Business Times – 26 Apr 2008
Buyers not forthcoming, so developers delay projects that are ready for market
By ARTHUR SIM
(SINGAPORE) 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) property data for the quarter also revealed that there were 2,526 homes launched, but unsold at the end of the first quarter of 2008, an increase of 22.4 per cent over the previous quarter.
CB Richard Ellis director Leonard Tay said simply: ‘As homebuyers were less forthcoming, developers decided to delay their launches.’
Mr Tay highlighted that most of the new projects launched were small projects located outside the prime residential districts. ‘The only project targeted at the mass market, the 405-unit Waterfront Waves at $800 psf (per square foot), met with a certain degree of success as evidenced by the 108 units sold,’ he added.
According to URA, prices of private residential property increased by 3.7 per cent in Q1 2008 compared to 6.8 per cent in the previous quarter.
Mr Tay said that while there were no new luxury projects launched, 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.
‘These, and probably some high-priced transactions in the resale and sub-sale markets, could have contributed to the 3.7 per cent rise to the private residential price index from the previous quarter,’ he added.
Interestingly, the 3.7 per cent increase in the PPI is lower than the earlier forecast of 4.2 per cent.
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 per cent points was in Q4 2001, when it was pegged downwards by 1.4 percentage points.
Jones Lang LaSalle local director and head of research (South-east Asia) Chua Yang Liang also noted that PPI was down by 3.1 percentage points from the 6.8 per cent growth recorded in Q4 2007, the biggest quarterly drop since Q3 2000, when prices declined by 4.2 percentage points.
Dr Chua said that overall, developers remained conservative on their new launches.
But while there was a significant growth in Outside Central Region (OCR) where a total of 813 units were released in the quarter – 60.5 per cent of total launches in Singapore in Q1 2008 – he noted: ‘Demand in this region was however not as strong.’
Take-up rate for OCR was only 38 per cent whereas Core Central Region (CCR) and Rest of Central Region (RCR) reported healthier take-up rate of 89 per cent and 71 per cent respectively.
And Cushman & Wakefield managing director Donald Han believes buyers are prepared to wait. ‘Property is sentiment-driven, and if buyers believe the economy will slow down, they will be prepared to wait it out on the sidelines,’ he said.
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.
‘Short-term speculators have been weeded out,’ Mr Han said. But, as Mr Han notes, it is now also ‘a smaller market’.
Savills Singapore director (marketing and business development) Ku Swee Yong also believes sub-sales have reached a plateau with current data ‘reflecting true demand’.
According to Savills’ own basket of properties launched and sub-sold in 2007 and 2008, the level of subsales fell from 34 transactions in Q4 2007 to just six transactions in Q1 2008. Subsale prices, however, remained stable, suggesting that panic selling for the time being at least is unlikely.
On whether the increasing backlog of unsold homes could pose a potential over-supply situation in the future, Mr Ku said that he believes not all the potential developments will be built.
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.
Mr Ku said there are certain ‘control mechanisms’ which could see a lower number of units completed by 2011 with the first being the construction factors. Mr Ku said that a project that has not already begun construction is not likely to be finished within two years, simply because of the costs and shortages within the construction industry currently.
Another control mechanism lies with developers. ‘In the previous downturn, some developers held off projects for 10 years,’ he said.