More developers may cut prices to push units

Buoyed by discounts offered by developers, private homes sales rebounded 55 percent to 745 units in April, following a slowdown in March when only 480 units were sold, according to Urban Redevelopment Authority (URA) figures.

Media reports said that property developers in Singapore have seen disappointing sale launches recently and to improve sales, some developers relaunched units at significant discounts to their initial launch prices.

The discounted relaunch prices, along with the reasonably priced new launches, helped to attract price-sensitive buyers.

CapitaLand’s Sky Habitat, for instance, released 80 new units in April, but ended up selling 130 units at an average price of $1,377 psf, or a discount of 13 percent from its initial launch price of $1,583 psf two years ago.

Despite the current weak buying sentiment, analysts believe that April’s sales indicated an underlying demand, provided prices are attractive.

“The developer’s strategy to reduce prices has obviously succeeded in drawing back buyers’ attention. The Sky Habitat story is a clear example that it is now a buyer’s market,” said Nicholas Mak, Research Head at SLP International.

Property consultants noted that the good response to the repricing could also see other developers offering discounts. To lure buyers, discounts should be about 10 to 15 percent below previous prices, they said.

Moreover, pushing sales through discounts helps developers manage cash flow, which is needed to fund ongoing construction costs, said CBRE research head Desmond Sim.

Moving forward, OrangeTee’s head of research and consultancy Christine Li expects total sales in May to exceed 1,000 units for the first time in 2014.

However, other consultants warned that although price discounts may stimulate the market, home buyers still have to face loan restrictions, which is their biggest drawback.

Source : PropertyGuru – 16 May 2014

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