Now, the couple is shopping for a new property. “If the price is right, we will sell our flat,” says Ong. She reckons that even today, her flat could still fetch about S$500,000 (RM1.2 million) — almost double the S$285,000 they paid a decade ago. “On the other hand, we may keep it, since the mortgage on the apartment is already paid off, and the government is going to build an MRT nearby,” she says.
The Ongs have been looking at new condominiums in the West Coast area and Jurong, where they grew up and their parents still reside. Their preference is for a two-bedroom apartment priced at S$500,000 to S$600,000. “We’re thinking of buying something smaller for when we’re older,” says Ong. The couple doesn’t plan to have children.
Cheang Kok Kheong, Frasers Centrepoint’s chief operating officer of development and property, says many people like the Ongs are turning up at The Caspian showflat along Lakeside Drive and across the street from Lakeside MRT station. “When we talk to people in this area, we sense that there’s a pent-up demand to live the lifestyle that they aspire to have,” he says. “Many of them own HDB flats that are already fully paid for.” While The Caspian may be a mass market development, its bathroom and kitchen finishing and fittings are comparable to that of higher-end developments, says Cheang.
Anecdotally, the appointed marketing agents for The Caspian, ERA and Propnex, have already collected more than 100 cheques from interested buyers prior to the public preview on Feb 7 and 8. “It’s a good sign and encouraging for us to know that there’s such demand, in spite of the not-so-good news out there,” says Cheang.
The developer, which had been assessing the market since last October and November before deciding to launch the 712-unit Caspian recently, found that the response was varied. “Some people said, ‘Let’s wait till your showflat is open’; others said, ‘The prices may go down further, I’m not sure I want to get in now’; or ‘I’m not sure I’m going to be able to keep my job’,” recalls Cheang. “But there were the more gung-ho ones who said, ‘I want to be the first in queue, and here’s a cheque.’”
The developer is pricing the first phase of 250 units at an average selling price of S$580 psf. Two to four-bedroom apartments will be priced from S$540 to S$640 psf. Studio apartments are priced at S$350,000, one-bedroom apartments at S$350,000 to S$400,000 and two-bedroom apartments from S$500,000 to S$550,000.
According to Cheang, unlike most mass market condominium buyers, who are predominantly owner-occupiers and upgraders from either older private apartments or HDB flats, about 20% of the buyers of The Caspian are investors. He attributes investor interest partly to the government’s plan to transform Jurong into a commercial and leisure hub over the next 10 to 15 years as unveiled in the URA Master Plan last year. Thus, many are looking to buy in anticipation of future capital appreciation, notes Cheang.
A report by ERA released recently showed that HDB resale flat prices in Jurong had appreciated faster than those in Tampines and Woodlands since the government’s announcement. The study compared median resale prices in 4Q2008 to those in 1Q2008.
For instance, ERA found that resale prices for four-room flats in Jurong appreciated 14.1% compared with 8.6% in Tampines and 12% in Woodlands. Five-room HDB flats in both Jurong and Woodlands appreciated 9.4% and those in Tampines inched up 1.3%. Meanwhile, resale prices of executive flats in Jurong West went up 16%, while Tampines saw a 4.9% appreciation and Woodlands, 6.2%.At S$580 psf, Frasers Centrepoint is pricing the project to sell, as it had purchased The Caspian site in December 2007 for S$205.6 million (S$248 psf per plot ratio) and construction cost is estimated at S$240 psf. Breakeven cost is expected to be S$570 to S$580 psf, which means the developer is pricing the project close to, or even at, breakeven point. In comparison, the 848-unit Lakeshore, completed last year and located across the street from The Caspian, has seen recent transactions ranging from S$720 to S$860 psf.
The developer intends to hold back its other new launches “because we think the market needs to make some adjustments”, says Cheang. One of them is Flamingo Valley at Siglap, which Frasers had acquired in a collective sale in February 2007 for S$194 million, or an average of S$415 psf ppr. For now, Frasers is leasing the units in the existing old condominium.
The other is the site at Woodleigh Close, which it purchased in a government land sale last June. It paid S$88 million, or S$270 psf ppr, for the 116,251 sq ft, 99-year leasehold residential development parcel. “Again, we’re holding back the launch as we’re closely watching the market,” says Cheang. “When the market is ready for those projects, we will sell them.”
The good news is that construction costs have come off. “Most of us think it could drop 15% to 20% by year-end,” says Cheang. This means a project that would have cost S$300 psf to build last year would now cost S$250 psf.
When the future launches are ready, Cheang says they would be priced affordably, with the developer prepared to make “maybe a little margin or just breakeven”. This allows it to free up cash flow to take advantage of opportunities in the next 12 to 18 months, he explains. “There should be a lot of opportunities this year,” he adds. “Maybe we can buy land — not necessarily at distressed value, but at a very attractive discounted price.” Apart from land, Cheang says Frasers would also be willing to look at either half-constructed or fully completed residential or commercial properties.
Cecilia Chow is City and Country editor at The Edge Singapore
This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 744, March 2-8, 2009.