BT: Developers hold back on luxury projects in Q4

Business Times - 17 Dec 2010

Developers hold back on luxury projects in Q4

This despite higher buying interest for high-end homes in October, November

By UMA SHANKARI

DEVELOPERS continued to hold back on launching new luxury projects in the fourth quarter even as buyer interest in such projects grew slightly in October and November.

No new luxury projects were launched in the fourth quarter, noted CB Richard Ellis (CBRE) in a report yesterday.

This was even though there was increased buying interest for high-end homes - that is, units that sell for more than $2,000 per square foot (psf) - in both October and November.

Around 230 units were sold in this segment in October and another 160 units last month. By comparison, the number of new homes that cost more than $2,000 psf did not cross the 100-mark from June to September 2010.

And for units priced at above $3,000 psf, the number sold doubled to 12 units last month compared to October. Analysts also noted that older launches such as Paterson Suites, The Trizon and The Laurels also saw renewed buying interest in November.

But despite this, most of the launch activity was centred in the mass market segment as developers capitalised on the strong demand from upgraders for cheaper private homes.

'Contrary to expectations that developers would look to unload previously accumulated land for high-end properties to ride on the building up of buying momentum for such properties, developers have only launched 9 per cent more of high-end homes in November,' noted Colliers International's director of research and advisory Tay Huey Ying. 'Instead, developers have surprised many by launching primarily mass-market homes in November.'

The 1,638 units of new mass-market homes released by developers last month was more than triple the 513 units launched in October and accounted for 70 per cent of all new homes released in November.

Buyers responded well, picking up 1,229 mass market units last month - 64 per cent of the 1,909 private homes sold in the month. The strong demand took total sales volume for this year to 15,025 units - even higher than the record 14,811 new private homes sold in 2007.

'Projects located close to MRT stations remain popular among homebuyers,' said Joseph Tan, CBRE's executive director for residential. 'Besides location, other selling points include government plans for future development and new transport network, amenities, tenure and product attributes.'

The trend was true for the first 11 months of the year as well. Data compiled by CBRE shows that out of the 10 best-selling projects, eight were in the outside central region (OCR), which is a proxy for mass market locations.

The three projects that drew the most buyer interest were: UOL Group's 616-unit Waterbank at Dakota (all but one unit sold as of end-November); MCL Land's 608-unit The Estuary (fully sold); and Kheng Leong's The Minton (482 units out of 1,145 sold).

The lack of activity in the high-end segment has also kept prices of such homes dampened despite gains in other categories.

The official URA private residential price index, which already went up 14.4 per cent in the first three quarters of this year, is expected to register another marginal climb in the final quarter, translating to a total rise of 15 per cent to 16 per cent for the whole year.

But most of the growth has been led by mass market homes, analysts noted.

'Overall, prices for prime, mid-tier and mass-market homes have more or less caught up with the peak levels in end-2007. However, prices of new luxury properties were still lagging behind by around 15 per cent,' said Mr Tan.

Equity analysts are getting increasingly wary of residential stocks with large exposures to the mass market segment on concerns that the government could announce more policy measures to cool the market.

'With sales activity largely centred on mass market condos, we believe this will lead to more demand-side and supply-side tightening measures ahead,' said DMG & Partners Research analyst Brandon Lee. 'As such, we are maintaining our preference towards high-end developers, which are less susceptible to policy concerns.'

He reiterated his 'buy' calls on Wing Tai Holdings and SC Global Developments.

DBS Group Research, on the other hand, said in a fresh report that it prefers companies with greater office exposure and laggards such as Keppel Land, UOL Group and Singapore Land, which have the largest office content in their revised net asset values.