Singapore’s CDL Sees Q1 Sales Plunge 55% as Home Inventory Runs Dry

City Developments Ltd (CDL) saw its sales plunge 55 percent in the first quarter as it nearly ran out of homes to sell in Singapore’s housing frenzy.

Singapore’s largest non-government-backed developer sold 88 units worth S$213.2 million ($158.4 million) in its home market last quarter or less than half of the S$477.9 million it booked selling 188 condos during the same period a year ago, according to a regulatory filing late Friday.

The company attributed the revenue drop to a dearth of new homes after its 639-unit Copen Grand project in central Singapore’s Tengah Town – its last Singapore development launched before the start of the quarter – sold out within one month of its October debut.

While Singapore authorities raised the additional buyer’s stamp duty (ABSD) on new home purchases by as much as 100 percent on 27 April, the highest levies are set on foreign buyers or speculators, with much of CDL’s upcoming pipeline focused on mass market or mid-range projects.

Pipeline Runs Out

CDL launched its first project of this year, Tembusu Grand – a joint venture with Hongkong Land subsidiary MCL Land – on 8 April and by the end of the month had sold off 56 percent of the 357 units available at an average price of S$2,465 per square foot.

While it had planned to launch its prime Newport Residences project on Anson Road in the central business district on 29 April, the company indefinitely postponed the roll out of that superluxury project when the ABSD hike was announced.

During the first quarter, two of CDL’s seven development projects – Nouvel 18 along Anderson Road as well as the 188-unit Haus on Handy near Orchard Road – were already sold out, while the remaining five developments had an average take-up rate of 95 percent.

While it has yet to set a new launch date for Newport Residences, CDL has confirmed that The Myst, a suburban condo project offering 408 units in Upper Bukit Timah, will be launched in the second half of this year.

With the recent property cooling measure in place, CDL expects its high-end and luxury projects in prime districts to take a hit given their popularity among foreign homebuyers.

ABSD Impact Minimised

While the government’s latest cooling measures raised ABSD rates for home purchases by foreigners to 60 percent from 30 percent previously, and hiked taxes on second home purchases by locals by as much as five percentage points, CDL does not expect the measures to disrupt its business, apart from the luxury sector.

“The group expects minimal impact on the mass and mid-tier segments where most buyers are locals and Singapore permanent residents, as evidenced by the recent launches that took place after the cooling measures were announced,” it added.

Outside of the high end market, homebuyers and investors seemed unfazed by the tax hike with local developer EL Development having sold 75 percent of the 275 condos in its Blossoms by the Park project in Slim Barracks Rise during its launch day on 29 April, at prices starting at S$2,183 per square foot.

A tie-up between Hup Realty and Sunway Developments found buyers for 216 out of the 816 available units at its The Continuum project during its launch weekend on 6-7 May, where prices were over S$2,500 per square foot.

Mass Market Sweet Spot

With the government launching fresh waves of property cooling measures, shares of the SGX-listed developer are down 16 percent so far this year, but at least one equity analyst believes CDL will continue to achieve stable returns.

“Despite a moderate residential outlook, we believe the impact to CDL’s bottomline is manageable, as its inventory is substantially sold and the remaining landbank is mostly in mass/mid-tier segments,” Vijay Natarajan, RHB’s resident property and REIT analyst, said in a research note.

During the last two years the company has been among the city’s most aggressive bidders in land auctions, including teaming up with Malaysia’s GuocoLand, which is controlled by a cousin of CDL chairman Kwek Leng Beng, to buy a pair of mass market projects in central Singapore’s Lentor Hills development.

Last September, the company acquired a 178,936 square foot (16,624 square metre) executive condominium site at Bukit Batok West Avenue 5 for S$336 million through a public tender, where it plans to build a housing complex with 510 subsidised homes and a carpark.

International Ambitions

Against the backdrop of Singapore’s latest market restrictions, the firm cautioned against excessive reliance on a single market at the same time that it continues to expand its overseas holdings.

“The recent property cooling measures in April serve as a continued reminder that the group should not be overly reliant on a specific country or asset class.” CDL said in the statement. “The group’s geographically diversified portfolio across its various business segments enables it to maintain stability while embracing growth.”

In March CDL purchased the 416-key Sofitel Brisbane Central hotel in Brisbane for A$177.7 million (then $119 million) and during the same month completed its £395 million (then $468.2 million) purchase of the St Katharine Docks complex in central London from Blackstone.