Property developers usually launch projects when sentiments are good and decent prices can be charged. However, they may lose the flexibility to time their construction and launches under a new rule, which is expected to take effect early next year.
If developers break the project completion period (PCP) on sites acquired from private sector sources, they might lose the 10 percent bankers’ guarantee for land cost, as well as end up paying huge amounts for time extension.
Market watchers said this could affect prices and force developers to launch projects earlier than what they might like.
Based on analysis by CB Richard Ellis (CBRE), the median price of a new luxury condo hit $3,265 psf in Q3 2010, up 18.7 percent year to date. But the figure remains 13 percent below the peak reached in Q4 2007.
It now remains unclear if the earlier peak median price of $3,750 psf can be scaled in 2011.
Based on CBRE’s compilation, around 1,500-odd luxury non-landed homes could be generated on developments that have obtained planning approval from the URA and which have not yet been launched.
“Developers’ strategy in the first instance, would be to hold off launching these projects as long as they can until sentiment improves further in this segment,” said Joseph Tan, executive director for residential at CBRE.
David Lawrence, chief executive of Wheelock Properties (Singapore) agreed, saying: “Traditionally, developers know that for really high-end projects on very good sites like Ardmore Park, if you just keep them in your pockets, eventually prices will come up and they make money. But developers can’t do that anymore.”
The catch is the amendment to the Residential Property Act, which will apply to private residential projects undertaken by foreign housing developers with Qualifying Certificates (QCs), a category that covers all listed developers.
These projects, constructed on residential sites acquired from private-sector sources, will soon need to be completed within the stipulated PCP; otherwise, developers may not only lose their bankers’ guarantees but also need to pay for any time extension.