While at least one collective sale bid will be launched as planned this week, others have hit the pause button or are drawing up new plans amid uncertain prospects following the surprise of fresh property cooling measures.
An extension in tender closing dates is one way that some marketing agents hope will keep their en bloc sale bids alive. They also told Channel NewsAsia that homeowners’ price expectations, the size and location of sites will become increasingly important factors for collective sale attempts moving forward.
In an unexpected move on Jul 5, the Government announced a string of measures aimed at cooling the local property market and keep price increases “in line with economic fundamentals”.
Apart from those aimed at homebuyers, the latest property curbs also include a non-remissible five per cent Additional Buyer’s Stamp Duty (ABSD) for developers when they purchase en bloc properties for redevelopment.
Residential developers also face an increase in the remissible ABSD from 15 per cent to 25 per cent, which can only be waived if all the units in the new development are sold within five years of acquiring the site.
These measures, described as “heavy-handed” by some analysts, will dampen the buoyant en bloc market as they raise land acquisition costs for developers and in turn, reduce the bullishness of tender bids. Buying demand will also be hit by the hike in ABSD rates and tightened loan-to-value (LTV) limits, analysts said.
Naturally, those hoping to jump on the en bloc bandwagon have been worried.
“Homeowners are definitely very concerned; one of the first comments I heard was ‘It’s game over’,” said Ms Christina Sim, director of capital markets at Cushman & Wakefield.
As such, Ms Sim said her company plans to suggest a one-month extension for the tender closing date for Dalvey Court when it meets with the sales committee. Put up for sale on Jun 25 at S$160 million, the tender for the 32-unit freehold condominium located off Bukit Timah Road is set to end on Aug 2.
Meanwhile, the plan for Waterloo Apartments in the Bugis area to go en bloc this week has been shelved, pending discussions with the sales committee, added Ms Sim.
“We were thinking if we should wait for authorities to get back to us on our outline planning permission (OPP) for the site to be zoned for hotel use, or launch it as a residential site as soon as possible,” she said. “I think now, we will most likely wait.”
JLL is also planning to advise the sales committee of Horizon Towers, which was put on the market at a reserve price of S$1.1 billion last week, to lengthen the tender period by about a month to early-September.
“We have to think about what sort of adjustments to take,” said JLL’s regional director of capital markets Tan Hong Boon, who added that Horizon Towers owners are “concerned” about the potential impact of the new cooling measures.
Given that developers would require more time to digest the surprise measures, Mr Tan said: “It is therefore prudent for us to advise the owners to extend the tender closing period to ensure sufficient time is given for the developers’ assessments of the market and the site.”
There are exceptions.
Fortune Park, for one, will be going ahead with its collective sale attempt on Thursday (Jul 12), according to marketing agent Huttons Asia. The project has a S$126 million reserve price.
“We have no plans to hold back the launch or change our tender period,” investment sales head Terence Lian told Channel NewsAsia.
Contrary to other marketing agents, Huttons Asia will also be staying put with the tender periods for Jansen Mansion and Blossom Mansions which are due to end on Aug 2 and Jul 31, respectively.
“While we received a lot of enquiries about how these cooling measures will impact the ongoing collective sales, we are not that worried because we think the measures will not affect small- and medium-sized projects,” said Mr Lian.
Fortune Park is a 68-unit freehold condominium in Kovan; Jansen Mansion and Blossom Mansions are smaller developments with 12 and 20 units, respectively.
He added: “The number of units that a small site can be redeveloped into will be comparatively lesser than a mega site. So even if developers have to pay the additional five per cent ABSD, they may be spared the 25 per cent penalty since they have a higher chance of clearing the units within five years.”
MARKET TO GRIND TO A HALT?
Still, Mr Lian said developers may give big sites a chance if they are in a prime location and reasonably priced.
Currently, Huttons Asia is working on two mega sites that are nearing the 80 per cent consent level.
For Kensington Park condominium in Serangoon Gardens, whose owners are eyeing a price of S$1.05 billion, the company has secured 70 per cent. Over at Pine Grove in the Pandan Valley area, it has managed to convince 76 per cent of homeowners.
To allay any concerns, Mr Lian said he and his team will be meeting the sales committees for both condos later this week. “Before the measures, some owners were hoping to increase the reserve prices. With this, we hope they can be realistic and come on board to support us.”
Echoing that, Colliers International’s managing director Tang Wei Leng thinks the latest cooling measures will “likely tame the euphoria among would-be en bloc sellers and help to rein in any unrealistic price expectation”.
“Typically, owners receive a 50 to 60 per cent premium from selling their property collectively. They may now have to accept a lower premium if they want to get the deal across the line,” she added.
For Cushman & Wakefield, the company might consider a re-launch of United Mansion at a lower reserve price. The previous tender closed on May 9 without concluding a sale as bids received were lower than the reserve price of S$98 million.
For the other projects, Ms Sim said she will advise homeowners to avoid jumping the gun.
This includes Cavendish Park, Eastern Lagoon, Chuan Park and Shelford Green.
Chuan Park – a 446-unit, 99-year leasehold condominium at Lorong Chuan – is the “more challenging” site given its sheer size, according to Ms Sim. Since convening last year, the sales committee has managed to secure 76 per cent consent level.
“We’ve got up to October to get 80 per cent and we are going to stretch it till then,” she said.
“I think the key is not to rush and jump the gun because there’s no point launching in the market now. Let the market recover from the shock first and typically, we should see the dust settle in about two to three months’ time.”
But not all market observers are optimistic of a recovery in the near term.
DBS analyst Derek Tan, for instance, believes that the en bloc market could grind to a halt as property developers recalibrate their strategies to clear unsold stock at high prices.
The revised ABSD rates “greatly increases the capital commitment for developers looking to land-bank further in a period of increased uncertainty in buying volumes and heightened supply entering the market in the coming two years”, he wrote in a note.
As such, the immediate strategy for developers with upcoming launches will be to re-look their pricing and launch strategy.
While this is not a base case scenario, “if sell-through rates do not follow through, the risk of potential write-off to land values will be a concern” in the longer term, Mr Tan added.
Source: Channel NewsAsia – 10 Jun 2018