developers reducing supply

[Kubes.SG]

According the article, about 10 units in Luma were sold at launch.  And more again this year.  So these prices were very real.  There are going to be some very pissed off early buyers.  Certainly looks like mis-selling to me.



River Valley condo Luma relaunches with prices halved

November 14, 2008

Units going for $1,450 psf, down from $2,800 psf at launch last year

THE big property sale has begun - although, in this case, it could reflect the situation of the developer rather than the state of the market.

Prices have been slashed by half at Luma, a 75-unit freehold luxury condominium at River Valley Grove.

Relaunching this weekend, units at Luma are being offered at $1,450 per square foot, down almost 50 per cent from $2,800 psf when it was first launched last year.

About 10 units had been sold, mainly in Dubai and Hong Kong.

SISV-Realink data shows two units on the 25th floor changed hands at $2,837 psf and $2,586 psf in April this year.

These prices were already much lower than those for two units on the 20th and 26th floors, which went for $3,349 psf and $3,291 psf in August last year.

At the time, some speculated that prices could soon reach $4,000 psf.

Luma (which will be completed in 2011) has three units on each floor, ranging from 743 sq feet to 1,173 sq feet. The developer behind the project is the mid-sized Novelty Group, which is also in the department store business. Luma sits on an en-bloc site at St Thomas Walk which Novelty bought in 2006 for $76.5 million, or about $810 psf of potential gross floor area.

The relaunch of Luma is believed to be the first among luxury condominiums as other developers are holding back, given the weak market.

Nicholas Mak, director of research and consultancy at Knight Frank, said more of the smaller developers could be relaunching at lower prices.

‘The bigger ones are discreetly offering soft discounts, such as lifestyle vouchers,’ he said.

‘I think the chief aim is to move units, to increase sales. They’ve probably done their sums - they expect to do a level of sales to achieve breakeven point, which will lower their borrowings and feel more comfortable,’ Mr Mak added.

Banks are probably repricing loans, and some developers that have revolving facilities or variable- rate loans may feel the pinch.

‘More smaller developers will be doing this if the economic situation worsens,’ said Mr Mak.

The Novelty Group also bought White House Park Apartments in Stevens Road for $22 million from Asia General Holdings. It also has developments in Pasir Panjang, Geylang, Yio Chu Kang and Pasir Ris.

Business Times - 14 Nov 2008

[notyet]

I see, then in Dubai and HK there must be some real suckers to actually have paid $2800 psf!  Dumb money, very dumb money.

But I stand by my conclusion that at $1400 psf Luma remains dramaticaly overvalued, both compared to ite neighbours in River Valley such as Valley Park at close to $1000 psf and because Singapore is dramatically overvalued in general.

I found this sentence interesting:

"Luma sits on an en-bloc site at St Thomas Walk which Novelty bought in 2006 for $76.5 million, or about $810 psf of potential gross floor area."

My guess is Luma will fail to reach anywhere near $1400 psf now that even the most thick headed optimist will have noticed the world is progressivey spiraing into a depression. In fact, I doubt they will ev en fetch the $810 psf paid for the potential gross floor area for the plot.

Lets take Valley park as a benchmark. As it approaches $1000 psf and with the gloabl economy deteriorating at a faster and faster pace we have to assume it wil have further to fall. Lets say $900 for the ake of argument, athough I think it could be lower than that.

If you buy at Luma you face all the risks of buying a development yet to be completed. The quality could fall short of promises and the TOP date may in the event of financial failure be NEVER. So Luma should be lower than Valley Park.

Assuming Valley Park can reach $900 psf then for the fair terminal value of Luma sahould be less, perhaps $800 psf simply because I need to be compensated for the risk I would be taking in agreeing to purchase prior to completion and because I would be losing out on other opportunities tat I may havbe been able to invest my money in. This value of $800 would be lower than the initia $810, let alone the breakeven value.

[Dream on]

You may have 1 or 2 of the small developers that launch small 20-30 units condos from time to time going banrupt but the biggies responsible for majority of the supply are too strong to go into liquidation.

no one is now big enough that can't go bk, from banks to automakers

So your are expecting Capitaland, CDL, Keppel Land, Allgreen, etc which are responsible for 90% of the supply to go belly up?. Yes they might if property prices collapse 90% in which case you will be long gone from Singapore.


Its exactly why Singapore needs all the expats at the top end of the companies here due to blind attitudes like yours - keep drinking the kool aid little boy

This is Singapore and we don't run big corporations the way Americans do.

[pxs set to fall]

even further ...

Nov 16, 2008, The Sunday Times
Home loans harder to get as prices fall
Check if bank can meet unit's valuation to avoid overpaying for the property
By Joyce Teo

A couple of telling anecdotes illustrate the unexpected glitches that home buyers can face as property prices start to fall. A Spring Grove condominium unit owner was denied the chance to take advantage of lower interest rates by refinancing his devalued property without coughing up more hard-earned cash. The owner had to make up the shortfall because the reduced value of the Grange Road unit meant the bank could not extend a large enough loan.

