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Spike in en-bloc sales may not lead to property bubble: Lawrence Wong

SINGAPORE – A total of about 2,700 existing private residential units have been sold en-bloc so far this year, compared with 600 units for the whole of last year, said Minister for National Development Lawrence Wong in Parliament on Monday (Nov 6).

File photo of Florence Regency in Hougang Avenue 2 that was put up for a collective sale with a minimum asking price of S$600 million in August. About 2,700 existing private residential units have been sold en-bloc this year, which was an increase from the 600 units last year, said Minister for National Development Lawrence Wong in Parliament on Monday (Nov 6). Photo: JLL

File photo of Florence Regency in Hougang Avenue 2 that was put up for a collective sale with a minimum asking price of S$600 million in August. About 2,700 existing private residential units have been sold en-bloc this year, which was an increase from the 600 units last year, said Minister for National Development Lawrence Wong in Parliament on Monday (Nov 6). Photo: JLL

SINGAPORE – A total of about 2,700 existing private residential units have been sold en-bloc so far this year, compared with 600 units for the whole of last year, said Minister for National Development Lawrence Wong in Parliament on Monday (Nov 6).

The spike could be due to how more developers are keen on replenishing their land banks given the fewer number of unsold units in the market, said Mr Wong who was responding to a parliamentary question tabled by Member of Parliament Lim Wee Kiak (Sembawang GRC).

Noting the “healthy increase” in the sales of new units in the first three quarters of the year, Mr Wong said the unsold supply has dropped from about 40,000 units in 2012 to some 17,200 units as of the third quarter this year.

The successful en-bloc sales last year could have also contributed to the increase this year, encouraging more owners of ageing residential projects to initiate the en-bloc sale processes to montise their assets, added Mr Wong.

On whether the current en-bloc fever is sustainable and whether it could lead to another property bubble, Mr Wong said he understands these concerns but pointed out that the collective sales may not necessarily lead to higher sale prices in the market.  

“That’s something people are concerned about – that developers bid high for land, eventually this will translate into higher prices… that need not happen because what the developers are able to sell for their units will eventually depend on demand and supply of the property market at that point in time,” he said.

The developers are also required to meet stipulated conditions or face additional buyers’ stamp duty (ABSD), such as the need to build and sell their units within five years of being awarded the site. “That will put some pressure on them to sell at reasonable price, within a five-year time frame,” he said.

He added: “There is an ABSD regime in place and we will monitor carefully to see what happens in the market down the road.” En-bloc sites that are taken off the market will eventually be put back into the supply in the next one to two years, thus moderating the prices, he noted.  

“Having said all that, the government continues to monitor closely the overall property market trends very closely… We would take appropriate actions to maintain a stable and sustainable market,” he reiterated.

During the boom period of collective sales between 2005 and 2007, a total of 12,710 units were sold over the three years with a total value of S$22.3 billion, according to data from Cushman and Wakefield Singapore. From 2012 to last year, only 1,402 en-bloc units were sold, with a total value of almost S$3.5 billion — with zero transactions in 2014.

Property analysts noted that the current en-bloc market has yet to reach the level observed during the frenzy about a decade ago.

Mr Eugene Lim, key executive officer of ERA Realty Network, pointed out that in 2007, 88 en-bloc deals amounting to about S$11.5 billion were transacted in total. This year so far, the total value of such sales has reached about S$6.7 billion after last month’s sale of Florence Regency.

Florence Regency was sold for S$629 million to Chinese developer Logan Property Company. Notable deals this year included Tampines Court, which was sold for S$970 million, the largest collective sale in 10 years.

Mr Lim said: “The high land prices are currently driven by developers’ need to replenish their land banks, to ensure business continuity. It is further bolstered by the increased level of new project sales transactions we have witnessed thus far this year.”

Unlike the previous boom, the current en-bloc fever was stirred before property prices started rising, said ZACD Group executive director Nicholas Mak. This could be because developers are trying to get ahead of their competitors, by bidding higher and higher for the land parcels, he said.

Ms Christine Li, director of research at Cushman & Wakefield, said there was “anecdotal evidence” which shows that there are still several developers which are “land-starved”. “As such, we expect (the pace of) the en-bloc market to sustain in the next 12 to 18 months or so, with potentially another 10 to 15 sites being transacted during this period,” she said.

Despite the en bloc frenzy, it is still a buyers’ market, the experts said,  and developers are unlikely to pay beyond a level which they could redevelop the plots for a profit. Mr Desmond Sim, head of CBRE Research in Singapore and South East Asia, said that around 90 per cent of private homes this year were sold below S$2 million each. Developers have to factor this into their planning before replenishing their land banks, he added.

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