Normanton Park is the biggest new condominium launch since the start of 2021. Marketers had been bombarding consumers with e-mail, print and online ads for weeks.
Before the end of the launch weekend on January 17 Sunday 6 pm, The Straits Times and The Business Times published unanimously a celebratory headline online that read “Normanton Park developer sells nearly a third of 1,862 condo units on first day”. It was quoted directly from developer Kingsford Huray Development’s press statement released on Sunday afternoon. It also said 600 residential units were sold. Among them, 80 percent were one and two-bedroom units. Earlier on, the media also reported a big turnout of 12,000 visitors in a 13-day preview in its sales gallery, despite heavy downpours over two weekends. The 5 percent (600 deals out of 12,000 visitors) conversion rate was not too bad.
What are the stories behind the developer?
In fact, the sales result was surprisingly good, considering the fact that on 30 November 2020, the Building and Construction Authority (BCA) had just lifted the two-year no-sale license slapped on the developer for failing to meet the requirements.
The developer from China had reportedly paid a total of $1.34 billion for the collective sale of former Normanton Park in October 2017, including 99-year lease top-up and development charges. In early 2019, the Controller of Housing suddenly slapped Kingsford with a no-sale licence. Without the Quality Mark certificate, the developer was prohibited from selling off-plan units to the public and was unable to use downpayments from early buyers to repay the bank loan. As the 5.5-year ABSD deadline (including 6-month extension due to Covid-19) will soon arrive in April 2023, the developer is racing with time to clear 1,862 units in two years’ time.
However, we don’t foresee any cashflow problem with Kingsford, as described in a news report by Hong Kong’s South China Morning Post.
Within Singapore’s exclusive Sentosa Cove enclave is a two-storey house shaped like a grand piano, with a swimming pool on its roof, a living area that opens out to the waterfront, a black Rolls-Royce in the porch and a blue Bentley parked nearby.
The property, on an 18,794 square-foot plot, put owner Cui Zhengfeng in the news in 2014, when he paid S$33 million (US$24.35 million) for it. The board chairman of the Hong Kong-linked Kingsford Development Pte Ltd is a Chinese national turned Singapore citizen.
Since arriving on the Singapore scene in 2011, his group has gained a reputation for splashing out on land for condominium projects, paying property agents more than the market rate, and hosting parties where guests go home with expensive watches won in lucky draws.
“Why Hong Kong-linked Kingsford Development can’t sell flats on a US$600 million Singapore property” (South China Morning Post, April 21, 2019)
Should we give the developer a second chance?
But why did Kingsford hit with a no-sale licence? Let’s refer to a previous report by The Business Times:
… the Building and Construction Authority (BCA) had found that at the developer’s other project Kingsford Waterbay, some building works such as windows, barriers and common storey shelter “had deviated from requirements under the Building Control Act and Regulations”.
Feedback received from buyers of Kingsford Hillview Peak, another project by the company, was also taken into consideration,” the spokesman added.
In December 2017, Kingsford Waterbay was issued with an order to stop building works. This was lifted only after rectification works were completed. Separately, in July 2017, Kingsford Huray was fined S$130,000 under the Workplace Safety and Health Act for repeated safety lapses at its Hillview Peak worksite.
– “Kingsford Huray gets no-sale licence for Normanton Park project” (The Business Times, April 15, 2019)
The table below summarized what exactly went wrong in the two older Kingsford condominium projects:
Source: Behind The Scenes of The Property Market
As consumers and homebuyers of private properties, we have some questions in our mind:
1) Should we forget about the past and give the developer a second chance like the Yellow Ribbon Project for ex-offenders?
2) Should we believe that the developer has turned over a new leaf after 2 years when the authority has lifted the no-sale license, even if there is no reason given?
3) Should we trust that the authority will have a more stringent check this time after two misses in the two previous Kingsford projects?
As the developer told us, at least 600 homebuyers have given the above questions a “Yes”. Anyway, they will have the answers two years later after the project obtains its TOP in 2023 when they collect the key to their new unit. This experiment only costs $1,750 psf or $840,000 to $1.5 million for one and two-bedroom units.
