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Price cuts revive April private home sales; further discounts expected

[SINGAPORE] Developers cut prices and succeeded in reviving private home sales last month, possibly setting the stage for further discounts in what's increasingly seen as a buyer's market.

April's private home sales reached the highest level since last November, following price cuts at several projects. Figures released by the Urban Redevelopment Authority (URA) yesterday showed transactions rebounding 55 per cent in April to 745 units, after a slump in March when only 480 units were moved. The figures are based on monthly submissions of private housing sales by developers.

Plagued by property cooling and loan restriction measures and spooked by disappointing sale launches, some developers have been releasing new units at considerable discounts to their initial launch prices to move inventory as their projects near completion.

The combination of discounted relaunches and reasonably priced new launches in the increasingly price sensitive market together drew bargain-hunting homebuyers back to showflats. Analysts said April's sales signalled that underlying demand is still present if prices are attractive, despite the current weak buying sentiment.

Property consultants also said that the good response to the repricing will encourage other developers to follow suit. What could draw buyers, they estimated, could be discounts averaging about 10-15 per cent below previous levels.

Pushing sales through discounts, even if it eats into profit margins, also helps manage cash flow which is needed to finance ongoing construction costs, noted CBRE research head Desmond Sim.

In all, 586 units were launched in April, versus 724 in March.

There were only two new project launches last month - Lakeville in Jurong by MCL Land and The Sorrento by Allgreen Properties at West Coast - which suggest growing caution among developers.

Both projects sold well. The 696-unit Lakeville sold 210 of its 230 launched units at a median price of $1,318 psf, while The Sorrento sold 125 of its 131 launched units at a median price of $1,414 psf. Comparing against historical transactions in the vicinity, JLL national director Ong Teck Hui found their pricing to be "realistic" and "reasonable".

Meanwhile, CapitaLand's Sky Habitat in Bishan also released 80 new units for sale in April - and ended up selling 130 units at a median price of $1,377 psf, a 13 per cent discount from its launch price of $1,583 psf in April 2012.

It was the second bestselling project in April, with sales volume comparable to the 131 units sold in the first month of its launch, although for a condominium situated within the city fringe, its revised psf price is now lower than that of a suburban condominium such as The Sorrento.

Said SLP International research head Nicholas Mak: "The developer's strategy to reduce prices has obviously succeeded in drawing back buyers' attention. The Sky Habitat story is a clear example that it is now a buyer's market."

Smaller units at Wheelock Properties' The Panorama in Ang Mo Kio are also expected to be relaunched at an approximate 10 per cent discount to their initial launch prices. Balloting was supposed to have taken place last Sunday, but it has since been postponed to May 23. The 698-unit condominium has only sold 56 of its 120 launched units as at end-April. Poor turnout at its showflat within the first weeks of its January launch this year had prompted the developer to temporarily close the showflat for a revamp in March.

This month, several anticipated projects, such as Waterfront@Faber in Clementi by World Class Land, CoCo Palms in Pasir Ris by City Developments (CDL), and Commonwealth Towers by CDL and Hong Leong Group, are expected to support launch volumes and sales in May.

April's sales, while an improvement over recent months, still stand well below the 1,384 units sold in April last year before the total debt servicing ratio (TDSR) framework was imposed.

Christine Li, head of research and consultancy at OrangeTee, now expects total sales in May to cross 1,000 units for the first time in 2014, while other consultants believe that the dust from cooling measures and the TDSR framework has somewhat settled, with buyers adapting to the new market conditions.

Others, however, cautioned that while price cuts may excite the market, the biggest problem many buyers face is still the loan restrictions.