After four years of subdued activity, residential collective sale roared back to life in late 2016 with three en bloc transactions – Shunfu Ville, Raintree Gardens and Harbour View Gardens - worth SGD1 billion. The positive sale momentum carried through to 2017 with a whopping 18 collective sales valued at SGD6.3 billion done between Jan and Nov.
With many more developments lined up to be put on the market, it appears that the ‘collective sale window’ may not slam shut anytime soon.
What is fueling the en bloc sale market?
A confluence of factors is driving the collective sale fervor. Chief among them – a surprising pick-up in new private home sales from Feb 2017 amid a dwindling stock of unsold units in the market, depleting landbanks among developers, and the rosier economic outlook.
Robust demand for new homes
Latest figures from the Urban Redevelopment Authority showed that a total of 9,460 new private homes were sold in the first 10 months of this year – already trumping the 7,972 units transacted for the entire 2016.
Record low unsold stock
The healthy primary market sales have depleted the unsold inventory levels amid limited supply of residential sites from the Government Land Sales programme in recent years. As at the end of Sept 2017, there were 16,031 unsold uncompleted private residential units (excluding executive condominiums) – an all-time low – down from 20,577 a year ago and a peak of 43,473 in the second quarter of 2008.
Brighter economic prospects
The improving global economy and external environment could also give a fillip to Singapore’s growth. Its gross domestic product is expected to come in at the upper half of the 2 to 3 per cent forecast range this year.
Some owners of ageing properties are also eager to get the collective sale process going, spurred by the potential windfall that awaits following a successful deal. Given that home prices have declined for more than three years up until recently, some owners may look to cash in on their homes now and buy a cheaper replacement unit before prices recover further.
There are other reasons to push for the sale apart from the prospect of profiting from it. Based on feedback on the ground, owners prefer to launch the tender sooner rather than later, to pre-empt potential competition from other collective sale sites, and before the Government announces its land sales programme in December.
Deals in the pipeline
Future homes at the Pearlbank Apartments site on the cusp of the CBD will command panoramic views of the city, while the seaside development on the Parkway Mansion plot is set to offer unblocked views of the sea – key attributes in wooing prospective home buyers.
How long will collective sale interest last?
Despite the steady stream of deals done since 2016, the collective sale market is unlikely to run out of steam soon. It is probably only a-third into the cycle.
The current upswing still pales in comparison with the 238 transactions worth SGD21.8 billion that were done in the previous en bloc wave which lasted from 2005 to 2007. Hence, it is possible for collective sale activities to spill over into 2018 and 2019.
That said, several factors could bring the upswing to an abrupt end. They include unrealistic price expectations among owners, a rise in the development charge which is paid to the state to intensify land use, an increase in the supply of sites in public tenders, fresh property cooling measures, as well as an economic downturn.
There is no telling exactly when the fervor will subside, but the collective sale market should play an increasingly larger role in encouraging estate rejuvenation in land-scarce Singapore.