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Collective Sale: The New Wave

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The growing residential demand in Singapore is evident from recent launches, triggering talks of cooling measures. Will this bull run continue on in this year of the metal ox?


As we enter into a new year of the Metal Ox, we can expect a bull market for Real Estate. 

"With the Government limiting the number of GLS sites, developers will have to turn to alternative land supply sources such as collective sales to replenish their land banks."

 

The Collective Sale is back!

Singapore Residential market has been performing very well for the past few months. The last piece of news reporting that Normanton Park sold 600 units on the first day of launch (about 30% sold) is a good indication.

With strong developer sales and limited land sales in 2020, unsold private residential inventory has come off to 27,000 units, close to the 24,000 units, a trigger point for collective sales back in 2017-2018. Developers' hunger could be seen in the 15 bids for the last residential tender site, the highest number of bids since 2017.  Colliers Research expects private land sales via en bloc and collective sales to recover in 2021.

The historical average annual absorption of housing is around 8,000 to 10,000 units, and we can expect the unsold units to be fully absorbed in a timeframe between 2.5 to 3 years.With the Government limiting the number of GLS sites, developers will have to turn to alternative land supply sources such as collective sales to replenish their land banks.

 
Residential demand in SIngapore

City fringe and suburban areas seem to be the preferred locations as they remain relatively affordable. 

Looking at the average family size, developers should build more 1-to-3-bedroom units. With a smaller quantum, 1-to-2-bedroom units are easier to sell, and 1-bedroom units are generally more appealing to investors. Family home-owners and HDB upgraders will be naturally going for 3-bedroom units. Bigger units with larger quantum will not sell as fast due to higher cost. Income level and the Total Debt Servicing Ratio (TDSR) cap could impact the amount of loan that homeowners can undertake.

 

"The Government is sending the signal to developers to keep their prices stable and affordable and their main priority is to clear their existing stocks because of the ongoing pandemic."

 

 

No cooling measures

Looking at the present situation, we do not expect the Government to implement any cooling measures soon for few reasons. Firstly, there is not enough supply to cater for the absorption demand of about 10,000 units annually, as previously mentioned. Secondly, the property prices have increased by merely 2%, and it is not significant to trigger some cooling measuresHistorically, when property prices increase more than 9% over four quarters, that is the trigger point for our Government to implement cooling measures to prevent prices from going up further.

The Government is sending the signal to developers to keep their prices stable and affordable and their main priority is to clear their existing stocks because of the ongoing pandemic. 

 
Collective Sales or GLS?

Both Collective and GLS have their pros and cons:

Collective Sales

GLS Site

Freehold

Longer planning period

Price with current market

Not Freehold

Shorter planning period

No option to review pricing

 

In conclusion, we are seeing a return of Collective Sales! The Singapore government is promoting rejuvenation, and collective sales play a significant role in this.

  

 

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