Are Singaporeans adventurous? Not really. I think we are still very conservative, especially comparing with recently how some salarymen and students quit their jobs and studies to “trade” in the US and Hong Kong stock markets full time, going after IPOs, GameStop, Telsa, Tecnet, etc. Why hold onto a job when there is no job security but pay cut? Why continue to study when there is no good offer after graduation in this economy? Why not jump in for some quick and easy money?
Will I take the risk too? Not for me. As Mad Money host Jim Cramer said last week: “Don’t invest in anything that has any risk for the vast majority of your newfound fortune. Who needs risk when you’re already rich?”
I am not rich. But I am no longer young. I have to preserve my wealth for my golden years. When you are young and desperate for money, you take big risk because you have nothing much to lose. When you are no longer young and not desperate for money anymore, who needs risk?
New private homes selling well?
On January 15, there is an article in The Straits Times titled “New private home sales up 57%, highest for December in 8 years”. We really need such encouraging headlines when we have been looming under the dark clouds of Covid-19 for a year now.
As usual, the newspaper and property portal articles interviewed spokespersons from property agencies, who were satisfied with the commissions made from marketing new private homes. They cited reasons behind the satisfactory sales numbers the result of a market turnaround, rebound or recovery.
Honestly, from what I see through the eyes of the man on the street, I don’t see any turnaround in the global economy under lockdowns, any rebound in the business of companies, any recovery of our pay cut, except resurgence of traffic jams during rush hours.
If we bother to finish reading the whole article, somewhere in the article said “the number of new units launched in December surged 265 percent from a year ago” and the December sales by developers “was 126 percent higher than a year ago”.
If there are more new units launched during the month, isn’t it just normal to see more new units sold that month? Here comes the question: Is a 265 percent surge in units launched but only 126 percent more in units sold considered good or bad in sales result?
At the beginning of 2020, the industry was expecting 40 new private residential projects to launch for the whole year. Due to Covid-19, only 23 new projects were launched in 2020. Together with some small government land sales and en bloc sites this year, developers have at least 25 projects queuing to be launched this year.
For the sake of the developers and property agencies, no matter what, we have to believe that there is actually market turnaround, rebound and recovery happening right now.
What happened to new projects launched since 2018?
The Straits Times (Jan 15) reported that in 2020, the “existing top-selling projects include Parc Clematis, Treasure at Tampines, Jadescape and Piermont Grand”.
But these are all “not so new” projects: Parc Clematis was launched back in September 2019 but still has 29 percent unsold as of end of last month. Treasure at Tampines has been launched for 21 months but until now has 25 percent unsold. Jadescape was first released 27 months ago in September 2018 but yet has 10 percent of total units left. Piermont Grand has been in the market for 18 months but there are still 129 unsold units or 16 percent of the total units.
For private home projects launched back in 2018 and 2019 but till now still have leftovers, they are not forgotten. Let’s take a look at the list of new projects that desperately need help from agents and homebuyers, starting from the ones with the highest percentage of unsold units.
Still remember some of these high-profile new projects launched with a bang last time?
1) Ola EC which claimed “30 percent sales over the weekend” but until now has 61 percent unsold after 9 months.
2) One Pearl Bank said “80% of 200 units snapped up at launch” is still 57 percent unsold after 18 months.
3) Avenue South Residence used to have “more than 90% of 300 units launched on first day sold” is 42 percent unsold after 14 months.
4) What about Singapore Press Holding’s The Woodleign Residences? They need help to clear 264 out of 667 units or 40 percent of total units, 19 months after first launch.
5) Remember the 1,000 buyers queuing in front of the three new projects on the evening of 5 July 2018 to beat the deadline of the new cooling measures? After 2 ½ years now, Riverfront Residences, Park Colonial and Stirling Residences still have leftover units. What’s the rush back then?
