The next 12 months will be a trying time for the luxury homes market, as it takes in the effects of recent cooling measures, and a looming global economic slump.
(Singapore is experiencing a slight overload of high-end luxury units, with many claiming the need for affordable housing should be prioritised. Image courtesy of thinkstock.)
Currently, there are the thousands of high-end units, developed, launched and still waiting for buyers. Due to lack of interest, developers are considering delaying other launches they have in the queue until things start looking up. Fortunately for them, low interest rates and sufficient cash from previous years’ bumper market should see them through.
“If a developer has not launched its project yet, it might be better not to launch because once you do you're locked in. But if you don't, then you can still adjust your plans according to changing market conditions,” warned Chesterton Suntec International research head Colin Tan to The Straits Times.
According to property consultancy CBRE, there are at least 25 launch-ready projects in districts 9 through 11 in the market. These districts are prime areas for high-end homes. The projects—including Ardmore 3, Leedon Residence and TwentyOne Anguilla Park opposite Wheelock Place—are made up of more than 2,000 unsold units.
CBRE also revealed that at least 30 already-launched projects in these districts still had at least 2,846 homes (or 50% of their units) unsold as of the end of November last year. Majority of these unsold homes came from the D'Leedon (with 1,257 of 1,715 units unsold), the Twin Peaks (413 of 462 unsold), the Hilltops (208 of 241 unsold); and the The Scotts Tower (200 of 231 unsold).
Taken into account all the homes that were not even released for sale, the stock of high-end homes stands at 5,903. This number excludes the luxury units of Sentosa Cove, where sales have also slowed drastically. According to caveats lodged with the Urban Redevelopment Authority, there were only 12 new sales in Sentosa Cove for the whole of 2011.
However, Tan noted that developers are still getting revenue from their projects in the mass market segments, which are currently enjoying healthy sales. As such, he told The Straits Times there is no urgency to sell the city-centre homes.
Indeed, experts do not seem too worried about the oversupply situation. Alan Cheong, associate director of Savills research and consultancy, told The Straits Times that he felt the oversupply is a “short term concern”. Developers are free to shift around their launch and completion timelines based on the market outlook.
Cheong added that they developers also have the option of leasing out their units, as opposed to selling them off. “Developers have strong balance sheets after reaping super-normal profits over the past five years. They have enough built-in fat and are hibernating [...] Most of these sites are also freehold so there's less urgency to launch.”
From the buyer’s perspective, this means resale prices of high-end homes are expected to soften, said Cheong. Meanwhile, he expects the values of high-end launches to remain strong this year.
Similarly, International Property Advisor chief executive Ku Swee Yong told The Straits Times he expects transaction volumes in the luxury market this year to fall by 50% but for prices to hold. “As long as none of the developers feels pressure to offload units, the risk of precipitating a price decline does not exist. Balance sheets are strong and borrowing costs are low.”
Others are less optimistic, and have predicted price falls of up to 15% this year. One insider noted that rather than holding back on launches, some developers might release their high-end projects over a few years so as not to cause another oversupply.
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Related Categories: General, Private Residential
Tags: CBRE, Chesterton Suntec International, condo singapore, condominium singapore, cooling measures, district 9, D'Leedon, economic slump, high end condominium, high-end homes, high-end units, Hilltops, Leedon Residence, luxury homes market, luxury property, new property launch, property project Singapore, property Singapore, Sentosa Cove, The Scotts Tower, TwentyOne Anguilla Park, Twin Peaks
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