New guidelines may price some buyers out of market: Redas

Some analysts maintain that the per sq ft price of new private apartments will have to drop if the absolute sale price of a unit with an increased floor area is to be kept affordable.
Dated: 19-Oct-2018

The new development control guidelines for private condominium projects could price some buyers out of the market, the Real Estate Developers' Association of Singapore (Redas) warned yesterday.

That is because, with the new rules promoting fewer and bigger units, there could be a rise in the overall average prices of new private apartments, analysts said. A smaller future supply could also firm up prices.

Some maintained that the per sq ft price would have to drop if the absolute sale price of a unit with an increased floor area was to be kept affordable.

Targeting potential strains on infrastructure, the revised rules announced on Wednesday by the Urban Redevelopment Authority will have the effect of curbing the proliferation of shoebox units in new projects. They will apply to new development applications submitted on or after Jan 17 next year.

Analysts said developers will not be able to over-intensify land usage now, as they are required to build bigger housing units. They have been building smaller units that are more affordable for buyers in overall price terms, but also more profitable for developers who charge higher prices per sq ft for them.

But Redas said developers are already scaling back the number of smaller dwelling units.

"They are building fewer smaller dwelling unit sizes... as demand has reduced over the years. Notwithstanding this, with the new guidelines, developers have to build bigger units, which may affect the affordability for people who want to retire and downsize, and millennials who want smaller dwelling units and flexible living."

Under new rules, the maximum number of housing units allowed in a project outside the central area is arrived at by dividing the proposed building gross floor area (GFA) by 85 sq m.

The current formula divides GFA by 70 sq m.

Meanwhile, nine areas will face even more stringent requirements, where the GFA will be divided by 100 sq m.

This means developers can build 18 per cent fewer units with the 85 sq m control, and 30 per cent fewer units for areas with the 100 sq m control, analysts said.

While the July 6 cooling measures dampened transaction volumes, they did not control over-intensification of land, said Withers KhattarWong partner Kenneth Szeto.

"It would have been interesting to see if developers would still have bought land through collective sales had the revised guidelines been implemented first, instead of the cooling measures," he said.

The July 6 measures, which increased the additional buyer's stamp duty and lowered loan-to-value limits for residential properties, are aimed at tempering home price growth.

Meanwhile, the guidelines are also likely to impact projects that are currently in the early stages of design development.

Developers are likely to speed up their design development to apply before the new rules kick in, said Ms Alice Tan, director of residential project marketing at Knight Frank Singapore.

The collective sales done earlier will likely not be affected, said Mr Eugene Lim, key executive officer of ERA Realty Network.

A CapitaLand spokesman said yesterday that its upcoming developments will not be affected.

City Developments (CDL) said the revisions do not impact its four recently acquired sites - Amber Park, West Coast Vale, Handy Road and Sumang Walk executive condominium site - as planning permissions have been obtained for them.

For its joint-venture Sengkang Central Government Land Sales site, which was awarded in mid-August, CDL said it is in advanced planning stages and on track to obtain its planning permission by the January deadline.

Source: Straits Times