Price war in the works?

Source : Today - 13 Feb 2009

CDL offers Valentine’s Day discount for Pasir Ris project

AT A time when consumers think twice before forking out money for big-ticket items, a major property developer here is dangling outright discounts to lure buyers. And if customers do bite, the move may mark the start of a price war, say industry observers.

Yesterday, Mainboard-listed City Developments Limited (CDL) fired the first salvo by revealing a 5-per-cent discount for selected units at Livia, a mass-market condominium in Pasir Ris.

The announcement was decibels louder than usual: Up until now, developers have largely offered discounts to walk-in customers, rather than publicly trumpeting the promotions. CDL is expected to be taking out advertisements for its special offer over the next few days.

The occasion for the promotion? Valentine’s Day tomorrow, according to CDL’s press release obtained by Today.

Cupid, however, is not going to be the clincher for customers, said Colliers International’s research and consultancy director Tay Huey Ying. It’s the “pretty attractive pricing”, she said.

Livia’s special price is about $620 per square foot (psf), said CDL, versus the average of $650psf during the phase-one launch in July last year when 340 of the 360 units released were sold. This equates to a discount of 5 per cent.

CDL “senses a renewal of market interest and improvement in buyer sentiment”, said group general manager Chia Ngiang Hong.

Although CDL said it would apply the offer to just 30 units of the 99-year leasehold project, the reality is likely to see some 60 units let go at that price, a marketing agent said, on condition of anonymity.

That is a small number compared to the 384 units still unsold. But observers say the V-Day offer may be a starting point, to test if the price is “right”. Said an industry insider: “People have been coming to showflats and just nibbling. Singaporeans want to see prices move.”

A three-bedroom unit at Livia will now cost $752,000, CDL said, versus the phase-one price of $793,000.

How long will the special offer last?

“A limited period,” CDL said.

Could this spark a price war? CDL’s competitors declined comment yesterday.

Colliers’ Ms Tay said developers were likely to resort to cutting prices - and hence eroding their profit margins - “only for projects that they’re keen to move in order to ease cash flow”.

It’s more likely that developers will roll out “a combination of competitive pricing and innovative marketing strategies”, said Ms Tay.

Demand, however, is certainly there. Crowds yesterday thronged Alexis, a freehold condominium near Queenstown MRT station, during the first day of its launch. By evening, more than half of the 293-unit project was sold, developer EC Prime told Today.

Agents there dangled a big sweetener: Discounts of as high as 28 per cent, resulting in prices between $850 and $1,150psf.

While there were interested owner-occupiers, some people were overheard asking: “What are my chances of flipping this?”

Last week, Frasers Centrepoint sold 300 units of the 712-unit Caspian project in Jurong West within the first three days for an average of $580 psf. Most of the buyers were Singaporean HDB upgraders.