Sunday, January 8, 2012

Luxury home market faces oversupply

Straits Times: Sat, Jan 07
THE upmarket segment of the housing market faces a tough 12 months as it battles a possible oversupply of new homes and the effects of the recent cooling measures.

Thousands of units already launched are still awaiting buyers while developers might be considering delaying further launches until things pick up.

The saving grace is that interest rates remain low, and many property firms are cashed up from the bumper market in recent years so they can ride out the slump.

Chesterton Suntec International research head Colin Tan told The Straits Times yesterday: 'If a developer has not launched its project yet, it might be better not to launch because once you do you're locked in.

'But if you don't, then you can still adjust your plans according to changing market conditions.'

Property consultancy CBRE said there are at least 25 launch-ready projects in districts 9, 10 and 11 - prime areas for high-end homes - in the market.

These projects comprise potentially more than 2,000 unsold homes and include Ardmore 3, Leedon Residence and TwentyOne Anguilla Park opposite Wheelock Place.

Launch-ready projects are those that have obtained all the prerequisites and approvals for sale and are simply waiting for developers to give the green light.

Chesterton's Mr Tan noted that developers are still getting revenue from healthy sales at mass market projects, so there is no urgency to sell city-centre homes where prices are still languishing below their previous peak.

CBRE also found that at least 30 already-launched projects in districts 9, 10 and 11 still had at least half of their units, or 2,846 homes, unsold as of the end of November last year.

These are centred on four projects: the 1,715-unit D'Leedon with 1,257 unsold; the 462-unit Twin Peaks (413 unsold); the 241-unit Hilltops (208 unsold); and the 231-unit The Scotts Tower (200 unsold).

Experts point out that while these projects have been launched, not all the units in them have been released for sale.

But the numbers are still startling. Taking into account all unsold units in projects that have been launched and those in launch-ready projects, the stock of high-end homes stands at 5,903.

And this number does not include the high-end apartments in Sentosa Cove where new home sales have slowed to a trickle.

There were only 12 new-sale transactions for all of last year on Sentosa, according to caveats lodged with the Urban Redevelopment Authority.

But Mr Alan Cheong, associate director of Savills research and consultancy, said the oversupply scenario is a 'short-term concern' as developers can stagger their launch and completion timeline according to market conditions to offset risks of a glut.

They can also lease out units rather than search for buyers, he added.

'Developers have strong balance sheets after reaping super-normal profits over the past five years. They have enough built-in fat and are hibernating... Most of these sites are also freehold so there's less urgency to launch.'

While he tips resale prices of high-end homes to soften, values of new high-end launches should hold firm this year.

International Property Advisor chief executive Ku Swee Yong expects high-end transaction volumes to fall by 50 per cent this year but for prices to hold.

'As long as none of the developers feels pressure to offload units, the risk of precipitating a price decline does not exist. Balance sheets are strong and borrowing costs are low,' he said.

Other experts, however, have predicted price falls of up to 15 per cent.

Mr Lee Liat Yeang, a partner in Rodyk & Davidson's Real Estate Practice Group, noted that rather than 'holding back' their launches, some developers might be looking to spread the release of high-end projects over a few years so as not to flood the market with too much supply at one time.

Separately, a DTZ report noted that luxury condominiums in the prime districts of 9, 10 and 11 fared the worst last year and formed the only segment with prices below their 2007 peak. Resale prices of such condos grew just 1 per cent last year over 2010.


462 units for sale

413 units unsold

Source: The Straits Times © Singapore Press Holdings Ltd

Team Marshe
Martin Koh/ Sherry Tang
9383-3992/ 9844-4400

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