Saturday, January 26, 2013

When the Going Gets Tough, the Tough Gets Creative

Jan 25, 2013

Developers are starting to think out of the box in the face of a quieter property market after the recent cooling measures.

El Development, the developer behind the 810-unit La Fiesta at Sengkang has sold 380 out of the 500 units it has launched. Most of these units were sold before the implementation of the cooling measures on January 12.

Post cooling measures, only 8 units have been sold. El Development is now offering discounts up to a staggering 24% of the selling price. A unit now costs an average of $1125 per square foot (psf).

On top of the discounts, the firm is also aiming to deliver the units by June 2016, a year ahead of the original date of June 2017. To get the units out in time, construction will start in early

March this year using better and more efficient construction techniques. This could up costs by 2 to 5% but the developer is planning to completely absorb that and not pass it to the buyers. El Development is hoping that by doing this, it could attract buyers who are looking for self-occupation, instead of those who are buying for investment.

Now faced with a tougher market in Singapore, EL Development will also be exploring overseas in the Iskandar region in Malaysia, as well as opportunities in China and Myanmar.

Many developers have been offering discounts to soften the impact of the rise in Additional Buyer's Stamp Duty (ABSD). Since the increase in the ABSD is between 5 and 7%, many developers are offering discounts of 5 to 7% on their new projects. This is especially true for the projects that were in the midst of a launch when the cooling measures were announced. By negating the increased ABSD with a discount of the same percentage, developers are hoping that sales will not stagnate.

Besides getting creative with the pricing, analysts believe that developers may also get creative with the types of units they offer. Although families are still the biggest buyers and it makes sense to build apartments that cater to them, developers may instead choose to build smaller units. This is because affordability has now become an issue with the increased ABSD, higher percentage of downpayment, and tighter restrictions on housing loans. In light of these factors, smaller, more affordable units will become more appealing to buyers.

Another possibility for some developers would be to look into commercial or industrial properties.

Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C
Senior Sales Director
DTZ Debenham Tie Leung (SEA) Pte Ltd (L3006301G)

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