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28-12-2010, 07:40 AM
Business Times - 28 Dec 2010
A mild collective sale fever
Most of the en bloc sales this year transacted at less than $50 million each, writes NICHOLAS MAK
THE residential en bloc or collective sales market in Singapore is picking up again in 2010 after taking a hiatus last year. To date, some 30-odd en bloc sales amounting to about $1.6 billion have been successfully concluded.
However, unlike the en bloc sales fever of 2005 to 2007, the size of each collective sales transacted in 2010 was smaller by comparison.
Most of the collective sales of residential developments transacted this year were less than $50 million each. The average value of each deal was about $52.6 million.
The largest collective sale transacted in 2010 was that of the 27-unit Meng Garden Apartments at Lloyd Road, which was sold for $137 million. By comparison, the average value of each collective sale that was concluded during the height of the previous property market boom in 2007 was $119.3 million.
The size, in terms of land area and the number of existing apartments, of each collective sale that was transacted in 2010 was also smaller. The average land area of the collective sales properties concluded in 2010 is about 36,000 sq ft, which is dwarfed by the average 105,000 sq ft of land of the en bloc sales in 2007.
Typically, about 94 per cent of the successful collective sale developments in 2010 consisted of less than 50 existing units. The average size is about 22 existing units in each project.
By contrast, the average number of existing units of the successful collective sale projects in 2007 is about 3.5 times larger.
The prime residential areas also witnessed fewer collective sales this year. Only about one-fifth of the successful en bloc sale developments in 2010 were located within the prime Districts 9, 10 and 11. The total transacted value of these en bloc projects in the prime districts added up to $678 million.
A significant number of collective sales projects were situated in the city-fringe areas, such as Districts 12 and 14. In 2007, the prime districts held about half of the 104 successful collective sales.
Government land sales
These prime district en bloc sales properties had a combined transacted value of some $8.5 billion.
One of the reasons for the smaller and fewer collective sales in 2010 is that many of the bigger developments in the prime districts and the popular East Coast region that could potentially be collective sales projects were already sold to developers in 2005 to 2007.
A second reason is that the flood of development sites from the Government Land Sale (GLS) programme for 2010, especially for the second half of this year, had attracted the attention and resources of many developers.
In response to the increase in housing demand and prices in 2009 and 2010, in the second half of 2010, the Singapore government released the largest supply of residential development land in the past 15 years. The 18 land parcels to be sold through the Confirmed List in H2, 2010 could potentially yield 8,300 housing units. In addition, there are another 13 sites on the Reserve List that could be developed into 6,000 homes.
So far this year, the authorities have sold 20 private 99-year leasehold residential sites amounting to $3.63 billion and another eight executive condominium (EC) sites that fetched $1.32 billion. This is not including the 14 smaller land parcels at Sembawang designated for landed housing that were auctioned off for $134.6 million in October.
In total, the government's residential land sales in 2010 had absorbed about $5.1 billion of funds from developers, which is more than three times the amount that developers spent on private en bloc sales.
Some developers prefer to acquire GLS sites because the process is faster and more transparent. In almost all government land tenders, all the names of the bidders and their respective bids are revealed hours after the close of the tender.
By comparison, property agents who conduct en bloc sales are never known to reveal the list of bidders and their bids in the same manner as the government.
Furthermore, once the highest bid exceeded the government's reserve price, the authorities would usually award the site to the highest bidder within a week after the close of the tender.
By comparison, some en bloc sales can be long drawn-out dramas, including protracted litigations, especially if some of the owners objected to the en bloc sale strongly or the estate agents had made some administrative mistakes.
Another reason why developers have been drawn to GLS tenders is the market segment that has enjoyed the most robust sales in the past two years is the mass market.
Condominium projects that are located near MRT stations are highly popular with homebuyers, provided they are priced reasonably. Developers are only too aware of this fact and there is a good selection of such land parcels in the recent GLS programmes.
The type of land that developers will buy would depend on the type of products that they are confident that they can sell at an attractive profit margin. The present trend of developers preferring small en bloc projects could continue into the first half of 2011.
This is because there are few indications that the sale volume in the high-end residential market would surge in the next few months.
