Heightening development risks will spook developers to lower home prices, say analysts
Their five-year project-completion deadlines are fast approaching.
Property developers may have to wait a little longer to get a breather. As their plea for extended deadlines were rejected, analysts say they may have to start lowering their asking prices to thrive in the challenging market.
According to analysts from Maybank Kim Eng, developers are getting worried about paying the duty with interests for their lands if they fail to sell all their units within five years.
“Using GLS sites sold since the implementation of ABSD, we estimate that 32 homes with project deadlines in 4Q16 remain unsold. This rises above 3,000 units for those with deadlines in 2017. As such, we expect further downward pressure on home prices, with the biggest downside for the mass market,” Maybank Kim Eng said.
Meanwhile, this lowering could potentially set the stage for a potential lifting of cooling measures in 2016.
“While a change in measures may not necessarily arrest home-price declines, we believe it could trigger a rebound in sales volume, removing a key overhang for developers,” they added.