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Singapore no home for luxury developers Govt’s cooling measures bite

SINGAPORE, April 18, (RTRS): 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. 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 percent, 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) Ltd, Ho Bee Land Ltd and Wing Tai Holdings Ltd. Larger developers are less affected due to their more diversified portfolios, but they are also cutting prices. CapitaLand Ltd, Southeast Asia’s largest listed property developer, is selling units at its Sky Habitat condominium for S$1,370 ($1,100) per square foot compared to as high as S$1,900 when it was launched two years ago, agents say. “It feels like we’re back in 2008,” said Christine Li, head of research at real estate firm OrangeTee, referring to the property slump that affected Singapore during the global financial crisis. “There’s quite a difference between the number of people who express interest in a development compared to those who are able to commit,” she added.

Expensive
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 18 percent 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 S$10 billion 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 60 percent 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.


“Definitely at the high-end, the luxury end, the market is a bit slower because these are the people who are most affected by the policy measures,” said Lim Ming Yan, chief executive of CapitaLand. Samuel Tsien, CEO of Oversea-Chinese Banking Corp Ltd , told Reuters last month the bank was extending 40 percent fewer new mortgages in the first quarter of 2014 versus the same year-ago period. 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.

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