http://www.todayonline.com/business/...e-say-analysts
SINGAPORE — The en bloc market, which has been subdued following additional tightening measures imposed on the property sector last year, is expected to remain quiet this year as developers turn increasingly cautious, while sellers are reluctant to budge on asking prices.
According to data provided by property firm CBRE to TODAY, the number of en bloc sales fell to only seven last year from 25 in the previous year and 49 two years ago. The value of these deals mirrored the trend, falling to S$572 million last year from S$1.4 billion in 2012 and S$3.02 billion in 2011.
With the cooling measures remaining in place, this segment of the housing market will likely remain in the doldrums.
“Looking at the whole of last year, there was quite a fair bit of land under the Government Land Sales (GLS) programme, so that swayed more developers to that. And many of the GLS sites come vacant, so developers don’t have to price in the demolition cost,” said CBRE Head of Research Desmond Sim.
“The cooling measures played a part in limiting the end-selling price of the redevelopment. For developers to go the en bloc route, there must be a good enough premium between the land sale and the end-selling price,” he added.
Mr Tan Kok Keong, Chief Executive of property consultancy REMS Advisors, said: “Many of the asking prices of the ongoing tenders are on the high side. I don’t think that’s achievable in this current market.”
“An improvement in market sentiment coupled with a reduction in GLS and a reduction in the unsold inventory will make some developers relook at en bloc, but looking at the results announcements of the developers, many of them are looking overseas for opportunities instead,” he said.
The long and sometimes tedious en bloc sale process does not sit well with developers, especially in the current weak market as the additional buyer’s stamp duty (ABSD) will be imposed if the redevelopment is not completed and fully sold within five years, said Mr Ku Swee Yong, CEO of property agency Century 21.
“In the case of an en bloc, the five-year point starts when the developer puts in the deposit to buy the site. But if this en bloc doesn’t have 100 per cent consent from the residents, they have to go to the Strata Titles Board for hearing and this takes six to nine months. This eats into the developer’s timeline and it will then have to rush to prepare for launch,” he said.
Such constraints are among the reasons developments such as Eunosville and Riviera Point have been unsuccessful in previous en bloc attempts. Both estates have recently been relaunched for sale, joining others such as Jervois Gardens, 165 Moulmein Road and The Versailles off Guillemard Road.
Analysts said freehold or 999-year leasehold, smaller-sized parcels will stand a better chance.
“Sites on GLS are usually 99-year leasehold and en bloc may be the only way to get freehold or maybe 999-year leasehold land. Developers are still hungry for land and if it’s not a very big development, developers might still go for it even if profit margin is smaller because at least there’s business continuity,” Mr Sim said.
However, bigger sites that cost above S$200 million will continue to be a tough sell as the overall financial commitment will add up to a large sum, which increases the risk of the project and limits the number of prospective buyers, analysts said.
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Originally Posted by Ringo33