Another buyer had to cancel his purchase recently after he learnt that banks' valuation of the property was less than what he was supposed to pay. The banks could not offer him the loan he needed as the collateral was inadequate. This is the brave new world of home loans as property values fall amid the global financial crisis and banks tighten lending.

Banks are still dishing out home loans but are much more selective these days, mortgage consultants said.

[Kubes.SG]

OMG, this is shocking, just shocking.   Who could have imagined that such things would happen and that banks would be actually undertake basic risk management, and not blindly and irresponsibly support the Singapore property sector and to nation-build Singapore?

This is an outrage.  Banks have a nation-building responsibility to assist Singapore businesses, developers, property owners and most importantly, the PAP.  Just look at the attacks on DBS from multiple Ministers because of DBS' action to retrench 900 people.  Can be pretty sure that this will the last foreign CEO that DBS will have.  Outrageous that he would make tough choices that are rational and financially prudent, with DBS' profitability and shareholders in mind.  And now we see a similar outrage against refinancers or potential borrowers.  Who do these banks think they are?

Let's see the SG Govt response to fix the attitude of Singapore banks.  There is no way they should be allowed to make people feel sad.

[It is over]

"Another buyer had to cancel his purchase recently after he learnt that banks' valuation of the property was less than what he was supposed to pay"

The value of the unit is less than he was supposed to pay. What a big surprise  

I wonder if any of the developers are reading papers these days? We cannot support their fat pay cheques and company provided Mercedes anymore... It's over.

[Bangla_Male]

Just a polite note: CSFB does not exists anymore. It is now CS IB i.e. Credit Suisse Investment Banking.

[Blaze]

Ok, let's get back to the topic... The developers will postpone their launches only because they seem to think it is a 'normal' recession with prices bouncing back in 3-5 years.

But what if this is the biggest 'depression' since 1929..? The truth is we don't know and nobody does. What if the stock markets dive 90% on average? The world has changed and there is no easy money to go around anymore. The GDP growth could very well vary from -2% to +2 annually with no bull runs at all. This has already happened in Japan.

So what are the SG developers going to do? Give up, raise the white flag saying ok, we don't want to complete developments, we don't want the sales and most of all we don't want to lower prices. We would rather be unemployed.

[If that happens]

Ok, let's get back to the topic... The developers will postpone their launches only because they seem to think it is a 'normal' recession with prices bouncing back in 3-5 years.

But what if this is the biggest 'depression' since 1929..? The truth is we don't know and nobody does. What if the stock markets dive 90% on average? The world has changed and there is no easy money to go around anymore. The GDP growth could very well vary from -2% to +2 annually with no bull runs at all. This has already happened in Japan.

So what are the SG developers going to do? Give up, raise the white flag saying ok, we don't want to complete developments, we don't want the sales and most of all we don't want to lower prices. We would rather be unemployed.

If this does turn out as the biggest depression than you and me would be unemployed and this forum will cease to exist. Least important will be what big developers will do.

[Kubes.SG]

If this does turn out as the biggest depression than you and me would be unemployed and this forum will cease to exist. Least important will be what big developers will do.

Actually not true, at least for my Company and a few of our competitors.  Well managed, zero/low debt, market/sector leaders with truly global scale can do very well out of recessions and depressions - they're an opportunity.  Certainly my MNC has powered through recessions, depressions, wars and disasters for the last couple of centuries, and likely will do so for the next few hundred years.   On the other hand, If you are in a relatively small, volatile or new sector, that is heavily debt/investment/risk driven, and without strong management in place, then this could get ugly.   So don't assume this is universally bad news.

[Blaze]

Ok, let's get back to the topic... The developers will postpone their launches only because they seem to think it is a 'normal' recession with prices bouncing back in 3-5 years.

But what if this is the biggest 'depression' since 1929..? The truth is we don't know and nobody does. What if the stock markets dive 90% on average? The world has changed and there is no easy money to go around anymore. The GDP growth could very well vary from -2% to +2 annually with no bull runs at all. This has already happened in Japan.

So what are the SG developers going to do? Give up, raise the white flag saying ok, we don't want to complete developments, we don't want the sales and most of all we don't want to lower prices. We would rather be unemployed.

If this does turn out as the biggest depression than you and me would be unemployed and this forum will cease to exist. Least important will be what big developers will do.

Sorry to disappoint you but I am the owner of my company and I think I will keep myself employed. You know, there are several industries that are in fact doing better during recession and we are in one of them.

So I will stay around then. Btw, there was once I was told by one of the 'bulls' that I would change my nick as soon as the bull run starts again... Looks like I have a long while to come up with one