Saturday, December 18, 2010

Developers left with few homes to sell

Straits Times: Sat, Dec 18
RECORD property sales this year have left developers scraping the bottom of the barrel with many facing a paucity of unsold units and undeveloped home sites. A record-breaking 15,025 homes were sold in the first 11 months, which probably caught m...
RECORD property sales this year have left developers scraping the bottom of the barrel with many facing a paucity of unsold units and undeveloped home sites.


A record-breaking 15,025 homes were sold in the first 11 months, which probably caught many developers by surprise coming so soon after the recession.


That means numerous developers could well be on the lookout to buy land in the year ahead, including collective sale sites.


A report by research firm Kim Eng found that nine out of the 13 Singapore Exchange listed developers which it tracks had fewer than 1,000 residential units available for sale as of Thursday.


Demand for homes is still strong despite recent government cooling moves and a major release of new state land.


Only three developers had more than 2,000 units. City Developments tops the table with an estimated 5,381 units in its stash, more than double that of second- placed CapitaLand.


At the other end of the spectrum, UOL Group had fewer than 100 units.


Spottiswoode Residences, launched last month on the city fringe, was its last residential project here before exhausting its landbank. The project was already 74 per cent sold at the end of last month.


The majority of unsold units were in suburban areas, while another 5,522 homes in the city centre were still on offer. On the popular city fringe, just 1,843 units were still on the market.


Experts said developers such as UOL and Wheelock Properties, which are running low on land, are likely to have land acquisition on their agenda next year.


Keppel Land is left with fewer than 200 suburban units in its portfolio after a healthy take-up of 629-unit The Lakefront Residences near Lakeside MRT station. The project sold 437 units last month.


Unused land and unsold units are key indicators that developers will monitor.


Experts said developers without new land would obviously have trouble notching up profits. Another key factor was the profit margin on projects, which was partly determined by prices paid for land.


Kim Eng property analyst Ooi Yi Tung said: 'A developer can be sitting on many plots of land but if it acquired those sites with very aggressive bids, the firm still won't make money.'


Mr Ong Kah Seng, senior manager of Asia-Pacific research at Cushman & Wakefield, said the definition of 'a healthy landbank' varied according to the size of the developer in question.


'Having two to three sites which are launch-ready in the financial year will add confidence for the developers and company investors but are not expected to radically affect the profitability of the company if it can be sustained by other real estate activities,' he added.


Boutique property group EL Development's managing director, Mr Lim Yew Soon, said his firm is looking to replenish its landbank. It is looking at all price segments, collective sale sites and government land sales.


'Besides the former Diamond Tower in Balestier expected to launch in the first quarter, most of our sites are fully sold... As the cost of borrowing is low, this is also a good time for developers to get land,' he added.


Developers' leaner landbanks, however, are good news for home-owners gunning for collective sales. Former HUDC estate Pine Grove, Tulip Garden and Hawaii Towers are just some of the mega collective sales of more than $600 million that have or are expected to enter the market.


Developers are often keen on such sites as they provide an opportunity to purchase land in prime locations, unlike those from the government land sales, which are on 99-year leases.


Mr Png Poh Soon, associate director and head of research and consultancy at Knight Frank, said that more collective sites in the city fringe region can be expected to be put up for sale as the economy picks up and that developers are likely to take this chance to replenish their landbank.


esthert@sph.com.sg

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