En-bloc sales' total value this year expected to trump 2017's; new record high on the cards?

SINGAPORE — En bloc fever continued unabated in the first quarter of 2018, with 17 successful residential en bloc sales valued at S$5.83 billion already chalked up between January and last month. This amounted to over 70 per cent of the total value of collective sale deals for the whole of last year, according to figures from global real estate services company Colliers International on Tuesday (April 3).

The firm predicts that the total value of this year’s en bloc sale transactions is likely to trump that of 2017 — which was S$8.13 billion from 27 transactions — which is a view that property analysts agreed with. Last year’s was the best showing since 2007, which holds the record sales volume of S$11.6 billion, according to reports from various property research firms. The experts, however, were divided on whether it will reach a new record high.

Buoyed by a brighter economic outlook and continued recovery in the property market, there is potential for the current en bloc sale wave to surpass the last cycle from 2005 to 2007, said Colliers International. However, it cautioned that factors like an economic downturn and fresh property cooling measures could “bring a premature end to this upswing”.

Even though there is still a “healthy appetite for well-located developments”, the deluge of sites on the market has tilted the balance in favour of developers. As a result, they are likely to cherry-pick the best sites that are priced realistically, said Colliers International’s managing director Tang Wei Leng in the media release on Tuesday.

The firm also noted a shift in preferences from suburban to prime sites. Eight of the 17 sites sold via collective sales in the first three months of this year were in the core central region of districts 9 and 10.

The top three en bloc deals within this period were Pacific Mansion in River Valley — which fetched a hefty S$980 million in the largest deal since the S$1.3 billion Farrer Court sale in 2007 — Park West in Clementi at S$840.9 million, and Pearl Bank Apartments in Outram at S$728 million.

Larger sites will also continue to appeal to developers, as well as buyers with young families, said Ms Tang.

“Bigger plots allow for more functional facilities and lavish landscaping, a luxury many smallish projects in prime locations are unable to offer,” she said.

“Young families, local and expatriate, increasingly appreciate more sizeable and spacious residential developments that offer recreational as well as social areas.”

While premiums over the owners’ asking prices appear to have weakened — sliding from an average 10.5 per cent last year to 4.9 per cent in the first quarter of 2018 — this does not mean that the market is losing steam, said Colliers International’s research head Tricia Song.

“We think this could have been due to higher indicative prices, higher development charges and more selective bidding by developers,” said Ms Song.

Commenting on Colliers International’s predictions, Mr Ku Swee Yong, co-founder of online property information portal HugProperty, said there is a “probability” that the total en bloc transaction value this year will surpass the previous high of S$11.6 billion from 111 deals in 2007.

But he stressed that this would be an “optimistic forecast”, as global interest rates are already on the rise.

“Banks might also limit their appetite towards lending, and would likely consider the risks of putting so much finances to just collective sales alone,” he said.

China’s introduction of crude oil futures denominated in yuan last week could also lead to a “significant drop” in demand for US dollars, which may in turn dampen the enthusiasm in Siingapore’s property market, he added.

Mr Chris Koh, director of property firm Chris International, agreed that the en bloc market might see a new high in terms of transaction value this year. He noted that property owners in older developments may be spurred to ride on the en bloc wave. “Developers will then be spoilt for choice,” said Mr Koh.

ZACD Group executive director Nicholas Mak, however, said it is unlikely for both transaction value and volume to reach a new high, as present conditions in the property market are “very different” as compared to 2007.

He said: “Buyers today are subject to many more cooling measures, which the Government is unlikely to relax in the near future. I also doubt there will be than many sizeable projects that will fetch significant value (to surpass the previous record).”