Despite the slim profit margin, the developers of Cuscaden Reserve and The Antares probably deemed it better to launch the projects now considering the significant supply. However, both GuocoLand and Low Keng Huat had enough room to price their projects more attractively and sell more units at launch.
Four new private residential projects that were recently put on the market registered tepid sales, with Cuscaden Reserve moving five units and Meyer Mansion 21 units.
The other two, Uptown@Farrer and The Antares sold 12 and 17 units, respectively.
Most analysts believe that pricing for the projects was on the high side, as developers paid high land prices for some of the sites acquired towards the end of the land-buying cycle that started in mid-2016 and ended in early July last year, when the government unveiled its latest round of cooling measures, reported The Business Times.
URA Realis data showed that the five Cuscaden Reserve units were sold at a median unit price of $3,341 per sq ft (psf) – which is not far off the price for new freehold luxury prime-district projects.
At Boulevard 88, for instance, 73 units were sold at a median price of $3,662 psf, while the 14 units sold at 3 Orchard By-The-Park achieved a median price of $3,621 psf.
3 Cuscaden, on the other hand, sold 72 units at a median price of $3,534 psf.
The developers of Cuscaden Reserve – SC Global Developments, New World Development and Far East Consortium – clinched the 99-year leasehold site in April 2018 at a state tender for $2,377 psf per plot ratio (psf ppr). According to analysts, this works out to a breakeven cost of $3,100 psf, leading to a profit before tax margin of around eight to 10 percent.
The Antares’ developers – a joint venture between Hock Lian Seng Holdings, Keong Hong Holdings and TA Corporation – acquired the Mattar Road site at the same tender for $1,109 psf ppr. With the breakeven cost at about $1,560 psf, the profit margin stood at around 14 percent.
With this, the 17 units’ $1,794 psf median price is deemed too high for a relatively untested location.
But despite the slim profit margin, the developers of Cuscaden Reserve and The Antares probably deemed it better to launch the projects now considering the significant supply from projects in the pipeline which are yet to be launched.
It was a different story for the two other projects.
GuocoLand sold 21 units at Meyer Mansion at a median unit price of $2,728 psf. The freehold site was acquired by GuocoLand at $1,580 psf ppr, which translates to a breakeven cost of $2,200 psf – offering a comfortable profit margin of 25 percent.
Uptown@Farrer’s developer, Low Keng Huat, also enjoyed a 24 percent margin. Based on Realis data, the 12 units were sold at $1,860 psf, Low Keng Huat clinched the site at a state tender for $1,001 psf ppr in January 2017, or during the early part of the land-buying cycle. Analysts estimate the breakeven cost at around $1,500 psf.
Both GuocoLand and Low Keng Huat had enough room to price their projects more attractively and sell more units at launch.
But despite the weak economy, the developers did not expect private home prices to correct and that they would be able to sell off their respective projects over a period of time.
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Victor Kang, Digital Content Specialist at PropertyGuru, edited this story. To contact him about this or other stories, email email@example.com