Possible revival of en bloc market in 2021 as developers turn to replenish land banks: Analysts
19 December, 2020
The muted collective sales market could visit a revival in the next half of next year, as developers turn to the private residential scene to feed an evergrowing appetite for land, according to property analysts.
This comes as the house market has remained resilient when confronted with the COVID-19 pandemic and consequent monetary uncertainty, said analysts.
Just two en bloc deals totalling S$77.2 million have already been inked so far this season, according to Mr Wong Xian Yang, a co-employee director of research at property firm Cushman & Wakefield.
They were for Yuen Sing Mansion in Geylang, that was transacted in August, and adjoining sites Fairhaven and Sophia Ville, that have been taken off the marketplace in early December.
In November, however, Roxy-Pacific Holdings forked out S$93 million for 15 terraced houses in the Guillemard Road area, marking the year's major private residential transaction.
A couple of days later, a consortium bought a plot with 11 homes near Haig Road for S$32.8 million.
The sums are small when compared to en bloc frenzy of 2017 and 2018, when transaction values totalled S$8.3 billion and S$10.3 billion respectively, said Mr Wong.
However, the stirring of activity could be the start of more to come, with analysts pointing to multiple signs of a collective sale revival within the next year or two.
FALLING INVENTORY PUSHING DEVELOPERS TO SHORE UP LAND BANKS: EXPERTS
For just one, developers are running sold-out, analysts sasid.
“Current unsold inventory has continued to fall and currently stands at 26,600 units as at Q3 2020,” Mr Wong said.
“The start of the previous en bloc cycle was in 2Q 2016, when inventory fell to 23,300 units… That can type of serve as benchmark to the point where developers would begin looking for land,” he said.
In addition, a lot of the existing launches are from the prior en bloc cycle during 2017 to 2018, said Professor Sing Tien Foo, the director of the Institute of Real Estate and Urban Studies at the National University of Singapore.
Developers must finish selling their projects within five years to reunite area of the stamp duties they pay, so their deadlines are approaching around 2022 or 2023, he said.
Prof Sing added that that could mean developers need to start out shoring up their land banks to plan for future projects, and en bloc sales certainly are a “quick way” to achieve that.
READ: Government maintains 'moderate supply' of land for private housing; new sites at one-north, Tampines Street 62
The experts also remarked that recent tenders beneath the Government Land Sales (GLS) programme have been hotly contested, like a plot at Tanah Merah Kechil Link that drew 15 bidders.
The supply from the latest GLS programme can be still “conservative”, which is likely to renew interest in the collective sales market, said Mr Ong Teck Hui, senior director of research and consultancy at JLL Singapore .
“The GLS supply is quite competitive and there are many eyeing it. For smaller developers, it’s a lttle bit harder to compete, so they may choose en bloc sites alternatively source,” added Prof Sing.
Huttons Asia’s head of research Lee Sze Teck said developers might also turn to the collective sales market for more “variability” in location, considering that the sites under GLS are “a bit concentrated in a few areas”.
However, JLL’s Mr Ong said any likely interest in the collective sales market wouldn't normally match “the extent of the fervour observed in 2017 and 2018”, because of more economic uncertainty.
WHO WILL REAP THE BENEFITS OF THIS?
Smaller developments will tend to be the first to benefit from heightened interest in the en bloc market, the experts said.
“The cooling measures just like the Additional Buyer’s Stamp Duty and the non-remissible component increase developers’ costs upfront,” said Huttons’ Mr Lee.
“That’s why they would not need very big sites that include over one thousand units (which are more expensive) … The chance of not selling out is also higher,” he added.
Instead, developers would eye small to medium developments with less than, or around 200 units, said Prof Sing.
“That’s also something that’s better to organise collective action for.
"Compare getting 160 persons to agree to a sale, to a project with 500 units where you will need 300 people to agree,” he said.
POSSIBLE INCREASES IN LAND PRICES
While this may be good news for owners seeking to sell, the return of the en bloc market may possibly also drive up overall land and property prices, the analysts warned.
“Developers have to entice current owners to market en bloc, so they have to offer something that’s much better than what they get if indeed they sell individually on market,” explained Huttons’ Mr Lee.
Which will feed into the price tag on whole equation, he added, so when the brand new project is launched, the developers will charge higher charges for the units.
“There’s a rise in prices due to the intensification of land use. Additionally you replace it with a fresh structure so that it costs you more,” Prof Sing said.
He added: “New developments may also attract more amenities to a location, which leads more people to move there and raises demand and prices for a location.”
Subsequently, owners from other developments will then take reference from these higher selling prices when they tend to resell their units or go en bloc too, feeding a cycle of rising prices, said Cushman & Wakefield’s Mr Wong.
Should that happen, Prof Sing cautioned that price increases should be carefully monitored, to ensure they do not fallout of line with economical fundamentals and the market's health.
Source: www.channelnewsasia.com