Property News: Developers hard-pressed to price projects modestly

Another private property news, see Business Times URL for details:

I extract some relevant part as below:

" LATEST official statistics showed that developers' housing sales continued to languish last month, but the focus now is on the likely launches for the rest of the year and how much room developers have to price them attractively to get potential buyers into making a commitment.

Many developers paid high prices for 99-year private housing sites at state tenders in the past couple of years as they sought to replenish land following strong home sales at the time.

"Those with a high breakeven cost but who need to launch a project are likely to adopt a "Star Buy" strategy for inferior stacks of units in the development to draw out initial take-up to drive confidence in the launch," a seasoned developer told BT yesterday.

"But even those who paid high land prices and left with less room for price adjustment may be willing to lower their price expectations. This could enable them to clear some units and generate cash flow - rather than maintaining the status quo and doing nothing as market conditions deteriorate further."

There will be heightened competition for buyers as more property launches are expected by developers who had bought residential land after December 2011. These developers are required to complete the projects and sell all units within five years, otherwise they would have to pay a hefty additional buyer's stamp duty on the land price with interest, Ms Chia noted.

"This goes to show that developers can revive sales at existing launches with meaningful price cuts. What remains to be seen, however, is whether this will result in a price war, which could be triggered, for instance, if one player were to sharply cut prices relative to other projects in the vicinity." "

From my past experience, when developers need to cut prices to move sales, they will always incorporate the strategy of cutting materials, construction, workmanship, and furnishing costs to bone, ending up with very inferior quality products!