Home developers may put launches on hold

Source : Sunday Times - 9 Nov 2008

But buyers can expect attractive prices when projects are launched next year

The market is unlikely to see major residential property launches for the rest of the year, given the gloom in the market.

Because buyers are staying away, developers continue to hold back their launches until they see an appropriate time.

But showflat visitors need not fret as launches should come on the market next year, industry experts said. Prices, they suggested, could be more attractive too.

Property consultants said some developers will likely consider marketing their projects from early next year while the rest will continue to sell their already-launched projects.

Where brand-new launches are concerned, ‘the first half of next year could be as quiet as the second half of this year’, said Savills Singapore’s director of marketing and business development Ku Swee Yong.

Demand for new homes slowed this year, with third-quarter sales at just 1,603 units.

Last year, sales reached 14,811 units, with August alone clocking in sales of 1,731 units.

The bulk of the launches are likely to be in the mass market segment since they are targeted at owner-occupiers and upgraders, he said.

And it will be supported by the HDB resale market, where prices rose 4.2 per cent in the third quarter, he added.

In comparison, private home prices fell by 2.4 per cent in the same period, registering the first contraction after 17 consecutive quarters of growth.

For a large part of this year, the deluge of bad news and a weak stock market have served to dampen buying sentiment. The bad news is still coming on strong: Last Friday, DBS Group announced that it will cut 900 jobs, or 6 per cent of its staff.

‘Overall market sentiment is tied to the stock market performance,’ said an industry source who declined to be named.

‘If the Straits Times Index (STI) stops sliding, or if it is less volatile, it might help buyers to consider buying properties.’

The STI closed 44.29 points higher at 1,863.49 on Friday, but it is far from last year’speak of 3,906.

Right now at least, the market is largely at a standstill. Many buyers are not committing themselves because they expect prices to fall further, sources said.

‘While potential buyers prefer direct price cuts, it is a tricky question for developers to decide on how much discount to give in order to move sales,’ said one industry source.

Prices of high-end properties have fallen about 12 per cent since January, though the fall is much bigger for the projects that have yet to be completed.

The good news for developers is that construction costs are expected to come down next year. ‘This may ease the burden on developers and allow them some leeway for price cuts,’ the source said.

Knight Frank director of research and consultancy Nicholas Mak added: ‘If they do not launch now, they can then wait for construction costs to fall before locking in lower costs, which would give them more pricing flexibility.’

Looking ahead, there is a strong pipeline of residential developments ready for launch, according to data from the Urban Redevelopment Authority. Indeed, the current number of unlaunched homes - at 40,400 units - is equivalent to five years’ supply, said Mr Mak.