Tuesday, December 16, 2008

Developer Sales Perk Up With New Launches

Source : The Business Times, December 16, 2008

Launch momentum may continue; price becomes key factor to move sales

The launch of new developments helped pull up developer sales to 192 units in November, up from just 112 units in October.

The number of units launched by developers increased from 159 units in October to 382 units in November.

Urban Redevelopment Authority's (URA) monthly real estate data also revealed that the number of launch-ready units hit 6,512 units in November, a marginal rise over October but an increase of 3,840 units from a year ago.

Rosewood Suites in Woodlands by EL Development (ELD) sold 42 units in November, the most units sold, followed by Newton Edge (34 units) and RV Suites (19 units).

ELD is a unit of local builder Evan Lim & Co. Managing director Lim Yew Soon said that the pricing - at an average of $580 psf - 'may be on the low side' but added, 'We expect construction costs to come down next year so we took a bit of a risk with a lower margin'.

Still, Mr Lim conceded that, 'the price may not be sustainable in the long run', and ELD could begin to raise prices.

He also believes that a price war among developers is not likely because most developers bought sites at about the same price. 'And unless a developer goes bust, there is no reason for them to sell at a loss,' he added.

PropNex CEO Mohamed Ismail said that prices for existing developments in the same area such as Casablanca are going for between $500-$550 psf. He said that Rosewood Suites is 'extremely attractive in today's market' especially considering that new public housing flats are about $300 psf with Design, Build and Sell Scheme (DBSS) flats at about $450 psf.

PropNex was the marketing agent for Rosewood Suites and Mr Ismail added that most of the buyers were HDB upgraders.

Both Newton Edge and RV Suites are in the core central region (CCR) and Colliers International director for research and advisory Tay Huey Ying noted that more than half the 382 units launched were in the CCR.

She added: 'Developers have been stepping up launches of prime properties since August 2008, in a reversal of the first half's trend where developers tended to hold back launches of prime properties. This could be an indication of weakening holding power amongst smallish and mid-tier developers with prime development sites.'

Ms Tay believes developers are likely to continue with the current launch momentum and could launch some 450-500 new units in December 2008, bringing the total launch volume for 2008 to some 6,500 units, less than half of last year's launch volume of more than 14,000 units.

Ms Tay expects developers' sale volume to hover between 150-200 units. This would bring sales volume for the year to less than 4,500 units, or less than a third of last year's volume of more than 14,000 units.

Other developments that registered better sales in November were Evania at Upper Paya Lebar Road and a landed housing project at Andrews Terrace.

CBRE Research executive director Li Hiaw Ho said: 'Price remains a critical factor to move sales, as seen by the good response to these projects.' He also said that prices for units in Evania have apparently been reduced from above $800 psf when it was first launched in March to $610 psf-$650 psf.

Knight Frank director (research and consultancy) Nicholas Mak expects home-buying sentiments and launch activity to remain subdued until after the Chinese New Year in January.

'Buyers will remain very cautious even if some re-pricing sets in,' he added. 'Since the economic drag is expected to persist into 2009, developers may be increasingly open to considering creative marketing tactics and soft discounts to attract buyers,' he added.

Already, Knight Frank notes that the lowest priced non-landed unit sold in November was in Rosewood Suites at $512 psf while the highest priced non-landed unit is Orchard Scotts, which sold for $2,006 psf (The highest-priced unit sold in Orchard Scotts was $2,407 psf).

DTZ executive director Ong Choon Fah also reckons the market is seeking 'clarity' on the economy and could wait for the January Budget measures before moving.

And while some hope for the return of the deferred payment scheme, Mrs Ong believes that if it is brought back, 'It won't be in its former form'.

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