28 July, 2021

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THE multiple price revisions for the newly launched Pasir Ris 8, which irked some prospective buyers over the weekend, could adjust expectations for suburban residential projects, especially when other developers relook at their own pricing, analysts say.

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Developers Allgreen Properties and Kerry Properties sold a whopping 415 units, or 85 per cent of the 487 units at the 99-year leasehold integrated development at an average price of nearly S$1,600 per square foot (as at Sunday). Prices for units ranged from S$1,400 psf to S$2,000 psf, with buyers comprising a mix of HDB upgraders and investors.

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However, some prospective buyers were caught offguard by a series of price hikes, with supposedly six rounds of upward revisions having taken place on Saturday itself.

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In response to queries from The Business Times, a spokesperson for the Urban Redevelopment Authority (URA), said on Tuesday: "The URA monitors the marketing and sale practices of developers and when necessary, adjusts its policies to ensure that the interests of property purchasers are protected. The prices of properties sold are determined by developers based on market conditions."

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One prospective buyer who declined to be named, told BT that the price for a three-bedroom unit had jumped substantially to over S$1.9 million by the time his booking slot came around late Saturday night, placing it well over his budget. Ahead of the launch weekend, he was given an indicative price of between S$1.5 and S$1.6 million for the unit. A price list seen by BT showed that a seventh floor, 1,066 sq ft unit was going for S$1.945 million (S$1,825 psf) by noon on Sunday.

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Expressing his disappointment, he said: "I didn't get a good (booking slot) to secure the unit of my choice. Secondly, they increased the price so much. If I had gotten an earlier slot, I could have gotten a good price and a dream home."

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Meanwhile, a two-bedroom, 721 sq ft unit on the fourth floor was understood to have been going for S$1.459 million by Sunday, which works out to over S$2,020 psf for the 99-year leasehold project.

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A spokesperson for Allgreen said that it was a common market practice to review prices during the sales launch throughout the day. "Likewise, we reviewed the prices several times according to the different attributes of the units and stacks available, and the demand at that point of sales," said the spokesperson, adding that a few more units have been sold since Sunday.

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Aside from the price revisions, prospective buyers also had to contend with a prolonged booking process. Allgreen told BT that this was due to safe-management measures and an overwhelming demand for bookings in the earlier part of the day, which resulted in longer waiting times for subsequent buyers.

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An analyst who declined to be named suggested that the developers and brokers had underestimated demand and perhaps initially priced Pasir Ris 8 on the low side. With the number of prospective buyers well exceeding the number of units, they were able to seize the momentum by raising the prices, he said.

Describing S$2,000 psf for Pasir Ris as absurd, the analyst added: "It's the price of some apartments in the CBD and prime locations."

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A report by Citi analyst Brandon Lee says that units in nearby existing 99-year leasehold developments in Pasir Ris recently transacted at lower prices, such as the 944-unit Coco Palms at S$1,200-1,300 psf, and the 912-unit d'Nest at S$1,100-1,300 psf. Mr Lee estimates a PBT (profit before tax) margin of 12-13 per cent, based on a breakeven of around S$1,350 psf, for the residential units at Pasir Ris 8.

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While multiple price hikes in a day is not common across the board, it is not unheard of, analysts say. BT understands from a source that The Linq @ Beauty World, which sold 115 of its 120 units on its launch weekend last November, also saw several rounds of price revisions.

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Managing partner at real estate agency SRI, Ken Low, recalls seeing multiple price increases in a day, usually for mass-market projects, when the market was buoyant back in 2012-2013. This was before the total debt servicing ratio (TDSR) kicked in. Describing the transaction as ultimately one between a willing buyer and willing seller, he said: "Developers only give an indicative price during the registration period. Buyers hope to get the cheapest unit but that depends on their balloting luck."

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Mr Low also pointed out that developers typically raise prices gradually over one to two years, but when faced with overwhelming interest, may increase prices in the near term to meet their targeted profit margin.

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Showsuite Consultancy chief Karamjit Singh said: "We're going through a transitional phase in the market, that is, seeing housing values re-priced. This is on the back of the strong confidence in Singapore's recovery outlook and confidence that an investment in homes in Singapore is a great wealth preserver."

He added: "Developers sensing this are also placing top bids for land of late, which points to new elevated pricing for the next generation of new homes."

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However, at some point, the pace of increase in the housing market would "naturally taper off" once overblown, he added.

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Lee Nai Jia, deputy director of the NUS' Institute of Real Estate and Urban Studies, said: "It changes our assumptions of suburban pricing. In the past, we would have thought it was S$1,400-S$1,500 psf, but it seems that buyers have an appetite for up to S$2,000 psf."

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And while recent land bids by developers for two sites, one each at Ang Mo Kio Ave 1 and Lentor Central under the Government Land Sales (GLS) programme, had appeared high, "it seems the bids are justified and that developers have a good view of the market", he added.

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For instance, a state tender for a residential (with commercial at the first storey), 99-year leasehold parcel at Lentor Central closed this month with a leading bid of S$784.1 million, or $1,204 psf per plot ratio, from GuocoLand. PropNex Realty highlighted that the potential selling price for the development that is to come up there could range from S$1,950 to S$2,000 psf.

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Where Pasir Ris 8 is concerned, analysts pointed to pent-up demand as there had been few launches for private residential projects in Outside the Central Region (OCR) this year. Among the launches to date were J@63 in Telok Kurau and two executive condominiums (ECs), Provence Residence and Parc Central Residences.

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Also behind Pasir Ris 8's allure is the convenience of a mixed-use development, as it is linked to a 260,000 sq ft mall and a bus interchange; it is also parked next to Pasir Ris MRT station.

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Another factor cited is the dwindling inventory of unsold units in the market.

 

Urban Redevelopment Authority figures state that the number of unsold, uncompleted private homes stood at 19,384 as at the end of Q2 2021.

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Mr Low said: "Market supply is running dangerously low, which is why prices are heating up quite aggressively."

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Analysts said prices for other existing projects in the area could head north after Pasir Ris 8's stellar performance, pointing to possible candidates such as Sim Lian's Treasure at Tampines and CEL Development's Parc Komo.

 

The higher pricing expectations by developers for new and existing projects, along with robust volumes for H2 2021, "could heighten policy risk", suggested Citi's Mr Lee.

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Mr Low, for one, expects developers with residential projects in the OCR to ride on this opportunity to increase prices. "With Pasir Ris transacting above S$2,000 psf, most of the developers will feel their units are underpriced now," he said. However, he added that they are unlikely to raise prices sharply. "I think we could see an increase of about 2 to 3 per cent on the first cut."

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Mr Singh said: "The market re-pricing transition manifested rather dramatically in the case of Pasir Ris 8 because of its unique packaged offering of being next to an (MRT) station and mall. For generic projects, however, it would be gradual and segment specific."