Developers sold year-high 1,668 units in May amid discounts and improved sentiment

Developer sales for the month hit 1,668 units – a record for the year and 37 per cent more than the 1,214 in April. More transactions also occurred in the high-end sector at prices above $2,000 per square foot (psf).

Some developers have raised prices as a result

DEVELOPERS continued to report encouraging private home sales last week, and some have upped prices on firmer demand.

BelleRive on Keng Chin Road and Martin Place Residences on Kim Yam Road are among the projects where prices have been raised. BelleRive’s average price is now 13 per cent higher than when it was previewed in mid-April.

Frasers Centrepoint sold 60 more units last week at Martin Place Residences; new units were released over the weekend at prices that were about 5-7 per cent higher.

Chia Boon Kuah, Far East Organization chief operating officer, property sales, told BT that ‘in recent weeks, we’re seeing growing broad-based demand for our products across our portfolio in every price bracket, from upgrader market to the upper-middle segments to high-end luxury projects’.

Last week, the property giant sold more than 40 units, up from the 30 a week earlier. Far East’s home sales for the May 18-24 week include two units at Vida on Peck Hay Road which fetched an average price of $2,030 psf; the buyers did not take up the rental guarantee offered by Far East for the recently completed condo. The developer also sold nine units at Floridian in Bukit Timah at an average price of $1,220 psf.

In the upgrader housing segment, it sold seven units at Mi Casa in Choa Chu Kang, nine units each at Lakeshore near Jurong Lake and Waterfront Waves near Bedok Reservoir. Waterfront Waves is a joint development with Frasers Centrepoint.

Frasers Centrepoint also sold four units each at its Caspian condo in the Jurong Lake location and Woodsville 28 last week.

At Martin Place Residences, the developer released fresh units below the 14th floor sky terrace in the second and final block in the 33-storey condo.

Prices of the freshly released units start from $1,350 psf, higher than the $1,260 psf starting price in the earlier block during the preceding weekend’s marketing campaign.

However, the latest pricing is still below the $1,700 psf starting price for the 33-storey freehold project when it was previewed last year. Inclusive of the units sold last week, 168 units in the 302-unit condo are now sold.

Frasers Centrepoint is offering an interest absorption scheme (IAS) for all its four projects on the market – in exchange for a 3 per cent price premium for Caspian and a 2 per cent premium for the rest.

Over in Bukit Timah, a Sing Holdings subsidiary is understood to have sold five units last weekend at BelleRive, taking total sales to 39 units in the 51-unit freehold project. BelleRive was initially priced at $1,350 psf average when it was previewed in mid-April; this was raised to $1,430 psf last week and upped further to $1,530 psf this week. This translates to a 13 per cent price hike in about six weeks.

The average pricing is for the apartments in the 15-storey project, and excludes the two penthouses. About 75 per cent of BelleRive buyers have taken up the IAS offered by the developer at no extra cost.

The units were picked up predominantly by Singaporeans. BelleRive’s draws include its proximity to Anglo-Chinese School (Primary) on Barker Road and Singapore Chinese Girls’ School along Dunearn Road.

In the Balestier area, Soilbuild is understood to have sold another 25 units at Mezzo over the weekend. The project is priced at about $850-900 psf on average; the cost is 2 per cent more for IAS.

Property giant City Developments also sold 14 units last week for The Arte at Thomson condo. The average price in the project is now $900-930 psf, compared with $880 psf when previews began in March. The 336-unit condo is 84 per cent sold.

Near Botanic Gardens, Straits Trading has upped the price of the remaining few units at Gallop Gables to $1,400 psf, from the $1,188 psf average achieved for units sold in the past six weeks. The price increase comes after the developer achieved the sale of its 40th unit in the completed freehold condo.

In the secondary market, some 50-plus units are said to have been sold last week at RiverGate condo near the Singapore River. These are out of 88 units listed in a sales campaign last week. The average price is about $1,400 to $1,500 psf.

