Residential en bloc market picking up steam, but developers cautious: Analysts

Residential en bloc market picking up steam, but developers cautious: Analysts

Singapore's residential en bloc market is picking up steam, with this year's deals already exceeding the combined value of last year's en bloc transactions. But analysts say developers are still cautious.

02:43
Singapore's residential en bloc market is picking up steam, with this year's deals already exceeding the combined value of last year's en bloc transactions. But analysts say developers are still cautious.

SINGAPORE: The residential en bloc market is picking up steam, according to experts - with four successful deals conducted so far this year to the tune of around S$1.5 billion.

This exceeds the combined value of en bloc deals reached in 2016, which saw three en bloc deals valued at more than S$1 billion.

Residential properties that have gone on the en bloc market recently include Pearl Bank Apartments on Jul 8 and former Housing and Urban Development Company (HUDC) estate Serangoon Ville on Jun 21. 

Projects that have clinched en bloc deals include other former HUDC estates Rio Casa in Hougang, which was sold in May for S$575 million, as well as Eunosville in Sims Avenue, which was sold for S$765 million - the second-highest price for a privatised HUDC project, after Farrer Court sold for around $1.34 billion in 2007. Both projects were sold above the owners' asking prices.

An aerial view of Rio Casa, a former HUDC estate put up for en bloc sale in April 2017. (Photo: Knight Frank Singapore)

"A lot of developments are - from what we hear from the ground up - forming their collective sales committees and they're trying to test the waters," said Edmund Tie & Company Southeast Asia research head, Dr Lee Nai Jia.

"There is a chain effect - it all started last year when we saw sales starting to trend upwards. Then the Seller's Stamp Duty ... further reinforced these positive sentiments," said Dr Lee, referring to the relaxation of the Seller's Stamp Duty for residential properties this March.

The collective sales market is also the only source of freehold sites, encouraging developers to keep an eye on properties that go on the market, said International Property Advisor CEO Ku Swee Yong.

DEVELOPERS STILL CAUTIOUS: MARKET WATCHERS

Yet while analysts cite the recent en bloc successes as contributing to positive market sentiment, they point out that there may still be a price-and-expectation gap between sellers and developers.

"On the macro side, developers would still be seeing additional risks from various sets of data," Mr Ku said. "Firstly, bank valuations haven’t been rising in a bullish manner as what we see in the new launches for existing properties. Secondly, there are pockets of weakness … in employment job reports, household income growth as well as household expenditure reports. The winds are not all aligned in the same direction as yet."

"So, developers are still cautious even though they want to replenish their land bank, especially with good quality freehold sites," he added. 

Developers also need to factor in the cost of topping up the lease for leasehold sites and potential penalties from the Qualifying Certificate and Additional Buyer's Stamp Duty.

"When developers are looking at en bloc funds, the concern is always the tight timeline that they have to finish selling before the penalties … kick in. So they have to price that in," Dr Lee explained.

"They also need to (factor) in the cost of the differential premium that they need to top up the lease. So some owners may feel that this a good time to expect a higher price. But when you weigh in the concerns, developers also tend to lower their pricing, because by having a high price it actually increase their risk."

JLL Singapore estimates that more than 30 projects are in the process of entering the collective sale market this year.

Source: CNA/dl

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