Freehold collective sale sites in Singapore ripe for developers
MAY 27, 2018
Christine Li
The market got off to a firm start this year with 17 collective sales deals worth $5.8 billion transacted in the first quarter, 29 per cent higher than the volume in preceding quarter.
With the upturn of the residential prices in the second half of last year, coupled with the paucity of the government land sale (GLS) sites on the confirmed list for the first half of 2018, the current collective sale cycle still has room for further growth.
Land-hungry developers who lack a sizeable land bank have bid aggressively for collective sale sites to ride on a price recovery after a price slide over three years. This is set to continue this year when the residential price recovery accelerates, driven by both stronger economic fundamentals and market sentiment.
In fact, according to the flash estimates announced by URA, the private residential price index rose by 3.1 per cent quarter on quarter, an acceleration from a 0.8 per cent increase in the previous quarter. What led to the strong recovery were the non-landed homes in the core central region and outside central region which rose 5 per cent and 3.8 per cent respectively.
Given the multitude of collective sales coupled with recently awarded and upcoming GLS sites, there may be concerns regarding potential oversupply in certain districts. Accordingly, we examined the supply of units from GLS and successful collective sales sites to be launched for sale from 2018 onwards, to assess the supply situation by districts. The most under-supplied districts may be more appealing to developers.
99-YEAR LEASEHOLD
District (D) 26 (Upper Thomson/Springleaf) is the most under-supplied with 80 units from the Chong Kuo Road GLS site. D8 (Farrer Park/Little India) is next with 200 units from the Perumal Road GLS site clinched by Low Keng Huat. D7 (Beach Road/Bugis) is third with an estimated 250 units from GuocoLand's Beach Road GLS site and the long-awaited launch of South Beach Residences' 190 luxury units.
D9 (Orchard/River Valley) has a modest supply of 684 units from CDL's Handy Road GLS site and Frasers Property's Jiak Kim Street site. D23 (Bukit Panjang/Choa Chu Kang) is fifth with 1,035 units from the upcoming Hillview Rise and Diary Farm Road GLS sites.
FREEHOLD
D8 (Farrer Park/Little India) is the most under-supplied with 15 units from Oxley's Tessensohn Road project.
D13 (Macpherson/Braddell) is next at 18 units, from Oxley's redevelopment of former Apartment 8.
D16 (Bedok/East Coast) is third with 25 units, from Oxley's Upper East Coast Road project. D20 (Ang Mo Kio/Bishan) is next with 31 units from Tee Land's Seraya Crescent site. D14 (Geylang/Eunos) rounds out the top 5 list, with 97 units stemming from Roxy-Pacific's two sites at Guillemard Lane.
As URA indicated that it will not significantly increase the GLS supply, developers who are still looking to shore up their land bank are likely to turn to collective sale sites.
Previous research by Cushman & Wakefield indicated that in contrast to past collective sale cycles which was led by freehold projects, the current cycle was however led by 99-year leasehold projects.
Indeed, the future supply from this year onwards comprises approximately 25,680 99-year leasehold units as compared to just 6,933 freehold units.
Therefore, there is an undersupply of freehold units which presents an opportunity for developers who still prefer freehold sites over leasehold ones.
Developers who acquire freehold sites will be able to target long-term investors and buyers with a preference for freehold status, such as those who have a strong bequest motive.
•The writer is the head of research at property consultancy firm Cushman & Wakefield Singapore. The article was taken from the firm's research publication titled "Freehold collective sale sites in Singapore ripe for developers".
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