CDL enjoys strong home sales despite property curbs

Despite having to navigate a challenging environment with the introduction of various property market cooling measures and the Total Debt Servicing Ratio (TDSR) framework, City Developments (CDL) has continued to enjoy robust sales at its new and existing residential projects.

In its third-quarter financial report released yesterday, CDL said more than 83 per cent of the 420 units in its [email protected] project have been sold since its launch in June, while its D’Nest in Pasir Ris and Bartley Ridge projects are 93 per cent and 85 per cent sold, respectively. Its 380-unit executive condominium (EC) project Lush Acres in Sengkang, launched in July, has sold more than 96 per cent.

“Profits however, were not realised … as these projects were either in early stages of construction or construction has not commenced yet. No profits were booked for two fully-sold ECs, namely The Rainforest (Choa Chu Kang) and Blossom Residences (Bukit Panjang), as well as the newly launched and almost sold-out Lush Acres,” CDL said in its report.

CDL’s net profit for the three months ended Sept 30 was S$120.6 million, down 10.4 per cent from the corresponding period a year earlier, partly due to a hotel segment that earned less because of an ongoing refurbishment programme. Revenue inched down 1.2 per cent to S$822.7 million during the same period.

The developer had earlier warned of “stronger headwinds” which would dampen demand for homes. The Government in January raised Additional Buyer’s Stamp Duty rates by 5 to 7 percentage points, imposed tighter loan-to-value limits and required higher downpayments on home purchases. The TDSR framework introduced in June requires financial institutions approving housing loans to ensure the borrower’s total debt obligation does not go beyond 60 per cent of his or her income.

In order to cope with these measures that are “beginning to show their true colours and bite”, CDL said in its latest report that developers had started lowering prices of both their existing and new projects to attract buyers and were willing to accept lower profit margins. At the same time, land prices are escalating due to limited land banks and the punitive restrictions imposed by the Qualifying Certificate (QC) policy, it added.

The QC conditions make it difficult for developers with any foreign ownership — many of whom are established listed companies — to buy land from the private market.

“Non-traditional property developers, especially foreign construction companies, are also entering the real estate development field, bidding aggressively to secure land for development, while sacrificing their profit margins in construction,” CDL noted.

“As a result, many developers have formed joint ventures to bid for land and, noticeably, successful bid prices between sites can vary widely, reflecting the lack of land stock in trade. This is a very potent trend that may affect the industry in the medium to long term,” CDL said.

Despite these challenges, CDL said housing demand would stay healthy in the long term, given a resilient domestic economy, high employment and a low-interest-rate environment that is expected to persist in the near future.

However, buying interest is now concentrated in the mass to mid-segment markets, with units that are located near amenities and “realistically priced” expected to see greater demand, it added.

Source : Today – 13 Nov 2013

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