Expect more property developers to follow the step taken by CapitaLand to cut prices, especially for slow-moving projects. To recap, CapitaLand cut prices for Sky Habitat by 12-14% at a new price range of S$1,267 to S$1,622psf when it relaunched the project On 19 April 2014. With that move, CapitaLand sold 106 units of Sky Habitat from 19 to 23 April 2014. Next, we can expect a similar move by Wheelock for The Panorama. Currently, some property developers are offering low single-digit discounts and higher discounts for “star buys” (selective units that are deemed less saleable owing to orientation, level and so on).
In our view, developers of slow moving projects may want to consider cutting prices instead of offering freebies (home appliances such as fridge, washer cum dryer, oven, microwave, dishwasher, and so on). Under current market conditions, ultimately what matters is price psf and the absolute price quantum. Clearly, the right pricing strategy remains crucial. A drop of 15%-20% in selling price, could be the magnet to move some of the slow-moving projects in the primary market.
Another trend that we foresee is that property developers will create new show units for projects that didn’t sell well. Furnishings may be different from those in the initial launch. Some of the savings from using a different type of material or product could be passed on to buyers via lower pricing.
My company, HSR have identified 50 projects with take-up rates of less than 50%. For that pool, the average take-up rate increased by less than 3% over the last five months. There were at least eight projects with less than 10% take-up rate over the last five months (December 2013 to April 2014), of which two projects recorded zero take-up. We have highlighted in light grey (see table) projects with stagnant take-up rates over the last five months
Research Analysts: Tong Kooi Ong and Penny Yaw , HSR International Realtors