Published 25 February 2011
The Business Times
By Uma Shankari
He sees 3-5% dip in private home prices, says sales are down
City Developments, Singapore’s second- largest property developer by market capitalisation, expects private home prices to fall 3-5 per cent this year on account of the chill from recent government cooling measures.
Home prices may decline after hitting a new record in 2010, executive chairman Kwek Leng Beng said yesterday. He also said that sales volumes have already fallen.
But prices are unlikely to plunge as there is still strong demand for homes in Singapore from overseas buyers, Mr Kwek said.
In addition to the traditional market of Indonesian and Chinese buyers, more money from the Middle East is flowing into Singapore in the wake of the unrest in the region, he said.
Mr Kwek was speaking at CityDev’s results announcement. The group’s Q4 2010 net profit climbed 41 per cent year-on-year to $249.2 million
‘Residential volumes have started to go down somewhat, but prices are still not down yet,’ he said. ‘Usually it’s the volume that is the precursor to prices going up or down.’
Unless there is a spike in demand from overseas buyers, ‘prices will go down 3 to 5 per cent’, Mr Kwek said. He also warned that the government may impose more curbs if the market ‘improves a lot’ and prices don’t fall.
Analysts have similarly said that further policy risk remains a persistent overhang, and that residential prices could fall by 5-10 per cent in 2011.
In a Feb 23 report, UBS Investment Research analyst Adrian Chua said that further policy measures cannot be ruled out if the market regains its exuberance. Future measures will focus on the initial purchase stage by ‘raising the level of equity required upfront’, he said.
Meanwhile, CityDev said yesterday it will buy Dubai World’s entire one-third stake in the South Beach project for $155 million.
CityDev, Dubai World and US-based Elad Group teamed up to buy the 99-year leasehold landmark Beach Road site opposite Raffles Hotel from the state for $1.69 billion in 2007. Each of the partners has an equal stake in the consortium developing the project.
The group also confirmed that it will boost its stake in the consortium developing the South Beach project, following a report in The Business Times yesterday that the company has exercised its right of first refusal to acquire Dubai World’s stake in the project. The moveÃ‚Â comes after Dubai World unit Istithmar Beach Road informed City- Dev that it is looking to sell its entire stakeÃ‚Â in the consortium developing the project. CityDev then exercised its right to acquire the Istithmar shares and has entered into a conditional sale and purchase agreement to acquire the shares for $155 million. The two parties have started the process for the fulfilment of the conditions precedent.
‘The company will make a further announcement upon completion of the proposed acquisition following satisfaction of all conditions precedent,’ CityDev said in a statement.
Mr Kwek said CityDev would eventually like to own more than 50 per cent of the project – although the company remains open to welcoming new investors.
CityDev plans to market 580 homes in four projects in the first half of 2011.
The group’s home sales rose 13 per cent to $2.1 billion in 2010, when it sold 1,559 homes. In 2009, CityDev sold 1,508 homes worth $1.9 billion in total.
Looking ahead, CityDev is still bullish about the high-end and luxury market segments. It noted in its results announcement that the high-end residential segment ‘could see increased activity as current prices are still below the previous peak’.
Backing up this assertion, the group will launch two high-end projects in H1 2011 – the joint venture project with Wing Tai at the former Anderson 18 site (now called Jean Nouvel Residences), and another project at Buckley Road.