Competition heats up among developers in Sengkang area

Two new condo developments in a Sengkang area are launching at around the same time, raising the possibility of a price war.

This comes on the back of a fall in suburban private home prices.

Prices of suburban condo units dropped 1 per cent in the last quarter of 2013.

That is the first dip in about four years, or since the second quarter of 2009.

Some analysts said the drop has made property developers jittery.

Colin Tan, research head at Suntec Real Estate Consultants, said: “We have gone beyond the historical demand, way beyond it. So I think most people feel that it has to give, at some point. And I think that’s what’s making the developers very nervous. So I think when the window of opportunity is there, they may take the chance to market it now.”

Marketing has already kicked off for Riverbank @ Fernvale.

Its developer UOL Development said it has collected over 500 cheques for the 555-unit development after the developer opened its showflats for preview last week.

Riverbank is located next to an upcoming 495-unit condo project, which is developed by a consortium formed by Frasers Centrepoint, Far East Orchard and Japanese firm Sekisui House.

There is a flurry of building activity in the area of Sengkang known as Fernvale. And two adjacent developments, RiverTrees and Riverbank, will add 1,050 new private units in the area, raising the possibility of a price war.

Other upcoming developments in the area include projects that are close to fully sold, such as City Developments’ H2O residences, and the Lush Acres executive condominium.

Mr Tan said: “If there’s a price war, it’s probably below the surface. It’s where the marketing agents — when they negotiate with the buyers — may be authorised to give bigger discounts.”

Still, RiverTrees’ developer Frasers Centrepoint said price competition won’t be necessary.

Cheang Kok Kheong, CEO of development and property at Frasers Centrepoint, said: “We will never be able to compete on pricing. What we have is long-term value in this project — a 150-metre frontage of the reservoir, and orientated our units such that about 90 per cent of the units actually have this view of the reservoir.”

The pricing for the units appear competitive.

The average selling price for a unit at Riverbank is slightly above S$1,000 per square foot (psf).

Frasers Centrepoint did not reveal an average selling price but said that the selling price of units at RiverTrees Residences will range from S$950 psf to S$1,150 psf in the initial phase.

But analysts said that could apply to large units, or units with less attractive attributes.

Instead, they estimated the average selling price to be in the range of S$1,050 to S$1,100 psf.

Frasers Centrepoint said that when its showflats first opened over the last weekend, most of the viewers were residents from Sengkang. The developer also added that interested buyers include property investors.

Still, some analysts said this means the units may be out of reach for some HDB upgraders in Sengkang, many of whom are reaching their five-year minimum occupancy mark.

This is because HDB upgraders may find it tough to sell their units, given that resale transactions have slowed to a record low last year.

Overall, prices of HDB resale flats dipped by 0.6 per cent in 2013, marking the first annual fall since 2005.

Mr Cheang said: “We think that the market has narrowed a lot, but we think there is still depth in the market. The people who are not having problems in making loans; the people who are buying their second unit, rather than third or fourth unit, are still able to look for assets to invest in.”

As the Frasers Centrepoint consortium paid about 9 per cent more for its site on a psf basis, analysts said that a similar price range for both developments could mean lower margins for the RiverTrees development.

Source : Channel NewsAsia – 12 Feb 2014