Priced to sell

On Feb 23, CapitaLand unveiled Cairnhill Nine, its mixed-use development on Cairnhill Road. Scheduled for completion by end-2016, the project contains a 30-storey residential tower with 268 units, and Ascott Orchard Singapore, a 20- storey serviced apartment block with 220 units. When completed, it will be linked to Paragon Shopping Centre via an overhead covered bridge across busy Bideford Road.

Model of Cairnhill Nine, a mixed development with a residential tower and The Ascott Orchard serviced apartment block

The 99-year leasehold project with a prime District 9 address has a mix of one- and two-bedroom units, including those with an extra guest room, as well as four-bedroom units and penthouses. Almost 90% of the units are of the oneand two-bedroom variety, with sizes from 592 sq ft to 1,324 sq ft. Prices are said to start from $1.35 million. Only 22 units are four-bedroom types, with sizes from 1,528 sq ft and priced from $3.68 million. Meanwhile, there are only eight penthouses in the development, and at 2,400 sq ft, they are priced above $5 million.

Property cooling measures which placed borrowing limits on second and subsequent property purchases since 2011, followed by the imposition of the total debt servicing ratio (TDSR) in June 2013, have constricted the purchasing power of homebuyers. With buyers becoming increasingly price-sensitive, the market has shifted in favour of smaller units in recent years, says Wen Khai Meng, CEO of CapitaLand Singapore. Units at Cairnhill Nine are designed to cater to this shift in demand, he adds.

As such, close to 90% of its units are priced below $3 million and about half are at $2 million or below, Wen says. “For an Orchard Road location, we believe this pricing is just about the right quantum,” says Wen. The average price of $2,500 psf for the project was benchmarked against the other neighbouring condos. In a booming market, prices would have been closer to $3,000 psf, he adds.

‘Life goes on’
Of concern among developers is the Additional Buyer’s Stamp Duty remission claw-back for developments with unsold units that will kick in at end-2016. This is likely to put further pressure on prices. “Currently, about 6,000 units remain unsold in 33 developments, excluding executive condominiums, which will be impacted by the ABSD remission clawback in 2017 and 2018,” said Augustine Tan, president of Real Estate Devel opers’ Association of Singapore ( Redas) in his speech at the Spring Festival lunch on Feb 18.

The ABSD was initially set at 10% from December 2011 and raised to 15% from January 2013. Developers are eligible for a remission on the ABSD only if they develop and sell all the units in their project within five years of acquiring the site. And this applies to all residential sites purchased from December 2011, whether they are en bloc purchases, private treaty deals or sites purchased in government land tenders. In a way, the ABSD is more punitive than the extension charges under the Qualifying Certificate, which require developers to sell all their units within two years of completion. Failing to do so will incur extension charges of 8%, 16% and 24% on land cost for the first, second and third year respectively. However, it is prorated based on the proportion of unsold units. According to Redas’ Tan, some 700 unsold units across 13 developments will be affected by QC this year, with estimated charges totalling close to $100 million.

While the ABSD and QC looms ahead, developers have to continue rolling out projects, regardless of market conditions. “As real estate developers, we have to ride through the cycles,” concedes CapitaLand’s Wen. “Good or bad, life goes on. We just have to do our best to adjust to the market at each point — whether it’s the pricing or the size of the units.”

Right pricing
The absolute price of the units and location of Cairnhill Nine, which is within walking distance of the shopping malls on Orchard Road, “is attractive”, says Joseph Tan, executive director of residential services at CBRE. In the current market, the tenure of the project is of less importance to buyers compared to price, he adds.

The sweet spot for buyers seems to be in the $1.5 million-to-$2 million range, adds Tan. “At this price level, the 15% ABSD for foreigners is less than the price of a new Mercedes. So, the ABSD is less of an obstacle at this price quantum for foreigners and even Singaporeans buying their second or third property.” He points to Wheelock Properties’ Scotts Square on Scotts Road, which was showcased in Hong Kong last year and sold more than 10 units, mainly one-bedroom apartments priced around $2 million. At Robin Residences, sales picked up steadily from the second half of 2015, with the most sought after units being one-bedroom apartments priced between $970,000 and $1.3 million.

When Cairnhill Nine was showcased in Jakarta during the weekend of Feb 20 and 21, it drew positive response from prospective Indonesian buyers. “Foreigners, and in particular Indonesians, traditionally like the Orchard Road address, and especially the proximity of the project to Paragon and Mount Elizabeth medical centres,” says CapitaLand’s Wen.

There are plans to showcase the project in other parts of Indonesia, such as Surabaya and Solo, as well as in Hong Kong. The sales gallery and show flat will open for preview on the weekend of Feb 27 and 28.

Luxury finishes
The units at Cairnhill Nine may be compact, but they have luxury features such as marble flooring, customised designer wardrobe and storage space, as well as fully fitted kitchens with cabinetry by Ernestomeda and Miele appliances, including coffee machine, cooker hob, oven, refrigerator and washer-dryer. Unlike in most projects, units will be fitted with LED lighting and cove lighting in the living area.

Residents at Cairnhill Nine will also be able to enjoy hospitality services provided by the neighbouring Ascott, such as concierge, housekeeping, laundry and even grocery shopping. Each unit will be equipped with a CCTV camera at the entrance and a biometric door lock where residents can identify a person before unlocking their front door via their smartphone. The home automation system provided is scalable to allow tech-savvy homeowners to connect with their sound, lighting or air conditioning systems if they want to, adds Wen.

The site of Cairnhill Nine was formerly that of Somerset Grand Cairnhill Singapore, which CapitaLand purchased from its unit, Ascott Residence Trust, for $359 million in 2012. The Ascott Residence Trust will, in turn, buy The Ascott Orchard for $405 million sometime in 2017.

However, CapitaLand will have to sell all the residential units at Cairnhill Nine by end- 2017 to be eligible for the ABSD remission. “The project has only 268 units,” says Wen. “We still have some time to sell them.”

Source: TheEdgeProperty

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