Analysts weigh on whether the hype is slowing down soon or not.
The Singapore en bloc market is raging with bulls. There was already $5.5b worth of deals done from the start of the year up until 19 March. According to Colliers International, this figure already accounts for more than 67% of the residential collective sales in 2017 at $8.1b
Recent deals – Katong Park Towers and Pacific Mansion – were also transacted above owners’ asking prices, Colliers International managing director Tang Wei Leng said in an interview with Singapore Business Review. This signals that “developers are still on the hunt for sites with excellent attributes and would pay a premium for them. However, given the deluge of collective sale sites on the market, we think the balance has tilted in favour of the developers, who are now spoilt for choice and would prefer to home in on the best sites and/or those that are realistically priced,” she said.
Given the shift to developers, will the en bloc hype head into a slowdown soon?
iCompareLoan chief mortgage consultant Paul Ho said 2018 will still be a bigger year for en bloc sales, not by the number of projects, but by their total en bloc volume. “If an en bloc has happened lately nearby an area for $1,500 psf ppr, another en bloc project who is priced at $1,420 psf ppr would attract bids. All things being equal, it is a matter of how the developer is able to price the project upon completion with its frills and all,” he said.
Ho noted that Mandarin Gardens is going for an estimated $2.5b, and Cashew heights may also go for around $1.65b. “So if these materialise along with many other developments, 2018 will indeed be a bigger year for en bloc sales, not by number of the projects, but definitely by the total en bloc volume of the projects,” he added.
Savills research & consultancy senior director Alan Cheong noted that the en bloc fever appears to last longer than even the experts thought so and does not appear to slow down. “Part of the reason is that developers are not getting enough lands to satisfy their need to reinvest their capital returning from projects that have just completed,” he said.
Christine Li, Cushman & Wakefield research director, agreed with Cheong and said developers are still keen to replenish their land bank. “Our research has also shown that around 8-10 developers have not managed to secure any land sites over the last 2 years. This could spur sustained interest in the state tenders and en bloc market, although, with higher DC revision and traffic impact studies for selected projects, there could be an inclination towards government land sales sites by some developers,” she added.
In 2017, the premiums over asking prices have dropped from 10% in 2017 to 2.9% in 2018 as at 22 February, Li revealed.
When asked what fuels developers’ positivity, Ho said, “It is not known what fuels this extreme optimism. In December, some felt that en bloc is reaching the tail end. Today I spoke to another industry insider, he felt that there are still many developers out there who would buy, depending on what price.”
Ho also noted that there will considerable election budget and some level of artificial pump priming of the economy to give the “feel good factor” for the coming elections. “Hence I think the developers may have had that in mind as one of the many considerations and their ability to price the projects,” he added.
Now, developers will need to rush their launches to capture the buyers, Ho noted. “In 2018, some of the 2016/2017 en bloc projects will have attained URA permission for sale and comes onto the supply in the pipeline ‘bandwagon’, these early bird developers will make money. There will be a lot of supply in the pipeline from the government land sales projects and on top of that, we expect easily another 10,000 or more units coming from en bloc tear down and re-development into new condominium projects. However, many "supply-in-the-pipeline" units have already been sold, so this is one mitigating factor against price drops,” he added.
PropertyGuru special project regional head Winston Lee said he expects robust en bloc activity to continue this year strongly pointing to a recovering property market and the anticipation of a huge volume of cash-rich buyers in the market. “Our recently launched PropertyGuru Property Price Index increased 2.1% in Q42017 as sellers continue to ‘future price’ their properties amid surging en bloc activity,” he added.
Lee also noted that that the sale of freehold Pacific Mansion is a sign the market is still recovering. “This shows that the property market is continuing to recover and there will be a huge volume of cash-rich buyers looking for replacement homes,” he concluded.
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