Landed home prices to fall in some areas after new rules, say analysts

Prices of landed homes in Telok Kurau, Kovan and Joo Chiat could fall by 10 to 20 per cent following the introduction of new rules by the Urban Redevelopment Authority (URA) to limit the number of apartments that can be built in low-density housing areas, property analysts said.

The rules, which kicked in on Thursday, are more likely to affect smaller developers, the analysts said. The plot size for all new flat developments in Singapore must now be at least 1,000 sq m and there is a cap on the number of units that can be built in a project in certain areas to prevent overcrowding.

Homeowners hoping to sell their plots for redevelopment in the areas identified by the URA as “problematic” will be particularly hit, analysts said. According to its circular to professional institutes, the URA named Telok Kurau, Kovan and Joo Chiat/Jalan Eunos estates.

Mr Eugene Lim, key executive officer at property consultancy ERA, said: “Developers are known to pay higher prices for land because they know they can build small units and they can price them at higher per square foot.

“There are now restrictions. You will see developers being less aggressive in their bids and we could possibly see prices for land in these areas coming down by as much as between 10 and 20 per cent.”

With the new requirements, developers will not be able to build as many units on the site. For instance, in the past, a 1,000-sq-m plot would yield about 20 units, but now the developers can build just over 10 units on the same plot.

Because the URA has limited the number of “shoebox” or small units that can be built in a project in order to improve the overall living environment, analysts said developers will now have to rethink their marketing strategy.

“If you are looking at a much larger unit, say about 1,200 sq ft and you are hoping to sell at the same unit price of S$1,000 psf, then you are talking about close to S$1.2 million, as opposed to less than a million kind of quantum. Therefore it may not be easy to sell,” said Ms Chia Siew Chuin, director of Research & Advisory at Colliers International.

But the upside of the new rules is that housing units will be better designed, more spacious and with larger areas for landscaping.

Source : Today – 25 Nov 2011

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