Developers are seeing a challenging outlook ahead for the private residential market but many are still keen to replenish their land bank, albeit in a selective fashion. Sim Lian Group, which sold the most number of residential units among developers this year, is actively looking at both the government land sales (GLS) programme and enbloc properties to replenish its land bank, its executive director Kuik Sing Beng told The Business Times.
The recently privatised construction cum development group sold over 1,000 units in the first 11 months of this year during which it launched two executive condominiums (ECs); it had 267 unsold units left in its inventory. CapitaLand, which sold 541 units as of end-November, said it will continue to look out for opportunities to build its development pipeline.
"As the impact of the property cooling measures continues to weigh on the market, private residential demand and pricing are expected to further moderate in 2017," a CapitaLand spokeswoman said. "Depending on market conditions, we will tailor our sales and marketing strategies accordingly." Christopher Tang, Frasers Centrepoint Limited (FCL) Singapore CEO, noted that even though the outlook remains challenging under current economic conditions, "there is still demand for quality projects which offer a strong value proposition in location, quality and price".
FCL has enough land bank for 800 to 900 residential units currently, including an upcoming project along Siglap Road. FCL had sold 352 units in the first 11 months of this year, compared to 771 units in 2015. "Our balance inventory is low (around 700 units including ECs) and we are not under as much pressure to reduce prices to move our inventory," Mr Tang said.
Developers are generally setting their sights beyond the near-term muted sentiment in the private residential market and are looking to replenish their land bank. To ensure stable continuing private homes supply beyond 2020 and in the midst of heightened competition among developers for land sites, the government could look at increasing the number of government land sales (GLS) sites available for tender next year.
But should market conditions weaken further next year and coupled with looming penalties for unsold units for many developers under the conditions of qualifying certificates and the additional buyer's stamp duty (ABSD), there could be further price adjustments going forward. A City Developments Limited (CDL) spokesman noted that the government has moderated the new supply of residential properties in its GLS programme, especially by allocating more GLS sites to the Reserve List, which will hopefully help developers move unsold units in their existing inventory.
As of end-November, CDL has an inventory of about 681 unsold units based on launched units and includes CDL's share of the unsold inventory in joint venture projects. It had sold 981 units for a total S$1.2 billion in the first 11 months, up from the 631 units sold for S$650.6 million in the same period last year. To help drive sales, CDL said it has initiated various marketing and promotional activities to attract buyers.
"The total debt servicing ratio and ABSD continue to impact residential sales volume as many buyers remain undecided on their purchases given decreased financing capacity and hefty stamp duties," the CDL spokesman said. "Looking ahead, 2017 is expected to be challenging as the uncertain interest rate environment, slowing economy, and property cooling measures continue to impact the outlook for the residential market and investor sentiment."
The upcoming GLS programme will likely remain focused on areas that saw high demand. For instance, the supply for areas like Punggol is likely to ease, while more sites could be offered in Serangoon and Tampines based on the success of Forest Woods and The Alps Residences. Given the appetite of developers to replenish their land banks, more enbloc sales may also materialise, although this may be restricted to smaller sites in established estates.
Adapted from: The Business Times, 9 December 2016