The first major en bloc exercise after the cooling measures ended without a single bid.
Singapore’s property market roared to life in the first half of the year with en bloc sales emerging as the prominent growth driver of real estate activity.
The en bloc fever which can be traced to late 2016 has seen previous record prices being shattered with the five biggest en bloc sales involving the Pacific Mansion for $980m, Tulip Garden for about $907m, Park West for about $841m, Pearl Bank Apartments for $728m, and Goodluck Garden for $610m.
Whilst the Pacific Mansions’ price tag fell below the historical record of $1.34b set by Farrer Court, the former so far holds the title as the largest collective sale for a freehold site.
The residential market boomed in the first half of 2018, as the en bloc market surpassed $9.9b in transaction value during that six-month period from $8.2b in 2017.
“In the private residential market, it was the collective and en bloc sales of existing residential developments to developers that captured headlines” with $10.5b deals being done in the first half of 2018,” said Alan Cheong, senior director at Savills Singapore.
Collective sales have dominated the Singapore market in 2018, with six of the top 10 deals by transactional size being collective sales, the largest of which was the Pacific Mansions deal, according to data from Real Capital Analytics. Additional preliminary data in the first half of 2018 also showed that the volume of collective sales has nearly hit $7b on track to meet and even breach the full-year record of $8b in 2017.
However in the midst of the strong uptrend, the government’s surprise cooling measures in July dealt a huge blow to bullish en bloc activity with analysts unanimously expecting fewer transactions in the latter half of the year.
The move was most evident after the tender for Horizon Towers, the first major en bloc exercise to close after the property curbs, ended without a single bid despite the extension of the tender period from August 7 to September 12.
Located in Leonie Hill, the property is composed of 211 units in two towers that has a reflected unit land rate is $1,786 psf ppr.
Following the dismal market response, the property’s sole marketing agent JLL is considering putting the property up for another public tender by early 2019 but is testing the waters first. “We are focusing to see whether new projects will be moving well in the next few weeks,” JLL told Singapore Business Review.
The weak take-up flags concern for upcoming en bloc candidates as prospective buyers hold back purchases to wait out the full effects of the government’s cooling measures whilst some have turned to the leasing market in the meantime.
This comes after government raised the Additional Buyers Stamp Duty (ABSD) rates by 5ppt for individuals and 10ppt for entities whilst tightening Loan-to-Value (LTV) limits by 5pt in its ninth round of property cooling initiatives since 2009. The trigger came after private home prices rose 9.1% over the past year and transaction volumes ballooned on the back of heated demand.
However, housing demand may recover in the near-term as buyers direct their money elsewhere.
“Underlying demand for homes will continue to be relatively healthy, emanating from homeowners of developments that have been sold collectively, although some of this demand may shift to the Housing Development Board market,” added Ong Choon Fah, CEO of Edmund Tie & Company.
Do you know more about this story? Contact us anonymously through this link.