In the past eight months, the sales volume of private homes in the prime districts had been relatively lacklustre as they made up less than one-fifth of the total number of private homes sold by developers.
On average, between April and November this year, 224 housing units in the Core Central Region (CCR) were sold in the primary market each month, while developers sold an average of 486 units and 642 units in the city-fringe and suburban regions respectively.
Furthermore, the asking price of the owners of the collective sales projects are unlikely to soften as they factor in the rising replacement cost of their new homes. Most collective sales could take months to conclude. And during that period, home prices could continue to rise.
But some developers may be turned away by the high asking prices as they could acquire the relatively cheaper GLS sites. Ironically, the very market forces that drive the en bloc sales market could also derail some of the potential deals.
Mega deals
In January 2011, four collective sales tenders are scheduled to close, including those with reserve prices exceeding $600 million each. It is an uphill task to successfully conclude such mega deals mainly because it would require the developer to put many of his eggs in one basket.
With a budget of $600 million, the developer could possibly acquire three to four GLS sites or 12 smaller en bloc sales sites, thereby diversifying his risks.
Each of the 20 GLS private condominium sites were sold by the government in 2010 for an average of about $181.4 million, while a large majority of collective sales in 2010 were transacted below $50 million each.
In addition, there is the risk of more cooling measures by the government in 2011. Any new government intervention is likely to further target property investors, while sparing first-time homebuyers.
And since a significant proportion of the high-end property buyers are investors and very few first-time homebuyers can afford luxury properties, any new property market curbs by the government is likely to affect the mid-tier and high-end segments.
However, there are also some major developers who are interested to acquire freehold trophy sites to add to their land bank.
But they are rather selective and the total land price, including the development charge that is payable to the government, is just one of the key selection criteria for the land parcels to be purchased.
In the coming year, there will be more collective sales attempts as some property owners try to cash in on the rising market.
In the face of such eagerness to sell, it is quite probable that one or two mega en bloc sales could be concluded in 2011.
However, the en bloc sales market in 2011 is unlikely to reach the red hot level of 2007.
Nicholas Mak is executive director (research & consultancy), SLP International Property Consultants
A mild collective sale fever
Most of the en bloc sales this year transacted at less than $50 million each, writes NICHOLAS MAK
THE residential en bloc or collective sales market in Singapore is picking up again in 2010 after taking a hiatus last year. To date, some 30-odd en bloc sales amounting to about $1.6 billion have been successfully concluded.
However, unlike the en bloc sales fever of 2005 to 2007, the size of each collective sales transacted in 2010 was smaller by comparison.
Most of the collective sales of residential developments transacted this year were less than $50 million each. The average value of each deal was about $52.6 million.
The largest collective sale transacted in 2010 was that of the 27-unit Meng Garden Apartments at Lloyd Road, which was sold for $137 million. By comparison, the average value of each collective sale that was concluded during the height of the previous property market boom in 2007 was $119.3 million.
The size, in terms of land area and the number of existing apartments, of each collective sale that was transacted in 2010 was also smaller. The average land area of the collective sales properties concluded in 2010 is about 36,000 sq ft, which is dwarfed by the average 105,000 sq ft of land of the en bloc sales in 2007.
Typically, about 94 per cent of the successful collective sale developments in 2010 consisted of less than 50 existing units. The average size is about 22 existing units in each project.
By contrast, the average number of existing units of the successful collective sale projects in 2007 is about 3.5 times larger.
The prime residential areas also witnessed fewer collective sales this year. Only about one-fifth of the successful en bloc sale developments in 2010 were located within the prime Districts 9, 10 and 11. The total transacted value of these en bloc projects in the prime districts added up to $678 million.
A significant number of collective sales projects were situated in the city-fringe areas, such as Districts 12 and 14. In 2007, the prime districts held about half of the 104 successful collective sales.
Government land sales
These prime district en bloc sales properties had a combined transacted value of some $8.5 billion.
One of the reasons for the smaller and fewer collective sales in 2010 is that many of the bigger developments in the prime districts and the popular East Coast region that could potentially be collective sales projects were already sold to developers in 2005 to 2007.
