Heartland condos at $1k psf or more?

A 99-year leasehold condominium The Vision, in the quiet suburbs of West Coast Crescent, was launched recently at an eye-popping price of around $1,000 to $1,200 per sq ft (psf).

Nevertheless, at least 160 buyers put down money for the mass market homes that come with branded goods and quality finishes, said the developer Cheung Kong (Holdings).

That set the benchmark price for the area. And this will not be the last of such pricey projects, industry players said.

PropNex chief executive Mohamed Ismail said the trend of a sizeable number of properties sold above $1,000 psf will likely continue over the next few months.

Still, this price level is not yet likely to become the norm for the entire mass market category, given that affordability will be a serious issue, said those in the industry.

This price level first came up in the mass market segment after Far East Organization launched its 329-unit Centro Residences in Ang Mo Kio at more than $1,100 psf last year.

At that time, property experts were caught by surprise, pointing out that the price would be a new suburban record.

Until then, the leasehold record was believed to be held by Bishan 8, which Far East launched at $1,100 psf in 1997.

Still, there were buyers at Centro, with five February deals registered at a median level of $1,220 psf.

At some of last year’s popular mass market launches, some units did cross this $1,000 psf price level, though the average launch price was below that mark.

These included Trevista in Toa Payoh, Meadows@Peirce in Upper Thomson and Elliot at the East Coast.

Looking ahead, the $1,000 psf price may not be surprising, based on some of the aggressive bids achieved at recent government land tenders, industry players said.

‘For the next half year, you will likely see new mass market launches hitting the price level,’ said Knight Frank managing director (residential services) Peter Ow.

‘The psf price is one thing, the quantum is another. As long as the total quantum is at $1 million or less, buyers can still afford to buy.’

Units will thus become smaller to keep the quantum affordable, he added.

‘If the developers bought land above $500 psf ppr, they would try to sell it for more than $900 psf ppr,’ said Ngee Ann Polytechnic real estate lecturer Nicholas Mak. (The term ppr refers to per plot ratio.)

However, the aggressive bidding situation will not last.

‘Demand is still strong. But as more supply comes onstream, developers’ landbanking needs will gradually be satisfied,’ said Mr Mak.

Their bids will come down gradually, he said.

Developers are also wary about overpricing their projects as they would then have difficulty selling them, he said.

Said DTZ’s South-east Asia research head, Ms Chua Chor Hoon: ‘Not all mass market projects can be sold at above $1,000 psf. They would need to have very attractive attributes in order to attract home owners or investors.’

This would include proximity to town and MRT stations, and proximity to employment hubs or sought-after educational institutions to provide a ready pool of good tenants, Ms Chua added.

‘Developers will try to maintain the ($1,000 psf and above) price level as the norm for very well-located mass market condos,’ said Mr Mak.

But it will not be the norm for mass market condos in general, he stressed.

‘We are not seeing a strong growth in household income, so how can we support those kind of prices?’

Source : Sunday Times – 21 Mar 2010