Saturday, January 7, 2012

Singapore Luxury Property Oversupply

At least 30 already launched projects in Singapore's central districts; district 9, 10 and 11 have still more than half of its units unsold by the end November 2011. 4 projects among these are heavily unsold: For example 1257 units of total 1715 units in D'Leedon in district 10 are unsold (73 per cent). 413 units of 462 units of Twin Peaks, at the site of old Grangeford apartments near Orchard Road, 208 units of 241 units of Hilltops and 200 units of 231 units of The Scott Towers are unsold.[1]

Things will be harder in 2012 for luxury projects in Singapore, which are ridiculously high priced and mostly grapped by foreigners. This is because of new property cooling measures requiring 10% extra stamp duty from foreign buyers, economic uncertainties as well as the financial positions of the developers. They will probably use the ultra low interest rate environment to finance their operations for a while instead of lowering the prices:

"Developers have strong balance sheets after reaping super-normal profits over the past five years. They have enough built-in fat and are hibernating ... Most of these sites are freehold so there is no urgency to launch".[1]

Some experts believe that they can lease up the units instead of selling them with lower prices. But this will be really difficult in an environment where expat packages are shrinking, banking and financial services industries are cutting jobs in Singapore and economy is growing with a slow pace. It is also very damaging for all developers to hold back since they eventually need to launch the projects and if they all hold back and launch around the same time in a high interest rate environment, it may be even more difficult to sell.

But some experts expect 15 per cent price falls in the luxury segment. According to DTZ, luxury condominium segment has already have a very bad 2011 even before new property cooling measures and prices of these condos have just gone up 1 % in 2010.

If the prices of these units are beaten by nearly 6% inflation, there must also be no reason to force buyers to put their money to luxury property.

[1] - Luxury home market faces oversupply

1 comment:

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