The 88 units were from an original pool of 100 units purchased in 2005 by a fund managed by Ferrell Asset Management.

Source: Business Times, 26 May 2009

Buyers respond well to scheme introduced at some projects

(SINGAPORE) Some developers here are turning to rental guarantees to lure buyers in the current down-market.

Under such schemes – which are offered only for certain units within selected projects – developers help buyers secure tenants, and also ensure that the owner gets a minimum pre-determined yield.

Far East Organization, for example, offers rental guarantees for selected units in selected projects such as Orchard Scotts, Vida, River Place, Tanglin View and Icon.

‘Through our marketing efforts over the years, we found that investors do not have the time to lease out or manage the tenancy of their apartments that they have bought from us,’ said Chia Boon Kuah, chief operating officer for property sales at Far East Organization.

‘Therefore, in 2006, we rolled out the rental guarantee scheme to assist our investment buyers in leasing out their properties. With our own in-house leasing and estate management teams, we are able to provide a seamless one-stop service to our buyers.’

For Vida, which is located in Cairnhill Rise, Far East is now offering a guaranteed rental yield of 5 per cent a year. This, according to Far East, can potentially work out to a return on invested equity of about 10-13 per cent a year.

‘Vida is a superior investment as we are offering a yield or return on invested equity of around 10-13 per cent per annum,’ said Far East in a recent letter to potential buyers.

Several other developers are offering schemes along the same vein.

At Belle Vue Residences, Wing Tai Holdings is offering a guaranteed return of 20 per cent on the downpayment a buyer makes if he picks up a unit using the deferred payment scheme. (DPS).
Under the scheme, the buyer will have to pay 20 per cent of the property’s price as the
downpayment. For a property worth $4 million, for example, this works out to $800,000.

But under Wing Tai’s scheme, he will get some of that money back.

Buyers who use the DPS to buy units in Belle Vue will get a guaranteed income of 10 per cent a year for two years on their downpayments. The guarantee will kick in once Belle Vue receives its temporary occupation permit (TOP) at the end of 2010. Using the same example as earlier, the buyer will get some $160,000 two years after TOP.

Market watchers said yield guarantee schemes are generally well-received in a down-market.
Investors, for example, snapped up units at high-end residential development Gallop Gables after The Straits Trading Company offered a two-year guaranteed rental yield of 7 per cent on 10 units there in April. All 10 units at the freehold Farrer Road estate sold in three days.

Elsewhere, at its preview for The Mezzo, Soilbuild Group Holdings offered a 6 per cent annual rental guarantee for two years, apart from the interest absorption scheme. The rental guarantee kicks in right after the TOP date. Soilbuild said recently that the launch of the first phase of The Mezzo was ‘met with an encouraging response’.

Market sources told BT that at least a few more new upcoming projects will offer variations of such schemes. Developers have historically offered such schemes to entice buyers when the property market is weak.

Hong Leong Group’s 71-unit luxury development Cuscaden Residence had such a scheme when it was launched in 2004 shortly after the Sars scare. Wing Tai Holdings also offered something similar for Duchess Crest in Bukit Timah in 1998, during the Asian financial crisis.

However, yield guarantees are a popular option for developers, said Joseph Tan, CB Richard Ellis’ executive director for residential. This is because such schemes force developers to manage units once they have been sold.

A check with Singapore’s three largest listed developers – CapitaLand, City Developments and Keppel Land – showed that none of them are currently offering any kind of rental guarantee schemes.

Units with yield guarantees could also come at a higher price, said Peter Ow, executive director for residential at Knight Frank. For example, developers who offer the interest absorption scheme at their properties usually charge a price premium of 2-3 per cent for units sold under the scheme, Mr
Ow pointed out. This is because the developers have to absorb the interest costs that would otherwise have been borne by the buyers. The same principle applies for units offering yield guarantees, he said.

Source: Business Times, 26 May 2009

Developers test waters at some projects by cutting back on discounts

(SINGAPORE) Some developers have quietly started raising prices a notch as they test waters after strong sales volumes seen in the first quarter.

