http://www.straitstimes.com/PrimeNew...ry_682882.html

Jun 23, 2011

Developers' interest in projects expected to remain healthy

By Esther Teo, Property Reporter


THE outcry that may have led a developer to slash prices at a Tampines housing project will not deter other builders bidding for similar projects, say developers and property analysts.

They told The Straits Times that demand for land to build such Design, Build and Sell Scheme (DBSS) flats is expected to remain healthy.

This is because they believe home buyers are still keen on these premium flats with condominium-like features, including built-in wardrobes and air-conditioning. It also helps that DBSS flats are open to applicants with a higher income who do not qualify for normal new Housing Board flats.

'There will always be a segment of buyers interested because DBSS flats come fully furnished,' said Dennis Wee Group director Chris Koh. 'Previous DBSS launches have also done well. If the location of the project is good, it will sell.'

The controversy over this category of flats centres around Centrale 8 at Tampines, the latest DBSS launch.

Developer Sim Lian Group had initially indicated that the biggest flats in the project would go for $880,000, or $750 per sq ft (psf), a record price that drew protests from the public.

But on Tuesday, the firm abruptly cut the top prices to $778,000, or $663 psf. While still a record, this makes units up to $102,000 cheaper.

The project's reduced prices have also raised talk among industry players that an invisible price ceiling of about $800,000 has surfaced for new flats.

But some developers are unfazed by this. EL Development managing director Lim Yew Soon, who plans to launch a DBSS project in Clementi in the fourth quarter, said the revised prices for Centrale 8 were actually more realistic.

'The project might not shift that many units with the higher price, and if a DBSS project doesn't do well, it might reflect badly on future projects.'

On the other hand, if demand for Centrale 8 had been very strong despite the original high prices, that might have led to more cooling measures from the Government - also a bane for developers, Mr Lim added.

Usually, developers of DBSS flats do not aim to maximise profits and prefer to sell units quickly, given the many sale restrictions, said Mr Eugene Lim of ERA Realty.

Buyers of DBSS flats are subject to the usual HDB rules, except that their monthly income can go up to $10,000, compared with $8,000 for normal flats.

Profit margins are generally lower for DBSS projects, at about 5 per cent to 15 per cent, while mass market private homes have margins of 15 per cent to 20 per cent.

But the Centrale 8 episode may still affect some developers. The Government now says it will review the scheme.

A senior executive for a property firm, who declined to be named, said her company will study the take-up rate at Centrale 8 before deciding on how to price future DBSS projects. 'We are more concerned about the review of the DBSS scheme that the Government has mentioned. There are more uncertainties there.'