The initial launch results on the first weekend of all these new projects all sound very impressive. What happen next, few months later, or even years down the road? Who are buying the leftovers? By when can developers clear all of them before the ABSD deadliine?
Still recall the good old days in 2013 when Hundred Palms Residences, The Hillford, Alexandra Central and J Gateway were all fully sold on the first day of launch? If these days new projects are left with considerable number of unsold units 30 months after first day of launch, can we still say “the new private home market is doing well”?
Let me summarize with a quote from an article in my new book titled “Tricks to report new launch sales results”
As readers or homebuyers, we are baffled. How do we know whether the reported number of units sold was really the actual number of units sold? What makes a new project a top seller in the eyes of the local media? Have they ever questioned the high number of new units sold by a new project that has been on the market for many months?
It seems that as long as the industry stakeholders and the media are keen to show the public that there is still strong buying interest in new projects, as readers, we don’t have a choice but to continue reading property articles in a celebratory mood.
– Behind The Scenes of The Property Market
You can now have a free preview and order the paperback or ebook online for my new book Behind The Scenes of The Property Market: Finding The Truths and Exposing The Lies of A Not-So-Transparent Industry.
Objective reminder.
Thank you.
Thanks for the article. I generally agree with your views and ideas but we have to be careful how we interpret the figures.
You may cast 126% growth in a bad light given the new launches but from a pure demand perspective, >100% growth from previous year is undeniably impressive – irregardless of supply. It just means 100% more families are willing to put down money on a condo despite the current macroeconomic and covid situation.
I agree supply may be increasing which will result in unsold units but it may be premature to forget local demand and appetite is there.
In any market, there are people who need to buy a home. But whether they are buying the right thing at the right time with the right price is a different matter. Anyway, when we ‘heard” many people are doing something now doesn’t mean it is the right thing to do. Time will tell. Buying a home is a big commitment. It’s best to do our own research and make our own purchase decision.
Great article. The devil is the details so I applause your research. Stop the false narrative.. Don’t have this country be like a house of cards.
Thanks. Always listen to what the industry stakeholders say with a pinch of salt. If in doubt, do your own research to find out the truth.
A few thoughts:
– Singaporean buyers 80+% for the recent sales (Having bought a 700-800sq ft unit at normanton, will they be buying again later ?) What is the breakeven psf?
– Developers pushing good commish to sell units (Would they do this in a good market?)
– 4Q20 Job losses slowing down -13.5k versus 3Q20 -29k , but still job losses, -172k for the year, where will these jobs come from?
– Wages stagnant/cut
– Borrowing costs are lower, introduction of SORA loans keep base rate ~1-1.4% (is it much cheaper compared to 2-3 years back? Not by much, at one time when rates were rising fixed was 2.4-2.5% but this was barely for a year. If rates come up what effect on loans then, should you be long duration or short duration?
– How many who bought during 2013-2015 actually made money after considering stamp/conservancy
– Debt moratorium
– Potential govn measures (who is the next pm and what are his thoughts versus affordability, already votes are falling)
Good questions. Thanks for leaving us much food for thought.
Really appreciate your insights.. I notice while the market has more supply, yet recent transaction prices seems to increased.. how do we make sense of this?
Yes, this happens in many other cities in the world as well. There is illogical buying frenzy from people after being confined at home during the lockdown or work from home for a prolonged time. Also “borderline” buyers who can’t afford to buy previously are making use of the low interest rates to buy (though interest rates have recently been raised in many countries including the US). Of course the media and industry stakeholders help to hype it up too to make good use of buyers’ FOMO and herd mentality. Thing are going to change soon. Just wait and see.
curiously, why do developers need to pay housing agents this days very high commission like Lilium 9% if the market is hot. Or is it a reward to agents. In the past, commission are even below 1%. Heard that some agents are giving discount in cash to buyers from a cut of their commission that think, CEA don’t allow but has not acted on it.
Exactly! If the new sales market is so good, there is really not necessary for agents to take the risk of doing kickbacks and for developers to pay agents high percentage of commissions when their margins are already so thin.