New Reporter
19-05-23, 11:59
After The Continuum, weak take-up in any new launch will cast a pall on the private housing market
May 15, 2023
THE jury is out on whether the latest property cooling measures that took effect on Apr 27 might amount to much ado about nothing.
Developers have launched new private housing projects post the cooling measures. And new homes are still being snapped up.
With the latest measures, foreigners pay higher Additional Buyer’s Stamp Duty (ABSD) for any home purchase. Singapore citizens and permanent residents (PRs) also pay higher ABSD on second and subsequent homes.
However, citizens buying their first homes pay an unchanged ABSD rate of zero per cent, while PRs pay an unchanged 5 per cent rate.
Still, the cooling measures may be biting. The sales rate of over 26 per cent for freehold The Continuum at an average S$2,732 per square foot (psf) over its launch weekend on May 6 to 7 was unimpressive. The 99-year leasehold Blossoms by the Park sold about 74 per cent of its units at its launch, one weekend earlier, at a median price of S$2,427 psf.
Blossoms by the Park in Buona Vista has 275 homes, while The Continuum in Katong has 816. Going by the number of units sold at launch weekend, The Continuum edged out Blossoms by the Park.
But The Continuum’s sales performance pales in comparison to the nearby 99-year leasehold Tembusu Grand. Launched in early April before the latest cooling measures, that development sold 340 out of 638 homes, or about 53 per cent of its units at its launch weekend, at a median price of S$2,463 psf.
Possibly, buyers are more enamoured with the pair developing Tembusu Grand – City Developments Limited : C09 -0.14% and MCL Land – than the developers of The Continuum – Hoi Hup Realty and Sunway Developments.
Nevertheless, selling over a quarter of units at a launch is hardly a disaster. Often, a developer has more than three years post a project’s launch to sell all the units in order to comply with conditions for ABSD remission, which include the need to complete and sell all homes within five years of buying a site.
Indeed, while targeting strong take-up at a project’s launch, many developers may not aim for sales rates of close to 100 per cent. A high take-up rate may indicate a project was underpriced. In such a case, profit margin would have improved if the pricing had been sharper.
Critically, if take-up at launches is buoyant immediately following the latest cooling measures, odds may rise of even tougher cooling measures being introduced.
Healthy sales
Still, many developers probably target healthy take-up rates at project launches – possibly closer to the 50-per-cent mark. After all, a project’s launch typically represents the culmination of months of marketing and branding to build traction with potential buyers.
Securing strong sales at the launch when construction is in its infancy translates into using less debt funding. If borrowing cost is 5 per cent per annum, every S$10 million less in loan drawdown a year means an annual saving of S$500,000.
In the fragmented housing development market, numerous developers compete fiercely to get land and snare buyers.
Nonetheless, over the coming months, developers may be united in wishing success for each other in new home launches.
Danger may be mounting that a major project could draw a weak sales response at launch – possibly under 20 per cent.
Far East Organization and Sino Group – which just started previews for 99-year leasehold The Reserve Residences, which is integrated with Beauty World MRT station – may keep pricing attractive to ensure a good take-up at launch. Prices for the 732 homes are expected to start at S$2,300 psf.
SingHaiyi Group’s 99-year leasehold Grand Dunman, with over 1,000 homes, is slated to be the third major launch in Katong this year. Might this project’s launch draw the lowest sales rate among the three major launches in Katong?
Weak sales at a project’s launch portends trouble for a developer. Financing costs will balloon. Crucially, a poor take-up rate creates a negative impression among potential buyers, which hampers future sales.
From Q2 2020, the private residential property price index by the Urban Redevelopment Authority rose for 12 consecutive quarters. Private home prices jumped by 28 per cent between Q1 2020 and Q1 2023.
https://i.imgur.com/Ywc3H64.png
Contagion risk
Poor sales at any upcoming major housing project launch could help halt the winning streak for private home prices.
There can be a contagion effect from any major launch that draws a weak response.
When project launches have frenzied responses, such as the 98 per cent take-up at AMO Residence’s launch in July 2022 and the 84 per cent take-up at Lentor Modern’s launch in September 2022, expect more fence sitters among potential buyers to commit to buying homes for fear of missing out. AMO Residence in Ang Mo Kio has 372 homes, and Lentor Modern in Yio Chu Kang has 605. Both are 99-year leasehold projects.
Conversely, if project launches draw tepid responses, more potential buyers could hesitate. Developers of projects that do not sell well may then need to lower prices or throw in more goodies to move inventory.
With the latest cooling measures, non-PR foreigners – who need to pay 60 per cent ABSD – could become largely inactive in buying homes. Citizens and PRs may shelve plans to buy multiple homes because of the higher ABSD rates.
Generally, any upcoming home launch will have to rely more heavily on demand from citizens and PRs who are first-time homebuyers.
Demand from these buyers could falter. Persons buying for investment may hold back due to high interest rates. If the leasing market cools down as more housing stock comes on stream, higher financing costs plus higher property taxes may make an investment property unappealing.
Persons buying for owner-occupation may also go slow, as economic uncertainties shake buying confidence and higher interest rates crimp budgets. Should price growth in the Housing and Development Board (HDB) resale market slow, HDB homeowners looking to trade their HDB flats for private homes may find the going tougher.
Sales commissions from new housing projects are a key revenue source for leading property agencies such as PropNex Realty, ERA Realty Network and Huttons Asia. Expect motivated and creative agents to work hard to keep the momentum going in new launches.
Watch out to see if developers and agents can avoid poor take-up in any upcoming major project launches that could end the party in the Singapore private homes market.
https://www.businesstimes.com.sg/opinion-features/after-continuum-weak-take-any-new-launch-will-cast-pall-private-housing-market
May 15, 2023
THE jury is out on whether the latest property cooling measures that took effect on Apr 27 might amount to much ado about nothing.
