More than 30 collective sales sites have failed to find successful bidders at the close of tender, following the latest round of cooling measures introduced in July.
In a bid to entice developers, around 15 en bloc projects have sought to lower their asking prices, according to Huttons Asia.
One of them is Park View Mansions in Jurong, which relaunched its tender for a second time on Wednesday (Dec 12) at an asking price of S$250 million – 22 per cent lower than its initial asking price earlier this year.
“After the cooling measures, developers turned very cautious and are very selective in acquiring new en bloc sites,” said Terence Lian, head of investment sales at Huttons Asia, which is the marketing agent for the project.
More than 80 per cent of owners at the 160-unit development agreed to the new price within two to three months “in view of current market conditions”, Mr Lian said. If successful, homeowners are expected to get between S$1.44 million and S$1.6 million from the collective sale.
Park View Mansions is the latest en bloc project seeking to lower its reserve price in a quieter collective sales market.
Other projects include Gilstead Mansion near the Novena area, which relaunched its tender at S$65 million – S$3 million less than its guide price in June. Windy Heights condominium in Kembangan is undergoing a re-signing process to lower its price by about 7 per cent to S$750 million.
This comes on the back of July’s cooling measures, as well as new guidelines aimed at cutting the number of shoebox units in certain districts and revised guidelines for indoor and outdoor spaces.
Other projects which maintained their asking prices following these measures saw their tenders close without finding a successful bidder. They include the Spanish Village condominium at Farrer Road, which made its second en bloc attempt in October at a price tag of S$882 million. Its tender closed on Nov 20 without securing a buyer.
“Developers will generally try to intensify the land use – that is the premium that they can get out of it,” said Dr Lee Nai Jia, head of research at Knight Frank. “The trick is that with all the balcony bonus and smaller unit size, it helps developers maximise the land value.”
“Now with all these measures coming in, it means the gross development value may be lower. Because the area per unit is larger, and they have to consider more things like function rooms, which eats into the efficiency of the development,” Dr Lee said.
“So in other words, what we are getting is the gross development value is likely to decline. And to maintain their margin in terms of profit, they also have to lower their asking price for this size,” he added.
“So if that particular area favours smaller units and cannot accept the supply of bigger units, (developers) will be more cautious and may lower their asking price for the sites.”
SOME PROJECTS RAISING ASKING PRICES
On the other hand, at least two en bloc projects are raising their asking prices.
Mandarin Gardens along Siglap Road, for instance, upped its asking price by close to 12.5 per cent to S$2.79 billion in November, after finding out that the land parcel it sits on was undervalued.
Pine Grove near Ulu Pandan Road also raised its price in October by S$140 million to S$1.86 billion, in a bid to secure a majority consensus needed to launch a public tender.
Analysts said raising the asking price would likely deter developers, especially for mega sites.
“Very often sellers are only interested in what they’ll be getting – that means the premium they’ll be getting – and omit the other costs developers will acquire for the plot of land,” Huttons’ Mr Lian explained.
“It’s not just the reserve price – it’s also the lease upgrading premiums, the differential premiums, the 5 per cent non-remittable ABSD (Additional Buyer’s Stamp Duty) plus the 25 per cent remissible ABSD if they cannot sell all their units within the five-year period.”
Knight Frank’s Dr Lee said that some en bloc sellers may have a “loss aversion” mindset when it comes to selling their properties.
“Some of them may have probably bought them at quite high prices and are generally only willing to sell if prices are above a certain mark,” he added.
“In the case of Pine Grove and Mandarin Gardens, they may find their product is very unique and so they want to push up prices … But it might be a bit difficult because there are other options – many options – available in the market.”
DEVELOPERS SHIFTING ATTENTION TO SITES FOR HOTEL USE: ANALYSTS
With a slower residential property market, some analysts said more developers may shift their attention to buying parcels for hotel use instead. Since the cooling measures in July, two of the three sites sold en bloc have clinched planning permissions to change their land use for hospitality.
These include Golden Wall Centre near Little India, which sold for more than S$276.2 million, as well as Waterloo Apartments at Bras Basah, which was sold at S$131.1 million. The deals come on the back of strong tourist arrivals and increasing gazetted hotel room venue, according to a Singapore Tourism Board report earlier this year.
“These assets provide income. To some of the developers, that’s good for their shareholders especially when land parcels or developers’ sales are slowing, so that helps them diversify some of the risk in the market,” said Dr Lee.
“If you look at the macroeconomic outlook, Singapore visitor arrivals are still holding up very well. Singapore is getting more integrated into the Southeast Asian economies,” Dr Lee said. “I will expect there will be more MICE events and collaboration between the different countries.”
Moving forward, CBRE expects en-bloc sales volume in 2019 to drop to 10 to 20 per cent of this year’s value. According to Huttons Asia, some en bloc projects may relaunch in the first quarter whilst maintaining its initial asking price, as the market stabilises, barring potential external economic shocks.
Source: Channel NewsAsia – 15 Dec 2018