US sub-prime crisis hurts confidence of likely buyers
City Developments (CDL) will delay sales of new residential projects in Singapore, where it gets more than half of its revenue.
The confidence of prospective home buyers has been eroded by the sub-prime mortgage crisis in the United States and the downturn in global credit markets, the company said.
“How long the uncertainty and credit squeeze will pan out has yet to be determined,” CDL said in a statement accompanying its first quarter earnings result.
“The group is confident of remaining profitable during the next 12 months, even if it decides to continue to hold back or pace its property launches.”
According to Urban Redevelopment Authority figures, total Singapore home sales slowed to 787 in the first quarter of this year – about half of the 1,449 units sold the previous three months. Prices rose 3.7 per cent over this period, the slowest gain in a year.
While CDL still managed to make strong profits during this period, this will get harder in coming months as sales slow.
Singapore’s second-largest real estate company said its first-quarter profit to end March rose 31 per cent to $165 million. Sales fell 1.3 per cent to $758.8 million.
CDL’s profit was also bolstered by a pickup in the global travel industry. The company owns 53 per cent of Millennium and Copthorne Hotels, the United Kingdom chain that owns the Biltmore in Los Angeles, which said May 6 that first-quarter profit rose 16 per cent to £14.1 million ($37.8 million) as it charged more for rooms.
Millennium and Copthorne is boosting room rates in some cities to capitalise on surging demand from business travellers. The company’s average room fee rose 7.4 per cent during the quarter. – Bloomberg
Source : Today – 15 May 2008