Developers have launched new private housing projects post the cooling measures. And new homes are still being snapped up.
With the latest measures, foreigners pay higher Additional Buyer’s Stamp Duty (ABSD) for any home purchase. Singapore citizens and permanent residents (PRs) also pay higher ABSD on second and subsequent homes.
However, citizens buying their first homes pay an unchanged ABSD rate of zero per cent, while PRs pay an unchanged 5 per cent rate.
Still, the cooling measures may be biting. The sales rate of over 26 per cent for freehold The Continuum at an average S$2,732 per square foot (psf) over its launch weekend on May 6 to 7 was unimpressive. The 99-year leasehold Blossoms by the Park sold about 74 per cent of its units at its launch, one weekend earlier, at a median price of S$2,427 psf.
Blossoms by the Park in Buona Vista has 275 homes, while The Continuum in Katong has 816. Going by the number of units sold at launch weekend, The Continuum edged out Blossoms by the Park.
But The Continuum’s sales performance pales in comparison to the nearby 99-year leasehold Tembusu Grand. Launched in early April before the latest cooling measures, that development sold 340 out of 638 homes, or about 53 per cent of its units at its launch weekend, at a median price of S$2,463 psf.
Possibly, buyers are more enamoured with the pair developing Tembusu Grand – City Developments Limited : C09 -0.14% and MCL Land – than the developers of The Continuum – Hoi Hup Realty and Sunway Developments.
Nevertheless, selling over a quarter of units at a launch is hardly a disaster. Often, a developer has more than three years post a project’s launch to sell all the units in order to comply with conditions for ABSD remission, which include the need to complete and sell all homes within five years of buying a site.
Indeed, while targeting strong take-up at a project’s launch, many developers may not aim for sales rates of close to 100 per cent. A high take-up rate may indicate a project was underpriced. In such a case, profit margin would have improved if the pricing had been sharper.
Critically, if take-up at launches is buoyant immediately following the latest cooling measures, odds may rise of even tougher cooling measures being introduced.
Healthy sales
Still, many developers probably target healthy take-up rates at project launches – possibly closer to the 50-per-cent mark. After all, a project’s launch typically represents the culmination of months of marketing and branding to build traction with potential buyers.
Securing strong sales at the launch when construction is in its infancy translates into using less debt funding. If borrowing cost is 5 per cent per annum, every S$10 million less in loan drawdown a year means an annual saving of S$500,000.
In the fragmented housing development market, numerous developers compete fiercely to get land and snare buyers.
Nonetheless, over the coming months, developers may be united in wishing success for each other in new home launches.
Danger may be mounting that a major project could draw a weak sales response at launch – possibly under 20 per cent.
Far East Organization and Sino Group – which just started previews for 99-year leasehold The Reserve Residences, which is integrated with Beauty World MRT station – may keep pricing attractive to ensure a good take-up at launch. Prices for the 732 homes are expected to start at S$2,300 psf.
SingHaiyi Group’s 99-year leasehold Grand Dunman, with over 1,000 homes, is slated to be the third major launch in Katong this year. Might this project’s launch draw the lowest sales rate among the three major launches in Katong?
Weak sales at a project’s launch portends trouble for a developer. Financing costs will balloon. Crucially, a poor take-up rate creates a negative impression among potential buyers, which hampers future sales.
From Q2 2020, the private residential property price index by the Urban Redevelopment Authority rose for 12 consecutive quarters. Private home prices jumped by 28 per cent between Q1 2020 and Q1 2023.
https://i.imgur.com/Ywc3H64.png
Contagion risk
Poor sales at any upcoming major housing project launch could help halt the winning streak for private home prices.
There can be a contagion effect from any major launch that draws a weak response.
When project launches have frenzied responses, such as the 98 per cent take-up at AMO Residence’s launch in July 2022 and the 84 per cent take-up at Lentor Modern’s launch in September 2022, expect more fence sitters among potential buyers to commit to buying homes for fear of missing out. AMO Residence in Ang Mo Kio has 372 homes, and Lentor Modern in Yio Chu Kang has 605. Both are 99-year leasehold projects.
Conversely, if project launches draw tepid responses, more potential buyers could hesitate. Developers of projects that do not sell well may then need to lower prices or throw in more goodies to move inventory.
With the latest cooling measures, non-PR foreigners – who need to pay 60 per cent ABSD – could become largely inactive in buying homes. Citizens and PRs may shelve plans to buy multiple homes because of the higher ABSD rates.
Generally, any upcoming home launch will have to rely more heavily on demand from citizens and PRs who are first-time homebuyers.
Demand from these buyers could falter. Persons buying for investment may hold back due to high interest rates. If the leasing market cools down as more housing stock comes on stream, higher financing costs plus higher property taxes may make an investment property unappealing.
Persons buying for owner-occupation may also go slow, as economic uncertainties shake buying confidence and higher interest rates crimp budgets. Should price growth in the Housing and Development Board (HDB) resale market slow, HDB homeowners looking to trade their HDB flats for private homes may find the going tougher.
Sales commissions from new housing projects are a key revenue source for leading property agencies such as PropNex Realty, ERA Realty Network and Huttons Asia. Expect motivated and creative agents to work hard to keep the momentum going in new launches.
Watch out to see if developers and agents can avoid poor take-up in any upcoming major project launches that could end the party in the Singapore private homes market.
https://www.businesstimes.com.sg/opinion-features/after-continuum-weak-take-any-new-launch-will-cast-pall-private-housing-market