Profits disappear in the property market

A schizophrenic Q3 had property prices manically picking up with spots of panic-selling in august, while the months of November and December finally calm the nerves of industry players as property markets exhibit a steady increase.

According to a CB Richard Ellis report, as many as 14,500 new homes are expected to be sold for the recession year of 2009. The number is second to the record take- up of 14,811 units in the sunshine year of 2007, before the crisis hit.

Peep below the glowing reports however, and the recession battle-scars show up on the consumer. Despite the high volume of new sales in 2009, the total quantum in 2009 is only 58% of that in 2007. Consumers are buying, but they’re certainly spending less.

A note from CBRE speculates that the lower quantum could be attributed to the dominance of mass market and mid- tier homes that were sold in 2009 compared to 2007, when high- end homes stole the limelight. The launch of these projects in the first half of 2009 at attractive prices, coupled with the stock market rally, brought about the return of homebuyers. The strong take- up then filtered upward to the prime segment by the second half of 2009, even as strengthening economic fundamentals gave a further boost to market confidence.

Large- scale mass market projects that were either fully sold or nearly sold out include Caspian at Lakeside Drive, Double Bay Residences in Simei Street 3, Mi Casa in Choa Chu Kang Drive, 8@ Woodleigh, The Gale in Flora Road, Optima@ Tanah Merah and Trevista in Lorong 2 Toa Payoh. Successful projects in the mid- tier segment include The Arte and Vista Residences in Jalan Datoh, Ascentia Sky in Alexandra Road, Meadows@ Peirce in Upper Thomson and Hundred Trees in West Coast Drive. The number of units sold from these two segments made up about 60.0% of the total sales quantum in 2009.

In contrast, back in 2007, it was high-end projects in the Core Central Region (districts 9,10,11, Marina Bay and Sentosa Cove) that made up 64.2% of the total sales quantum.

Also, an increase in the number of small- format apartments sold in 2009 as compared to 2007 has been noted. A total of 540 caveats were lodged for units 500 sf and below in 2009 whereas only 221 of such units were sold in the whole of 2007. Examples of small- format projects launched in 2009 are The Alexis at Alexandra Road, The Mercury in Shanghai Road, Illuminaire On Devonshire, Attitude At Kim Yam, City Loft in Race Course Road and Suites@ Guillemard in Lim Ah Woo Road. Each unit costs an affordable range of between $300,000 and $600,000, and were fully sold within a few days of being launched.

12,000 new homes were developed in the first 9 months of 2009, but the supply of mass market projects ran dry by the last quarter. Also, a warning from the government that economic growth may be short-lived cooled hot-under-the-collar buyers from frenetic buying and selling.

By December 2009, prices of all segments of new residential projects were back at 2008 levels at median prices of $2,900 psf and $1,660 psf respectively for luxury and prime projects.

Freehold and 99- year leasehold projects stood at $960 psf and $800 psf.