Hong Leong Group Approaching Property Launches With Caution

Source : The Business Times, January 5, 2008

CDL may consider putting off redevelopment

THE Hong Leong Group, which includes Hong Leong Holdings (HLH) and City Developments Ltd (CDL), appears to be taking a cautious approach to new property launches amid the fallout from the US sub-prime crisis.

The Aalto: The development will be officially launched at an average price of $1,800-$1,900 psf

After selling about 60 per cent of the 196-unit Aalto at Meyer Road since August 2007 through soft launches, HLH has decided to officially launch the development at an average price of $1,800-$1,900 per square foot (psf).

And asked about future launches, including those on en bloc sites like Lucky Tower in Grange Road, CDL, which has one of the biggest landbanks here, said that it may consider putting redevelopment on hold.

'Depending on construction schedules, where there are opportunities we may consider other alternatives like short-term leases,' a CDL spokesman said.

According to CB Richard Ellis, CDL alone could have about 2,800 residential units ready for launch this year.

With this sort of figure, it makes sense for developers to tread carefully, with some preferring to test the market first.

HLH's Aalto will only be officially launched this weekend but monthly data from the Urban Redevelopment Authority reveals that sales began as early August last year.

According to the data, about 60 units were sold at a median price of $1,597 psf that month. The highest price achieved was $2,470 psf while the lowest was $1,389 psf.

A month later, HLH sold one unit at $1,570 psf, followed by 49 units in October at a median price of $1,632 psf. In November, it sold six units at a median price of $2,052 psf.

A spokesman for HLH said: 'The units released during the soft launch were mainly units on the lower floors, hence the average price for the units sold during the soft launch was lower than for the six units sold in November, which were on the higher floors. We are opening up high-floor units for the official launch and henceforth the estimated average price for the whole development will be at $1,800-$1,900 psf.'

Knight Frank's director of research and development Nicholas Mak reckoned that the pricing for the official launch is on the 'aggressive' side but said that because more than half the development has been sold, the developer can afford to test the market with higher prices. 'Developers can choose to price high and sell at a slower pace, or price low and sell at a faster pace,' he said.

Pricing developments too high can be a 'gamble', depending on how the US sub-prime crisis plays out, he added.

HLH said that 50 per cent of the buyers so far are Singaporeans, with about 5 per cent thought to be HDB upgraders. The remaining buyers are foreigners.

HLH said that it is still allowed to offer deferred payment to Aalto buyers and about 40 per cent have taken this up.