A second reason is that the flood of development sites from the Government Land Sale (GLS) programme for 2010, especially for the second half of this year, had attracted the attention and resources of many developers.
In response to the increase in housing demand and prices in 2009 and 2010, in the second half of 2010, the Singapore government released the largest supply of residential development land in the past 15 years. The 18 land parcels to be sold through the Confirmed List in H2, 2010 could potentially yield 8,300 housing units. In addition, there are another 13 sites on the Reserve List that could be developed into 6,000 homes.
So far this year, the authorities have sold 20 private 99-year leasehold residential sites amounting to $3.63 billion and another eight executive condominium (EC) sites that fetched $1.32 billion. This is not including the 14 smaller land parcels at Sembawang designated for landed housing that were auctioned off for $134.6 million in October.
In total, the government's residential land sales in 2010 had absorbed about $5.1 billion of funds from developers, which is more than three times the amount that developers spent on private en bloc sales.
Some developers prefer to acquire GLS sites because the process is faster and more transparent. In almost all government land tenders, all the names of the bidders and their respective bids are revealed hours after the close of the tender.
By comparison, property agents who conduct en bloc sales are never known to reveal the list of bidders and their bids in the same manner as the government.
Furthermore, once the highest bid exceeded the government's reserve price, the authorities would usually award the site to the highest bidder within a week after the close of the tender.
By comparison, some en bloc sales can be long drawn-out dramas, including protracted litigations, especially if some of the owners objected to the en bloc sale strongly or the estate agents had made some administrative mistakes.
Another reason why developers have been drawn to GLS tenders is the market segment that has enjoyed the most robust sales in the past two years is the mass market.
Condominium projects that are located near MRT stations are highly popular with homebuyers, provided they are priced reasonably. Developers are only too aware of this fact and there is a good selection of such land parcels in the recent GLS programmes.
The type of land that developers will buy would depend on the type of products that they are confident that they can sell at an attractive profit margin. The present trend of developers preferring small en bloc projects could continue into the first half of 2011.
This is because there are few indications that the sale volume in the high-end residential market would surge in the next few months.
In the past eight months, the sales volume of private homes in the prime districts had been relatively lacklustre as they made up less than one-fifth of the total number of private homes sold by developers.
On average, between April and November this year, 224 housing units in the Core Central Region (CCR) were sold in the primary market each month, while developers sold an average of 486 units and 642 units in the city-fringe and suburban regions respectively.
Furthermore, the asking price of the owners of the collective sales projects are unlikely to soften as they factor in the rising replacement cost of their new homes. Most collective sales could take months to conclude. And during that period, home prices could continue to rise.
But some developers may be turned away by the high asking prices as they could acquire the relatively cheaper GLS sites. Ironically, the very market forces that drive the en bloc sales market could also derail some of the potential deals.
Mega deals
In January 2011, four collective sales tenders are scheduled to close, including those with reserve prices exceeding $600 million each. It is an uphill task to successfully conclude such mega deals mainly because it would require the developer to put many of his eggs in one basket.
With a budget of $600 million, the developer could possibly acquire three to four GLS sites or 12 smaller en bloc sales sites, thereby diversifying his risks.
Each of the 20 GLS private condominium sites were sold by the government in 2010 for an average of about $181.4 million, while a large majority of collective sales in 2010 were transacted below $50 million each.
In addition, there is the risk of more cooling measures by the government in 2011. Any new government intervention is likely to further target property investors, while sparing first-time homebuyers.
And since a significant proportion of the high-end property buyers are investors and very few first-time homebuyers can afford luxury properties, any new property market curbs by the government is likely to affect the mid-tier and high-end segments.
However, there are also some major developers who are interested to acquire freehold trophy sites to add to their land bank.
But they are rather selective and the total land price, including the development charge that is payable to the government, is just one of the key selection criteria for the land parcels to be purchased.
In the coming year, there will be more collective sales attempts as some property owners try to cash in on the rising market.
In the face of such eagerness to sell, it is quite probable that one or two mega en bloc sales could be concluded in 2011.
However, the en bloc sales market in 2011 is unlikely to reach the red hot level of 2007.
Nicholas Mak is executive director (research & consultancy), SLP International Property Consultants
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