Developers wary of looming market uncertainties: Wing Tai boss
DEVELOPERS are fast-tracking mass market properties in order to take profits sooner rather than later, a leading local developer said yesterday.
These firms fear looming property market uncertainty, said Wing Tai Holdings chairman Cheng Wai Keung.
With government cooling measures taking hold, developers believe it is better to take a bet on prices now, and are pushing out their properties much faster than usual, he said.
Mr Cheng was speaking at Wing Tai’s results briefing at the Raffles Hotel. He was answering a question on whether he believed there would be a correction in the property market.
‘My reading of the upgraders’ market is that it seems to have come to a saturation point,’ he said, after low interest rates and a ‘tremendous increase’ in the number of permanent residents saw property demand outstrip supply.
He said Wing Tai would have tendered for land last year before prices shot up, but not now as it would be dangerous to ‘chase’ rapidly rising land prices.
‘If you look at any developer, they are actually pushing out (properties) much faster than the normal timeframe required. What it translates to is that people believe the risks are too high to wait.
‘You can see that more and more projects are actually pushed out in six to nine months’ time, rather than the normal time of one to 11/2 years.’
The site for Waterbank at Dakota was won by the UOL Group in September last year, and pushed out within seven months in April this year. Similarly, Hong Leong Group won the site for The Scala last October and launched the property in July, while City Developments’ Tree House site was won last August and launched in April.
‘If we also try to push off in the next six to nine months, we may get jammed and given there is such a high price, we believe, even if we wait, the upside may not be there,’ Mr Cheng added.
Property prices in the mass market segment have surged. Home buyers have already snapped up 9,957 private homes in the first seven months of this year, after last year’s strong sales of 14,688 units.
The latest official data shows sales of private homes have slowed, but prices have still edged above their 1996 highs.
The Government moved to cool the market with a string of measures last September and again in February and a record Government Land Sales programme in May for the second half.
Mr Cheng said the Government is likely to introduce more measures if the market is still not ‘in control’.
While the frenzy in the mass market has not been reflected in the high-end market, Mr Cheng believes this segment will eventually continue to rise. ‘I see this market becoming even more sophisticated than before,’ he said.
When asked why Wing Tai has not joined the frenzy for sites, he said it was because ‘most of the land available for tender is for the upgrader market or just one class above it’.
Wing Tai is among 10 bidders to buy and redevelop a landmark commercial site at City Hall which includes the historic Capitol Theatre, Capitol Building and Stamford House. It did so as the site offered long-term opportunity, he said.
‘We will have to look at the different sites available. If you ask me, I will play a medium-to-long term game now, rather than the next nine to 12 months.’
On possible launches this year, Mr Cheng said the high-end Anderson18 site, its joint venture with City Developments, ‘is a likely scenario’. But he said he did not want to pre-empt its partner.
Wing Tai booked net profits of $68.9 million in the fourth quarter, reversing a net loss of $53.9 million a year earlier. This helped push its full-year profits up 666per cent to $160.8 million.
Revenue rose 64 per cent to $821.9 million for the year helped by properties sold at Belle Vue Residences and The Riverine by the Park. For the quarter ended June30, revenue was up 17per cent to $222million.
The firm declared a final dividend of three cents a share and a special dividend of two cents a share.
Source : Straits Times – 24 Aug 2010