SINGAPORE - An integrated development by CapitaLand, comprising a residential tower and an Ascott serviced residence, will soon come up at the site of Somerset Grand Cairnhill opposite Paragon along Orchard Road. Both will be completed in end-2016.
At a showflat viewing, CapitaLand Singapore CEO Wen Khai Meng said the residential project has been designed to fit the current market conditions.
With prices at Cairnhill Nine averaging S$2,500 per square foot (psf) and just under 90 per cent of its units priced at S$3 million and below, he said: "We thought this quantum is very affordable, particularly for the Orchard Road area."
Loan curbs have made it difficult to borrow beyond certain limits, so low price quantums have become a draw with buyers. The same rationale goes for the increasingly high proportion of small units in developments. Nine in 10 units at Cairnhill Nine are two-bedroom and smaller.
"When this project was designed, we noticed the market has shifted to smaller units because once all the cooling measures come in, people are very constrained on the absolute quantum (they can borrow), whereas for the neighbouring Orchard Residences, Urban Resort and Urban Suites (which are also CapitaLand projects), those days the fashion was to do as big as possible. We go through cycles."
Mr Wen added that in a good market, the units could have been priced close to S$3,000 psf. "If indeed the (market) is booming, then the price level you see will be quite different. We just do our best to adjust to the demands of the market at each point, whether it's the pricing or the size of the units."
Asked if this was one of the projects that S$110 million in impairment was provided for in Singapore in its latest fiscal results, he remained coy. "As I said, every year as part of our exercise, even in a good year, we assess all the projects. To the extent that the stress price is 15 per cent below the prevailing market price, less than our cost, then we've got to take some provisions. The provisions are over several projects which I shall not identify."
Cairnhill Nine's 268 units come in a mix of layouts and sizes ranging from 591 square feet to 3,864 square feet. The starting prices range from S$1.35 million for a one-bedroom unit to S$3.68 million for a four-bedroom unit. Penthouses range from S$5.8 million to S$6.67 million.
It is the first Orchard Road residential project to be launched in more than three years. The last one was TwentyOne Angullia Park, built by China Sonangol and launched in April 2012.
Christine Li, research director at Cushman & Wakefield, thinks the pricing is competitive. For comparison, Liv on Wilkie, when newly launched in October 2013, sold 63 units at a median price of S$2,465 psf based on caveats lodged, and that was a freehold property, she said. Cairnhill Nine is a 99-year leasehold.
SLP International executive director Nicholas Mak believes that at S$2,500 psf, the first 30 per cent of the project should sell "fairly quickly", with majority of interest coming from investors eyeing a prime-located rental home for yields.
This is partly given the scarcity of units in the Core Central Region (CCR) in recent times. He cited data showing that of about 7,000 new developer homes launched for sale in 2015, only 120, or less than 2 per cent, were in the CCR. That said, about 5.5 per cent of units sold were in the CCR.
"This was due to both a lack of new projects in these areas and a lack of confidence on developers' part that the market can support the prices they want. Some launched their projects, it didn't go very well, and they stopped," he said.
A VIP preview of Cairnhill Nine will be held at its Indus Road show gallery on Feb 27, while viewings by appointment will begin the following weekend. The official launch could be in mid-March. Already, the developer has started soliciting interest among Indonesians in Jakarta.
Adjacent to Cairnhill Nine is Ascott Orchard Singapore, a 20-storey serviced residence with 220 units.
The project follows after the success of another integrated development - Ion Orchard and The Orchard Residences, which CapitaLand completed in phases from 2009.
The decision to redevelop the former Somerset Grand Cairnhill came about because its design was dated and the development was not making optimal use of the prime land. The largest units were 1,270 sq ft, and the building came with a carpark with over 800 lots.
In September 2012, CapitaLand completed the purchase of the site where Somerset Grand Cairnhill stood for S$359 million from Ascott Reit. Ascott and CapitaLand are jointly doing the redevelopment now. Eventually, Ascott Orchard Singapore is expected to be divested to Ascott Reit in 2017.
This article was first published on Feb 24, 2016.
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