Property News Weekly #1

Developers holding back some launches? Why?

Buyers are scarce, investors have vanished. Developers have no confidence of selling at the prices they would love to. Conclusion? Just delay some projects that are ready for market. That's not a problem for most developers as they are extremely well positioned, financially.

The number of homes that could be launched for sale immediately, but have been held back, has increased to 10,239 in the first quarter of 2008, an increase of 44.2 per cent over the 7,099 units in the fourth quarter of last year. This, perhaps, is a reflection of the standoff between developers and buyers.

The Urban Redevelopment Authority’s (URA) indicated that there were 2,526 homes launched, but unsold at the end of the Q1 of 2008, an increase of 22.4% over the previous quarter. PropertyBingo Data Consultant Danny Lim commented; ‘The peak in June 2007 will never be repeated in a long while. There were more than 4700 private transactions, excluding option tradings. In March 2008, we only had less than 800. That's a huge drop in activities and sentiment. It's impossible for the developers to maintain their optimism in setting high margins. However, the mass market will still see some demand for any projects marketing below the $1000psf psychological barrier.’ The 405-unit Waterfront Waves is a good example. Selling at $800 psf, they sold more than 100 units.

According to URA, prices of private residential property increased by 3.7% in Q1 2008 compared to 6.8% in the previous quarter. A few units from existing projects were known to have been sold at above $3,300 psf in Q1 2008, with several units in Marina Collection sold at above $2,600 psf. However, price increases do not mean high demand. As noted by Danny, there were many properties still asking for higher prices as compared to 2007. The Sail, for example, recorded an average of 250-300 sellers but only 5 sold in March.

URA said that the last time the flash estimate of the change in private residential property price index (PPI) was revised downwards by more than 0.5% points was in Q4 2001, when it was pegged downwards by 1.4 percentage points. Take-up rate for Outside Central Region was only 38% whereas the Core Central Region and Rest of Central Region reported healthier take-up rate of 89% and 71% respectively.

The disappearance of speculators from the market may have also dampened sales, as reflected by the lower number of subsales at just 346 transactions, down from 649 in the previous quarter. Subsale prices, however, remained stable, suggesting that panic selling for the time being at least is unlikely. But agents handling projects commented that sellers are less resilent on their asking prices.

URA projects that 56,501 units are expected to be completed between Q2 2008 and 2011, of which 29,685 units are already under construction. The fact remains that developers are able to control their "releases" of units and projects to the market, thus preventing an avalanche of panic selling. Developers can easily cut down supplies during a period of low buying sentiment and maintain their asking prices for a long time.

"This, effectively, helps resellers to maintain reasonable asking prices and not a huge discount. However, for properties fully sold by developers, the players are the resellers." said Danny. At least for now, we don't expect panic selling.