While executive condominium (EC) prices are expected to fall, following weak sales in the segment and low winning bids for EC sites, home buyers may not see a significant price drop, revealed industry experts quoted in the media.
Recently, two EC site sales have mirrored the cooling market.
One site at Woodlands Avenue 12 was sold last week for $103.8 million, or $278 psf ppr, while an Anchorvale Crescent site was awarded for $157.8 million, or $280 psf ppr during the same month.
Both marked the lowest EC land prices recorded since July 2011. At $279 psf ppr on average, the prices were way below the average EC land prices of $351 psf ppr in 2014, $360 psf ppr in 2013 and $321 psf ppr in 2012, JLL analysis showed.
The two sites are expected to have a breakeven cost of around $650 psf.
“They can easily sell well below $800 psf and still make a decent margin,” noted JLL National Research Director Ong Teck Hui.
Meanwhile, new sale prices for ECs have been on an upward trend in the past few years, standing at an average of $820 psf in Q4 2014, up from the previous year’s $783 psf and 2012’s $739 psf.
Moreover, 2,251 EC units that have been launched remain unsold, while another 6,500 units are expected to enter the market.
“Softening prices of private homes (also) place a downward pressure on EC prices, if that gap between private homes and ECs is to be maintained to keep ECs attractive to buyers,” Ong said.
“With sluggish sales at current price levels, prices may have to be adjusted downwards by about five to eight percent to achieve significantly better sales take-up.”
However, many EC projects now are situated on sites that were acquired at higher prices earlier, leaving property developers with little room to adjust prices without sacrificing revenue margins.
Aside from this, construction costs have also increased with foreign labour constraints as well as prefabrication requirements, said Desmond Sim, CBRE Research Head for Singapore and South-east Asia.
Thus, even as developers that bought land sites at lower costs reduce unit prices, their end products may still be sold at the already benchmarked prices, albeit with room for discounts, shared Sim.
“The latter is more favoured as it preserves the value of the whole development,” he added.
Romesh Navaratnarajah, Singapore Editor at PropertyGuru, edited this story. To contact him about this or other stories email firstname.lastname@example.org