Published July 26, 2008

Private homes to take a slower road to completion

Many units pushed back as costs rise and sentiment falters


(SINGAPORE) The latest news is good or bad - depending on your point of view. Official data now shows that the number of private homes that could be completed by end-2011 may be less than previously thought - which means residential rental and capital values could hold better than expected.

Urban Redevelopment Authority's (URA) latest Q2 figures, based on quarterly surveys of developers, showed that 46,480 private homes are expected to be completed between Q3 2008 and end-2011. This figure is 18 per cent - or 10,021 units - lower than the figure of 56,501 units slated for completion between Q2 2008 and 2011 listed in URA's Q1 data.

Of these, 2,587 units were completed in the second quarter and have hence been removed from the supply pipeline, URA explained. Other completions have been put on hold as some developments have been postponed - as seen in the case of some en bloc sale sites. Rising construction costs and cautious market sentiment have delayed the construction of other projects.

Notwithstanding this, URA highlighted that the total supply of new private homes in the pipeline stood at 67,569 units as at end-Q2 2008 - about the same as 67,736 units at end-Q1. However, more of these units may now see completion after 2011.

Some industry players welcomed the latest figures, which will hopefully clear up some of the question marks about home completions.

Knight Frank managing director Tan Tiong Cheng said: 'Rents should hold better and capital values should also hold slightly better. Basically the window widens for those who've bought homes earlier on deferred payment schemes to clear their purchases if their units are in projects whose completions are being delayed. In short, there should be less panic selling.'

Typically, deferred payment schemes - scrapped since last October - expire when a project is completed, which is when buyers have to pay the bulk of their purchase price to developers. As a result, 'specuvestors' tend to offload their units in projects before they are completed.

However, Mr Tan also pointed to a potential downside for developers whose projects are in the immediate vicinities of condos sold earlier. 'As a developer, I face competition for sellers from those specuvestors who've bought in nearby projects for a longer period now if the project completions are delayed.'

URA's price index for non-landed private homes in Core Central Region (CCR) dipped 0.1 per cent in Q2 over the preceding quarter - for the first time since Q1 2004, the earliest period for which such data is available.

The Q2 decline in CCR - which includes the prime districts 9, 10 and 11, the financial district and Sentosa Cove - came on the back of a 0.5 per cent drop in the price index for uncompleted homes in the region; the index for completed homes rose 0.3 per cent.

Non-landed home price index (overall, covering both completed and uncompleted units) rose 0.7 per cent in Q2 for Rest of Central Region and by 0.9 per cent in Outside Central Region.

URA's headline islandwide price index for private homes (landed and non-landed) inched up 0.2 per cent quarter on quarter in Q2 - weaker than the 0.4 per cent flash estimate rise announced earlier this month. The index has risen 3.9 per cent in the first half from the end-2007 level - after escalating 31.2 per cent for the whole of 2007.

Looking ahead, CB Richard Ellis executive director Li Hiaw Ho said: 'Correction of residential prices, to the tune of 5 to 10 per cent in H2 2008, will be inevitable but is likely to vary according to location, product type and target market', citing the continued toll of the sub-prime mortgage meltdown on the global economy and high inflation.

Developers sold a total 1,525 private homes in Q2, double the Q1 volume. But overall in H1 2008, they have sold only 2,287 units, which is around just one quarter of the 9,912 units developers sold in the same period last year.

The total number of subsale transactions - often seen as a proxy for speculative activity - rose 10.6 per cent quarter on quarter to 440. Leading the pack was the Outside Central Region (OCR), where subsale volume jumped 39 per cent to 154 units. Subsales in Q2 made up 8.1 per cent of private home deals in the region, which includes mass-market locations, up from 6.7 per cent in Q1.

URA said that examples of projects that saw significant subsales in OCR in Q2 include The Centris in Jurong (15 units) and The Raintree near Bukit Timah Nature Reserve (16 units). Analysts say that The Calrose in Yio Chu Kang and Varsity Park Condo also saw at least 10 subsales each in Q2.

Some of these projects have either received Temporary Occupation Permit or will be getting it soon; investors tend to sell off units shortly before or after a project gets TOP as buyers are willing to pay a slightly higher price then, because units can be immediately rented, analysts noted.

URA press release: