Wednesday, June 9, 2010

Consultants set to peg down estimates of developer sales

Price forecasts also likely to be moderated as bleak European picture leads to caution here

(SINGAPORE) Property consultants are getting ready to lower their projections for full-year developer sales. Some are also moderating their price expectations, though most don't expect developers to chop prices any time soon given the still rosy picture for Singapore's economy.

Generally, the consultants are awaiting official figures on the number of private homes that developers sold in May (these will be released by the Urban Redevelopment Authority next Tuesday) before they pen their revised sales and price forecasts.

Based on BT's poll of developers and estimates from consultants, developers could have sold about 1,000 private homes last month. The drop from the bumper sales of 2,207 units in April was expected given the slowdown in property sentiment due to Europe's economic crisis.

'Some potential buyers have retreated to the sidelines for now, looking for some positive news before they come out again,' says Knight Frank chairman Tan Tiong Cheng.

DTZ executive director (consulting) Ong Choon Fah says: 'The general feeling is that things are getting more opaque. People are asking again whether there's going to be a double dip in the global economy.'

However, demand from HDB upgraders looking to buy suburban condos for their own occupation is still strong. Investors and some foreign buyers may take a back seat, unless they are buying for other reasons - such as securing permanent residence in Singapore, Mrs Ong added.

Assuming that developers sold about 1,000 units in May, it would take total primary market sales for the first five months of 2010 to about 7,600 private homes.

Reaching full-year sales of 10,000 units is not expected to be an issue as it implies average monthly sales of just about 340 units from June to December. However, consultants who had projected much higher sales numbers previously now expect to pare the top end of their estimates.

Jones Lang LaSalle's (JLL) South-east Asia research head Chua Yang Liang said yesterday that developers may sell 13,000 to 14,000 private homes in 2010, instead of 13,000 to 16,000 units that he estimated previously.

Colliers International director for research and advisory Tay Huey Ying too reckons full-year developer sales could come in at about 12,000 units, against her earlier prediction of 12,000-14,000 units. 'Prices in the mass-market segment are already peakish and sales may slow if developers continue with an aggressive pricing strategy, especially if interest rates also start to rise,' she added. However, the increase in state land sales in second-half 2010 is expected to limit developers' pricing ambitions, some analysts suggest.

JLL's Dr Chua predicts that URA's benchmark overall price index for private homes will appreciate at a slower clip in the months to come, turning in a full-year increase of about 10 per cent, including the 5.6 per cent gain in Q1. Previously, he had forecast a 10-12 per cent full-year rise. He is moderating his price gain projection rather than predicting a price fall because 'so far, Europe's economic problems have not had a direct impact on Singapore's economy, other than the stockmarket jitters'.

'But if there is a broader economic contagion effect on Asia, there will be implications for Singapore's property market,' he added.

Agreeing, DTZ's South- east Asia research head Chua Chor Hoon said: 'I don't foresee a price fall in the coming months or full year unless, say, we see a double dip in Europe or the US, and this affects Singapore's economic growth.'

DTZ's Mrs Ong suggests developers will tend to be 'more reasonable' with pricing. She does not foresee them chopping prices of projects already on the market as that may damage goodwill with earlier buyers. However, she reckons they may choose to launch towards the mid or lower end of their target price range and not push for as high a price as possible, which they were doing 2-3 months ago.

Agreeing, a seasoned property agent said that developers are more likely to offer incentives other than a price cut. Incentives offered by developers in the past include furnishing vouchers, stamp duty absorption and even rental guarantees.

Among the projects expected to be released later this month or next month are City Developments' 157-unit freehold condo on the former Concorde Residence site at Thomson Road, OUE's Twin Peaks condo on the Grangeford site, Hong Leong Holdings' condo at Serangoon Avenue 3, Waterfront Gold in the Bedok Reservoir area, the 72-unit Horizon Residences on Pasir Panjang Hill, and Terrene at Bukit Timah, a 172-unit project in the Toh Tuck area by UOL Group.

Apart from developer launches, another source of supply is specuvestors who wish to dispose of their units while they still can.

'In every segment of the market - big, small, niche projects - there's competition. So everyone's watching one another,' said an industry player.

Source: Business Times, 9 Jun 2010

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