Analysts expect developers to make pricing adjustments

Christopher Chitty16 Jul 2018

Based on their response on the government’s new property cooling measures, developers are expected to cut prices of new launches by up to 10 percent, with prices for high-end homes likely to witness bigger adjustments, reported The Business Times.

In fact, some analysts have already priced in a five to 10 percent reduction in average selling prices (ASP) in their forecasts when they downgraded stock ratings for several developers.

“While we expect a moderation in EBIT (earnings before interest and tax) margins to single digits for most projects, we do not see any developer losing money,” said Maybank Kim Eng analyst Derrick Heng, who priced in a five to 10 percent reduction in ASP in his projections.

To account for the lower loan-to-value (LTV) limits and higher additional buyer’s stamp duty (ABSD), developers would need to revise their prices by at least five percent, if not more, said DBS Bank analyst Derek Tan.

Tan noted that potential write-offs to land values on the balance sheets of developers is not a near-term risk, but “could emerge a couple of years later if sales momentum falters”.

So far, developers have not yet provided huge discounts, though “price discounts” of three to seven percent from earlier price lists have been offered for certain projects.

Christine Sun, research head at OrangeTee & Tie, expects this trend to continue since most developers have strong holding power and deep pockets.

JLL national research director Ong Teck Hui believes that the ASPs for mass-market new launches would be “two to five percent less aggressive than originally intended”, while adjustments for high-end homes would likely be higher.

Some developers, who spoke on condition of anonymity, said slashing prices by five to 10 percent may be possible for projects with sufficient margin buffers, but not for those built on land acquired at costlier rates.

“Given that the cost of production is high due to the land cost element, there is little room for many to manoeuvre on the selling price front. Hence, any adjustments will at best be marginal or nothing at all,” said Savills Singapore senior director Alan Cheong.


Senior Content Producer, Christopher Chitty, edited this story. 


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