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Sales of Singapore's high-end properties have been sluggish for a while, and developers faced with a ticking clock on high charges for unsold units may take drastic measures to change that, but probably not price cuts.
"Price is not the issue. The issue is there's no demand," Derrick Heng, a property analyst at Maybank-Kim Eng, said Tuesday.
It's not just a matter of sitting on the unsold units while waiting for buyers to return. Developers in Singapore are running out of time: any units still unsold two years after a project's completion face an "extension charge," of 8 percent of the proportional land cost for the first year, rising to 16 percent in the second year and 24 percent in the third. It's a measure aimed at preventing property hoarding by "foreign" developers in the land-starved city-state.
The only way to avoid the charges is if the developer is Singaporean or the company has only Singaporean shareholders and board members.
"Penalties for unsold units under the qualification certificate (QC) ruling may persuade some developers to go down the de-listing path," Heng said in a note late last month.
The market has already picked its top candidate for de-listing: developer Wing Tai Holdings, which is around 50 percent owned by the Cheng family. Its stock is up around 24 percent so far this year, compared with an around 7.4 percent rise in the FTSE ST Real Estate Index, of which it is a component, over the same period.
Wing Tai faces extension charges of around 25 million Singapore dollars ($18.4 million) and 48 million Singapore dollars on its Le Nouvel Ardmore and Nouvel 18 projects respectively in 2016-17 if units remain unsold, according to data from CIMB. More than 90 percent of units at the two projects are unsold. By comparison, Wing Tai's net profit for the fiscal year ended June 2014 was around 254 million Singapore dollars.
With the stock's large free-float, de-listing would be expensive -- around 900 million Singapore dollars -- but the company wouldn't be the first Singapore developer to go that route. In 2013, developer SC Global went private with an offer valuing that company at around 745 million Singapore dollars to avoid extension fees on its luxury units. In January, Popular Holdings also began the delisting process as most of the units at its Ei8ht Raja project sat on the shelf.
In mid-2014, media reported Wing Tai's chairman said the company wouldn't try to de-list.
But it's not an outlandish prospect.
"If I were them, I would take it private," Alan Cheong, senior director for Savills Research, said Tuesday. "If you really want to clear your stock in the high-end, you have to take a steep haircut. If your balance sheet is strong, why take the haircut," he asked.
Cheong expects experienced developers will take a longer-term view on whether to cut prices, but companies that need to refresh their capital or that don't have property as a core business will be forced to cut prices.
But that may not clear units in the high-end, which can be vulnerable to foreign demand. Faced with some political pushback to a big population jump in recent years, Singapore has been limiting the number of foreigners allowed to move into the country.
Overall, Singapore's market faces an oversupply situation. Heng estimates housing demand will come in at 15,000 units a year, but he forecasts supply will rise at 45,800 units a year through 2018. While the city-state's overall property-price index for private property fell only around 4 percent last year, Heng believes high-end prices are now around levels touched during the global financial crisis, even as mass-market prices are still 70 percent above their trough.
—By CNBC.Com's Leslie Shaffer; Follow her on Twitter