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Singapore homes clamp hits luxury developers

Singapore, April 19, 2014

Luxury property developers in Singapore are facing their worst sales outlook in six years as a raft of government measures to cool one of the world's most expensive real estate markets bite.

Sales of private homes, which account for just under one-fifth of the total property market, fell to their lowest in more than four years in January to March, official data showed this week, according to a report in the Gulf Daily News, our sister publication.

If the decline continues at the same pace for the rest of this year, analysts expect sales to halve from the 15,000 units sold in 2013.

Prices of private residential properties are also expected to fall this year and the next by between 10 and 20 per cent, analysts say. The drop began at end of last year, due to the government measures, reducing prices that had increased by around two-thirds since end-2009.

The weakness in the market is likely to weigh on the sales outlook of smaller listed developers of premium properties such as Wheelock Properties (Singapore) Limited, Ho Bee Land Limited and Wing Tai Holdings Limited.

Larger developers are less affected due to their more diversified portfolios, but they are also cutting prices. CapitaLand Limited, Southeast Asia's largest listed property developer, is selling units at its Sky Habitat condominium for 1,370 Singapore dollars ($1,100) per square foot compared to as high as 1,900 Singapore dollars when it was launched two years ago, agents say.

Singapore is the world's fourth most expensive market for luxury property according to Knight Frank, with prices propelled by a scarcity of land and its popularity as an investment destination for wealthy Asians. Most of the country's 5.4 million people, however, live in cheaper, government-built apartments.

Private houses and condominium apartments account for about 18pc of the market, but the value of contracts awarded each year to build these properties usually outstrips that for public housing.

Last year, contracts worth nearly 10 billion Singapore dollars were awarded for private residential construction, a figure the building regulator estimates will fall by as much as a third in 2014 as developers avoid new longer-term projects in an unfavourable environment.

Wary of a property bubble, the government of this island-state has initiated seven rounds of cooling measures since 2009. These had failed to put a major brake on price rises until a new rule last June took effect, limiting buyers total loan obligations to 60pc of their monthly income.

This has made obtaining mortgages harder, reducing the overall number of property buyers, and especially those looking for larger, expensive homes. Cheaper, smaller apartments are not as badly affected, as they remain relatively affordable.

Adding to developers' conundrum, and the pressure on prices, is the threat of government charges on companies unable to sell all units within two years of completion. Penalties are based on a percentage of the unit price, and rise each year the home is left unoccupied. – TradeArabia News Service




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