.'

Market watchers said that the supply of prime district residential sites emanating from collective sales may slow down next year as recent changes to en bloc rules could lengthen the time it takes to launch a sale.

Developers, too, are in no hurry. Riding on the high-end boom of the last couple of years, many of them have built up enough financial muscle to be able to hold back launches.

Even if they do go ahead with their launches, some developers have taken to holding back some units from sale for longer-term investment. This is what City Developments announced last month, when it partnered US-based Wachovia Development Corporation to buy two blocks at CityDev's Cliveden at Grange.

The slowdown in the high-end market could touch not just launches but also actual sales. This year, CBRE estimated that 29 per cent, or 4,458 of the 15,500-odd private homes sold came from the high-end segment.

Next year, not only are developers' islandwide sales expected to shrink to between just 10,000 and 13,000 private homes, but the CCR could account for an even smaller slice of the primary market sales, market watchers reckoned.

'Going forward, with a lower economic growth forecast of 4.5 per cent to 6.5 per cent in 2008 and a likely credit crunch arising from the sub-prime mortgage problems in the US, we expect the pace of sales and price hike in the residential market to slow down in 2008,' CBRE's executive director Li Hiaw Ho said.

Analysts said that some potential buyers may also find themselves being priced out of the market.

The sales volume of high-end homes will depend partly on whether those who have sold their homes in en bloc deals buy their replacement property in the high-end market, said Knight Frank's Mr Tan.

For foreign buyers, 'if they see nervousness in key markets like London and New York, they may pick Singapore instead,' he added.

CBRE expected the official Urban Redevelopment Authority's price index for private homes to rise 8-10 per cent next year, after jumping by an estimated 25-29 per cent for full-year 2007.

Soaring rentals, too, could moderate. CBRE estimated that URA's overall private residential rental index will appreciate 40 per cent this year but the pace could slow to 8-10 per cent next year.