Price adjustments are often made by reducing discount levels. On a project average basis, the effective prices for some developments may have gone up between 2 and 5 per cent compared with levels earlier this year, according to developers and property consultants.

‘Developers aren’t raising prices overnight. Prices are being adjusted only after clear buying momentum has set in for a project. If you look at the first and last units sold in the project, the price difference could be, say, 10 per cent; but if you look on a project average basis, the price increase would be less than 5 per cent,’ says Knight Frank chairman Tan Tiong Cheng.

The recent stock market rally has generated its share of positive sentiment. Even so, property agents say that prices of only the better-selling units have been raised in some projects, while the others have seen more widespread rises. ‘Developers are careful; if they push up prices too fast, potential buyers may start looking at other projects,’ one agent said.

The recent price adjustments have to be viewed against the significant price declines before that, seasoned players point out. For instance, Q1 2009 prices of mass-market condos were about 10 per cent off the peak levels in late 2007/early 2008, while for luxury condos, the price decline was steeper, at around 30-40 per cent.

DTZ executive director Ong Choon Fah says that developers started to inch up prices in April and May from Q1 levels. ‘In the secondary market, sellers have been more aggressive; some are asking about 5 to 10 per cent more than in Q1,’ she added.

Property giant Far East Organization’s residential projects such as the Mi Casa condo in Choa Chu Kang, The Lakeshore in Jurong, Hillview Regency in Bukit Batok, Floridian at Bukit Timah Road (non-premium units), and Vida at Peck Hay Road are among those that have seen slight price gains lately.

Rival City Developments is also said to have incrementally raised prices for The Arte at Thomson as sales progressed briskly. The developer has sold more than 250 units since it previewed the mid-end project in March.

BT understands that prices of the remaining 80-plus units have been adjusted upwards slightly this week. The average price is now about $900 psf and the freehold project includes a mix of two-, three- and four-bedroom units.

Bukit Sembawang is also said to have introduced a single-digit per cent price hike for later units (apartments) at The Verdure at Holland Road after the initial batch of units were sold.

UOL Group and Kheng Leong are also understood to have upped prices selectively – for better-selling units – at Double Bay Residences in Simei.

A major developer said: ‘Demand is better now. People are prepared to come to the negotiating table and not baulk at prices, compared with last year when it was very difficult to even get buyers to sit down. I think there’s a sense that the worst is over.’

He says that the quantum of price appreciation that a developer can achieve in the current market will hinge on a project’s location, the nature of the development and the profile of its buyers. ‘For instance, for a prime district project with a lot of small units costing $1-2 million each, you can adjust prices a bit more, especially if you have a fair number of foreign buyers,’ according to the developer. ‘Mainland Chinese buyers are more optimistic, and can accept price hikes better as they have seen an upturn in their own property market,’ he added.

Mr Tan says that there’s currently a ‘sweet spot’ in the Singapore market for projects priced below $1,000 psf and on a lump-sum basis costing $1 million to $1.2 million per unit (for three-bedroom units) and $800,000 and below (for two-bedroom units). Their prices can take a sub-10 per cent increase without affordability being seriously dented.

Mr Tan argues that a small price increase will not generally price buyers out of the market or send them to the sidelines again – ‘especially if they think the worst is over and don’t want to miss the boat’.

‘Even if the view is that we’re not at the bottom yet, there seems to be a greater sense of price stability now. The thinking now is that if prices drop a further 5 or 10 per cent, can I live with it?
Three months ago, there seemed to be no bottom,’ Mr Tan recalls.

Agreeing, CB Richard Ellis executive director (residential) Joseph Tan says: ‘Once people are more confident, they can accept the fact that price may be higher, but in an improving situation. If I believe the market has bottomed, the closer I buy to the bottom, the better it is for me. That sort of thinking is also being fuelled by the stock market rally; traditionally the residential property market lags the stock market by three to six months.’

Source: Business Times, 13 May 2009