ST : Developers may delay condo launches

Sep 1, 2010

Developers may delay condo launches

By Jessica Cheam

PROPERTY developers are widely expected to delay their new launches, now that buying sentiment is likely to be hard hit by the slew of market-cooling measures.

The Government announced new rules on Monday that strongly discouraged speculation on homes, such as extending a seller's stamp duty from one year to three years.

The measures also require home owners with outstanding mortgages to fork out at least 30 per cent of the purchase price upfront, rather than the 20 per cent that previously applied.

Some industry analysts said yesterday that the changes could dent sales, especially for new launches in the mass-market segment.

DMG and Partners property analyst Brandon Lee said the measures would 'dampen buying sentiment across all residential segments and cause developers to delay their launches'.

However, he felt that prices were likely to stay firm, due to developers' strong holding power in view of robust sales and low funding costs.

'We believe speculative purchases will be curbed, particularly within the mass-mid segment, where small units of low price absolute quantum but higher prices per square foot continue to generate strong take-ups,' he said.

Property developer City Developments (CDL), which was slated to launch two new projects - NV Residences in Pasir Ris and Copthorne Orchard in Bukit Timah - in the third quarter of the year, said yesterday that the launches will be timed 'according to market conditions'.

Prior to the announcements, industry watchers had noted that developers were lining up projects for launch after the traditionally superstitious Hungry Ghost Festival ends next Tuesday.

Hoi Hup Sunway was said to be launching the 473-unit Vacanza@East - a freehold project in Lengkong Tujoh in the east, near the Pan-Island Expressway.

And Chip Eng Seng's Oasis@Elias in Pasir Ris was slated for relaunch at higher prices, after those at the condo rose to about $740 per square foot recently, compared to an average of $670 per sq ft in July last year.

Now, industry watchers are unsure if the launches will go ahead. Many developers may hold off until the effects of the new rules are more certain.

A CDL spokesman told The Straits Times yesterday that 'as the new measures have just been released, the market will take time to absorb the news'.

OCBC Bank head of treasury research and strategy Selena Ling said that the impact on market sentiment 'may be significant', given the array of measures in both the public and private markets.

Given that prices have now exceeded the historical peak set in 1996, she felt the measures were a 'sobering reminder against further froth in the domestic property market'.

'The risks are twofold as cited by the Government, namely potential capital losses should growth falter, and higher interest rates,' she said.

CBRE Research executive director Li Hiaw Ho noted yesterday that the changes ensured that only people with strong cash positions would be able to enter the residential market for investment purpo-ses.

'Going forward, we expect that developers will be less bullish in their bids for development sites and increases in home prices will be more moderated,' he said.