With still another quarter to go before 2016 comes to an end, the value of collective sale deals in Singapore has almost doubled that in the previous year, as developers scour the en bloc space for land after the Government reduced supply in its biannual sales programme.
Two en bloc deals for residential estates Shunfu Ville and Harbour View Gardens worth a total of S$671.25 million have been completed this year, compared with just one transaction for the mixed-use development Thong Sia Building for S$380 million last year.
The jump coincided with an uptick in sales at recent launches at a time when land supply under the Government Land Sales (GLS) programme continued to be reduced, resulting in tougher competition for land among developers, analysts said.
This is evident by the high number of participants in recent land tenders. As such, developers are exploring other options, such as the collective sale market, said an analyst.
Chinese developer Qingjian Realty, a familiar name in local property circles, made its debut purchase in the en bloc market when it snapped up the privatised Housing and Urban Development Company (HUDC) estate Shunfu Ville for S$638 million in May. The transaction was this year’s first and Singapore’s largest en bloc deal in nine years – after the sale of another privatised HUDC estate Farrer Court to a CapitaLand-led consortium for S$1.34 billion in 2007.
The Shunfu Ville sale renewed optimism among owners keen to put up their properties for collective sale, with property firms saying they have received more enquiries after the deal.
“The successful deals do make people wonder whether there is a revival in the market. Interest has always been there among owners and memories of homeowners making good money out of selling through en bloc are still fresh in their minds, so they are keen to do the same. But for a deal to go through, it boils down to (price) expectations (by owners). It takes two hands to clap,” said Mr Eugene Lim, key executive officer of property firm ERA Realty Network.
After the sale of the 358-unit Shunfu Ville, Harbour View Gardens, a 14-unit condominium in Pasir Panjang, was sold last month to Roxy-Pacific Holdings for S$33.25 million, while the 175-unit Raintree Gardens in Potong Pasir has been put up for collective sale with an asking price of at least S$315 million.
Analysts said Raintree Gardens, whose tender closes on Oct 5, will likely see healthy interest from developers given its proximity to the city centre and reasonable asking price.
The tender for Raintree Gardens would be a litmus test for the collective sale market. If successful, that would add another S$315 million, assuming they meet their asking price, which would bring the total en bloc sales value in 2016 to nearly S$1 billion.
However, total deal volume still remains thin, with only three transactions in 2016, as compared to 2011 to 2013, when there were at least 12 en bloc transactions per year.
The small number of deals done indicate that developers are still cautious when it comes to acquiring sites through the en bloc segment despite the need to shore up their land banks, analysts said. They may be hindered by the tedious and lengthy collective sale process – part of the reason why developments such as Eunosville and Tampines Court were unsuccessful in their past attempts in the en bloc market.
This is especially so as developers will be hit with the Additional Buyer’s Stamp Duty if they do not build and sell all units in the project within five years. Therefore, whether the momentum from the two deals thus far can be sustained depends on whether there are “choice plots” on offer, said Mr Lim.
“I think developers would still be looking at GLS sites, but GLS supply has slowed down so if choice plots do come out through the en bloc market, there will be a fair amount of interest. Choice sites are those with appealing locations and attributes that allow developers to maximise the potential of the sites,” he added.
But the tapering of land supply under the GLS programme and the increased competition for sites would spur developers to look more actively for land through the en bloc route.
Recent GLS tenders have been very, very competitive. And with asking prices having come down, there is more reason for developers to look at the en bloc market to pick up some sites. They would still be paying a bit of premium, but it’s better than paying a premium on top of a high price, said a consultant.
Adapted from: TODAY, 26 September 2016