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Property and Environment

Property slowdown hits Asian developers

They arrived with big pockets and a willingness to tackle mega skyscraper projects previously unseen in Australia’s capital cities, but the current residential property slump is proving dire for some heavyweight listed Asian developers.

As residential property prices slide across the country and Chinese buyers turn their focus elsewhere, a survey of interim financial results for development groups listed in Singapore, Malaysia and Hong Kong shows apartment sales have slowed dramatically and few developers are chasing new residential investments.

Buyers have all but dried up at Singapore-listed Fragrance Group’s signature 78-storey Melbourne tower, the unusual and distinctly curved design of which was inspired by US pop singer Beyonce.

Premier Tower has approval for 796 apartments and 167 hotel rooms.

Rapid construction of the glittering edifice is underway opposite Southern Cross Station, now almost half finished, even though a quarter of its apartments remain unsold.

Fragrance’s track record on selling units is illustrative of the broader sector’s travails, particularly as offshore developers are seen as having deeper and more effective sales channels to willing buyers in their country of origin.

In the rush to sign buyers after the tower’s 2105 launch, it booked sales of 61 per cent.

By March last year, company records showed sales were stubbornly slow, with at least 74.2 per cent, or around 200, remaining.

Now, it has reported have sold just 11 apartments over the interim year. Sales in the curvaceous tower are stuck at an anaemic 75.6 per cent.

Fragrance is controlled by billionaire developer Koh Wee Meng, who built his fortune on a series of budget hotels in Singapore’s red-light Geylang district.

The group’s only other Australian development, NV Apartments in Perth, has encountered similar hurdles.

Along with a lack of other active projects in Singapore, “this may cause the group to report negative results for certain quarters in financial year 2019″, it said.

Three-quarters of its apartments are yet to sell despite being nearly 80 per cent constructed.

Things are less grim for developer Roxy-Pacific Holdings, also listed on Singapore bourse, which reported annual revenue from Australia of $58 million.

Roxy’s residential projects, all in Sydney, “have been well received”, it says.

It has just one unit left to sell, out of 43, in its $41 million Octavia development in Killara, in Sydney’s northern suburbs, and both towers in West End Residences in inner-city Glebe are around 90 per cent sold.

The developer, nonetheless, has pulled back from residential, buying an industrial warehouse and office site at 36 Mavis Street in Revesby and signing a management deal to open a 319-room Park Hotel in central Melbourne in 2022.

Another big player, Malaysian developer UEM Sunrise, controls Melbourne’s second tallest tower, the Aurora Melbourne Central megalopolis in La Trobe Street.

It has reported a healthy 98 per cent settlement rate on the third portion of the massive 1149-unit project, about 201 apartments, that have been handed to new owners.

But the group’s $322 million, 42-storey Conservatory development in MacKenzie Street had only achieved a settlement rate of 73 per cent by March.

As a result of the slowdown, UEM has turned its hand to property management, striking a joint venture deal with Wotso in the co-working and serviced office space.

Across town in Southbank, developer OSK Holdings is having more luck with its equally ambitious 1054-unit Melbourne Square project.

Listed on the Malaysian exchange, OSK launched the first tranche of 457 apartments in June 2017 and by the end of last year had sold 60 per cent.

It reported sales a further 22 sales in the three months to March.

According to real estate agency JLL, the well-catalogued free-fall in house prices, slumping offshore demand and tighter bank lending has forced Melbourne’s developers to shelve or repurpose 51 apartment projects – and an estimated 16,550 units – over the past two years.

The crunch has hit hardest on city high-rises and mega projects with 500 or more apartments, but is being felt across the state, the agency said.

Source: Sydney Morning Herald

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