BT : Local buyers baulk at prices that's over $3,000 psf - 10 Jul 07

[Daniel Leong]

Published July 10, 2007
Local buyers baulk at prices that's over $3,000 psf
But well heeled foreign investors may continue to set new benchmarks
By KALPANA RASHIWALA

SOME high-net-worth individuals from places as varied as Indonesia, Thailand
and Russia who need to park money in Singapore may not bat an eyelid about
paying record prices for condos, but resistance seems to be setting in from
local investors for properties priced at more than $3,000 per square foot,
according to some market watchers.

Will this clip developers' ability to constantly keep jacking up prices of
new projects? Or will the Singapore luxury market evolve to a new plane, as
Singapore becomes increasingly attractive as a global city, where buyers at
luxury residential property launches will be predominantly foreigners?

Some foreign buyers may be more amenable to paying top prices if they find
Singapore still offers them an attractive proposition.

Of late, 60 per cent of the buyers for most new high-end projects have been
foreigners, but sometimes the figure is even higher. At City Developments'
Cliveden at Grange Road, 90 per cent of the 38 units sold so far have gone
to foreign buyers, with an average price of $3,600 per square foot.

Some industry players say there is resistance from local buyers to anything
costing above $3,000 psf, although one major developer has put the
resistance band higher, at $3,300 to $3,600 psf.

Despite prices of $4,635 psf for a unit at St Regis Residences and $5,100
psf for another at The Marq On Paterson Hill, 'buying at prices above $3,000
psf is still pretty selective at this point in time', reckons DTZ Debenham
Tie Leung executive director Ong Choon Fah.

Just how many units developers have been selling, and for how much, will
emerge soon when the Urban Redevelopment Authority (URA) publishes more
pricing details of units sold by developers.

The URA is expected to aggregate the number of units sold by developers each
month, for each project, within certain dollar-per-square-foot price ranges,
as well as the average dollar psf price posted each month for each project.

This source of information, where developers report sales prices achieved
directly to the URA, will provide the market with more timely information
instead of having to rely on caveats, which take time to be lodged.

And then there are also buyers who have not been lodging caveats, perhaps
because they intend to flip the units for a quick profit.

Lamenting the current dearth of detailed price information on prices
actually achieved for launches, Colliers International director (research
and consultancy) Tay Huey Ying says: 'For most projects launched since the
beginning of the year, generally only an estimated 40 to 70 per cent of the
total number of units reportedly sold in each project have lodged caveats
thus far. Hence, sales information that is available via caveats lodged is
incomplete at this point in time.

'Improving provision or publication of more timely and complete information
on sale progress and their transactional prices will go a long way in
improving market efficiency. Would-be home-buyers will be able to make more
informed purchase decisions.'

Going by caveats lodged for primary market sales between Jan1 and June19
this year, units sold by developers in high-profile projects like Orchard
Residences, St Regis Residences and Beaufort @ Nassim at prices above $3,000
psf formed the minority of transactions for the respective projects.

Sixteen of the 48 caveats lodged during the period for Orchard Residences
were for prices above $3,000 psf.

For St Regis Residences, the figure was five of the 39 caveats lodged, while
for Beaufort @ Nassim, the share of caveats for developer sales at prices of
above $3,000 psf was four out of 13.

Of course, a different picture may well emerge when the URA's data is
released.

But whether the resistance is $3,000 psf, or at the $3,300 to $3,600 psf
level, the resistance being shown by local investors is very real, say
industry players.

'As prices go higher, potential buyers have more and more alternatives, and
may want to diversify risk, to even beyond Singapore,' Mrs Ong of DTZ
reckons.

'For such investors, chances are it will not be their first or even second
property. If they pay $3,000 psf for, say, a 2,000 sq ft condo, the price
comes up to $6 million. For this sort of sum, they will ask: 'Where else can
I put my money? A small bungalow in Singapore, a top-end condo in Malaysia,
Bangkok or even Sydney?'

CB Richard Ellis executive director (residential) Joseph Tan says that from
his experience, for the price of condo units costing 'anything more than
$8-10 million, which could work out to say $3,500 to $4,000 psf, local
buyers have the option to look at freehold landed properties in prime
locations'.

However, Mrs Ong says these would not be the sort of considerations going
through the minds of wealthy foreign investors who may just want to park
some money in Singapore real estate to diversify their portfolio.

Mr Tan says: 'They peg local property prices to those in major financial
cities. For instance, average prices of luxury homes in London are about
two-and-a-half times those in Singapore. So Singapore prices still look
attractive to these global investors.'

Whereas foreign buyers have accounted for no more than 60 per cent of buyers
in new high-end condo launches in the past, Mr Tan believes this figure can
increase further.

But some market watchers reckon developers counting on just foreigners to
set benchmark prices for their projects may not necessarily find the sailing
smooth.

'Some foreigners prefer to buy projects that are well supported by local
investors for added assurance, since local investors would generally be
considered to know their market best,' Mrs Ong reasons.

But whether developers rely predominantly on foreign investors, or a mix of
Singaporean and overseas buyers, developers may still be able to achieve
higher prices for luxury housing projects here, if they can offer compelling
propositions on design, lifestyle and the like, market watchers reckon.

While $3,300-3,600 psf appears to be a resistance of sorts among local
investors currently, the level may move higher, depending on economic growth
and supply-demand dynamics, Mrs Ong adds. 'Just last year, there was
resistance at the $2,000 psf level,' she recalls.

Mr Tan says: 'If Singapore continues to be attractive to foreigners and our
prices look appealing to them, it is likely developers will continue to bid
aggressively for prime sites.'