Is en bloc fever back? Analysts are split

Some see the signs for an upswing in Singapore's real estate prices

June 3, 2017

Judith Tan


WITH four collective sales of properties in Singapore in the last month or so, analysts are debating if that is an indication the en bloc fever is back. So far they have yet to reach consensus.

Three of these en bloc sales were sealed in the last seven days, pushing some analysts to believe that the signs are there for an upswing in the real estate prices.

Rachel Tan and Derek Tan of DBS Vickers Securities took the overweight stance for developers, seeing City Developments Ltd (CDL) and UOL as key beneficiaries to any price increase, given their existing unsold stock and potentially better margins for recently land-banked projects.

At 10.38am on Friday, CDL was trading at around S$10.94 a share, up five Singapore cents. But at the market's close, it fell to S$10.81. However, UOL continued to rise. It was at S$7.05 a share, up one Singapore cent, at the same time on Friday and closed at S$7.08.

"Looking at the way these en blocs and land bids are transacted, we believe that developers seem to be pricing in a price recovery in 2018 in their bids, implying the bullish sentiment towards land-banking good-quality sites in Singapore," the two analysts wrote in a report titled Hidden pot of gold for privatised HUDC homeowners.

Agreeing, head of investment and capital markets at Knight Frank in Singapore Ian Loh said people are getting excited about the four collective sales "as they have not seen this in a number of years and are keen to look at the exercise again".

He said overall sentiment in the real estate market has picked up significantly since March, when the government lowered the stamp duty imposed on those who sold their residential property within the first few years of purchase.

"Sales have picked up in terms of transaction volume in the past six to nine months and some developers need to sustain their construction arms by taking part in every one of the land sales and bidding for new sites," Mr Loh said.

Property developers have been bidding aggressively for residential sites here, with foreign developers, especially the Chinese players, leading the charge.

The latest was Hongkong Land's fully owned unit MCL Land clinching the Eunosville site through a collective sale for S$765.78 million. It came hot on the heels of sales of the Rio Casa estate in Hougang and mixed-use development Goh & Goh Building in Upper Bukit Timah Road last week, and One Tree Hill Gardens in the prime District 10 in early May.

Separately, China property developer Fantasia Holding overtook 10 other bids with the offer of S$75.8 million for the 1.34-ha land parcel in Lorong 1 Realty Park in a government land tender that closed on Thursday.

Mr Loh said the keen Chinese presence in Singapore is because of the relatively low barriers to entry and, unlike some markets, the bidding process at government land auctions is transparent, with clear transaction rules in the property market.

However, other analysts felt four collective sales do not an en bloc fever make.

Director of investment properties at CBRE Galven Tan said with this news, more developments will be attempting to go for collective sales.

"But any signs that developers are aggressively looking to land-bank would result in the government raising the number of available land sites and tackling potential bubble from forming in the prices. These collective sales will then be competing against GLS (Government Land Sales) sites, which are more feasible," he said.

Mr Tan said an en bloc sale is usually long drawn and its success hangs on price expectations and how soon the development can be put in the market, in relation to the availability of GLS sites.

"En bloc projects that are ready for tender in the next three to six months should get good response," he added.