ST : Home sellers in flood areas may lose out some

Aug 22, 2010

property

Home sellers in flood areas may lose out some

Buyer interest falls, but effect is temporary, say property experts

By Esther Teo

The floodwaters may have long receded, but property agents report that homeowners in flood-affected areas are facing reduced buyer interest.

Industry players say that property bargain hunters, however, might see the floods as a bargaining chip and an opportunity to invest should they chance upon an urgent seller.

They say that the floods are expected to be a temporary problem with drainage improvement works and flood prevention measures slated to be carried out by the Government, after which prices would resume their upward trend.

A number of condominiums in property hot spots, such as the Tessarina and Gentle Reflections in Bukit Timah, had their carparks flooded during heavy rain over the past two months, damaging parked cars and angering residents.

Landed home residents in Opera Estate and Jalan Ma'mor in Balestier woke up to muddy water gushing through their homes on a Saturday morning last month after a storm with nearly twice the force of the two in June battered the central and eastern parts of Singapore.

Managing director of property agency AC MacGyver, Mr Alexs Chua, said homes located in flood-prone areas might need to be priced at an estimated 15 per cent discount compared to those on higher ground.

'It is hard to compensate a buyer who may have to change his furniture whenever it floods,' he said.

Mr Steven Tan, executive director of residential at the OrangeTee agency, said that flood areas were likely to face price resistance in the short term.

'Prices might not necessarily go down, but they might not move as quickly upwards compared to other projects in the area if the problem persists or if buyers remain wary,' he said.

Property agents say that homes in popular areas such as Bukit Timah, Upper Thomson and Telok Kurau are being viewed by reluctant buyers who have lost some interest in projects devastated by the floods. Some sellers are more willing to negotiate on their asking prices.

Fire sale prices, however, are unlikely, agents say, since most sellers are not urgently divesting. But with buyers having more bargaining power now, they may be able to tease out small discounts from more flexible sellers.

PropNex chief executive Mohamed Ismail said: 'No seller is going to sell a house at a 20 per cent discount just because of the floods, especially when they know the problem is not expected to be a permanent one.'

Knight Frank agent Mindy Yong, who markets the Tessarina condo in Wilby Road, said sellers may be open to offers $20,000 to $50,000 below their asking price.

A property agent who wanted to be known only as Mr Tay said that the current gap in price expectations between buyers and sellers in previously flooded areas has kept the market quiet since the floods.

'Some buyers expected a fire sale and asked for a 20 per cent discount. Of course, sellers refused. But if they ask for a more reasonable 5 per cent discount, then why not?' he said.

Mr Tay added that if no transactions were sealed in the next few months, it was inevitable that some sellers might become desperate and start lowering their selling prices.

However, prices are not expected to stay flat in the long term with the PUB already announcing plans to alleviate flooding in these hot spots, some experts say.

Singapore's water agency said that works will include raising roads as well as widening and deepening drains. Where possible, the works will be expedited.

For example, improvement works in areas like Jalan Ma'mor and Jalan Bahagia will see water flow diverted to Sungei Whampoa and the drains deepened. Tenders for improvement works have also been called last month for the stretch of Bukit Timah Canal between Wilby Road and Maple Avenue.

Mr Colin Tan, research and consultancy director of Chesterton Suntec International, said landlords rather than owner-occupiers are more likely to sell their flood-prone homes as they may decide to reinvest.

While potential gains will be affected, the market is still moving upwards, he said, adding that over the long term, most buyers may forget about the floods.

esthert@sph.com.sg



Fire sale prices at properties like the Tessarina condo in Bukit Timah (above), which had its carpark flooded during heavy rain, are unlikely, say agents, but buyers may be able to tease out small discounts. -- PHOTO: JERRY CHAN