With less than a third of collective sale sites sold so far this year and no deal inked since property cooling measures took effect more than a month ago, one property analyst has declared the current cycle of en bloc fever to be over.
More than 30 collective sale sites have failed to secure a buyer since January, according to data from real estate agencies Huttons Asia, Savills and Colliers.
“This cycle has reached its end,” said International Property Advisor’s chief executive Ku Swee Yong.
If that is the case, the current cycle would have lasted about two years – beginning with the sale of former Housing and Urban Development Company (HUDC) estate Shunfu Ville – shorter than the three-year run that lasted between 2005 and 2007, he said.
Other analysts stopped short of declaring an end to en bloc fever, believing there is still some life yet as some developers are still on the look-out for choice sites but may need two to three months to assess the market.
Successful en bloc deals have been made every month in the first half of the year. Between June 1 and July 5 – the day the Government announced property cooling measures – six successful deals worth more than S$1 billion were announced, said ZACD Group executive director Nicholas Mak.
But after July 5, up to 10 en bloc tenders have closed without a buyer.
Both large and small private developments have not been spared.
Large sites, such as Spanish Village and Elizabeth Towers whose tenders closed on July 18 and 19 respectively, were among those that did not manage to close the deal.
The 330,000 sq ft Spanish Village along Farrer Road had an asking price of S$882 million, while the 54,000 sq ft Elizabeth Towers site in Orchard had an asking price of S$610 million.
Smaller sites include the 9,000 sq ft Blossom Mansions in Geylang, on the market for S$32.8 million, and the 16,600 sq ft Jansen Mansion near Kovan MRT going for S$22 million. Their tenders closed on July 31 and Aug 2, respectively.
Smaller sites are seen as having a higher chance of being sold as developers would be more confident of selling all the redeveloped units before the five-year deadline in order to apply for the remission of the 25 per cent Additional Buyers’ Stamp Duty (ABSD).
Analysts reiterated the momentum of collective sales was already tapering prior to the Government’s cooling measures.
The ABSD rate for entities was 15 per cent previously, but it was raised by 10 percentage points in the latest round of cooling measures. An additional non-remissible 5 per cent ABSD for developers was also introduced, which further increased the cost for developers when acquiring land.
Some collective sales were already going through at amounts below the asking price in the second quarter of the year, said Ms Suzie Mok, senior director of investment sales at Savills.
For example, Dunearn Gardens was sold for S$468 million in April even though its reserve price was S$489 million.
Referring to City Developments group chief executive Sherman Kwek’s comments this week that developers have priced some recent launches 10 to 15 per cent lower than they could have – in terms of per-square-foot pricing – Mr Ku said en bloc sellers may need to lower their reserve price by a similar percentage.
Mr Terence Lian, investment sales head of Huttons Asia, said that there are still developers looking out for good sites, although they may need two to three more months to assess the market.
“There will still be some sites transacted at a reasonable price,” he added.
Even if they are not in any rush, there will always be homeowners living in old properties looking forward to a collective sale, noted Mr Chris Koh, director of Chris International.
Developers unable to clinch sites at their desired locations through the Government Land Sales programmes will also be looking at the en bloc market.
The value of en bloc transactions this year is currently at about S$10 billion, already surpassing last year’s S$8.13 billion.
One thing is for sure, said Ms Tricia Song, Colliers head of research for Singapore: “Certainly, the first deal to be done (after the cooling measures) will be keenly watched by the market.”
Source: Today – 11 Aug 2018