The en bloc residential market has seen a slowdown in successful sales since December’s cooling measures as developers take a more cautious approach.
Market watchers say that the gap between the reserve price and the price that developers are willing to fork out has widened as developers grapple with the latest property curbs, along with other headwinds such as elevated costs.
Following the close of its public tender, The Beaumont went into a 10-week private treaty period which expired last week without any offers. The freehold residential development at Devonshire Road in the Orchard area was put up for sale at S$478 million.
According to The Beaumont’s marketing agent Savills, it will likely be relaunched for public tender soon, once it gets the green light from the collective sale committee.
Another en bloc candidate, Thomson View Condominium, saw its S$950 million tender close without a successful bid after the measures kicked in.
Still, there have been other en bloc hopefuls that are taking another crack at the market, such as 99-year leasehold Chuan Park at Lorong Chuan, which relaunched its collective sale tender in March at S$938 million. Lakepoint Condominium went back on the market in April, sticking to its reserve price of S$640 million, while Lakeside Apartments at Yuan Ching Road was relaunched for sale at a reserve price of S$240 million in March - on par with its asking price in 2019.
Freehold condominium High Point at Mount Elizabeth is also back on the market with a similar reserve price of S$550 million after Hong Kong’s Shun Tak Holdings walked away from the en bloc deal in December, days after the property curbs were announced.
Jeremy Lake, Savills’ managing director (investment sales & capital markets), described the lack of offers at the expiry of The Beaumont’s private treaty period as not entirely surprising. “We’re still living with the impact of the December cooling measures. At the super luxury end, developers are monitoring the market and trying to judge what impact, if any, the higher additional buyer’s stamp duty (ABSD) will have on the pace of sales as well as on pricing (in per square foot).”
Lake went on to say that that developers continue to look for evidence that buying activity has resumed - at higher prices and a high volume of transactions - but have yet to come to a conclusion. Still, he maintains this is a transitionary period and remains confident that sales of super luxury homes will pick up in the coming weeks and months.
There have been a couple of successful residential collective sales this year, albeit smaller sites, such as freehold condominium Gloria Mansion at Pasir Panjang which went for S$70.3 million and freehold 14-unit residential building, Baode Building, at 8 Lorong 35 Geylang was sold via private treaty for S$27 million. Big sites, such as those with billion dollar price tags, have fallen out of favour.
Cooling measures aside, developers are also battling higher construction and materials costs. Compounding the headwinds are geopolitical tensions, while the stock market has taken a drubbing as the US Federal Reserve adopts a more hawkish stance this year. In addition, interest rates are on their way up.
Against this backdrop, market watchers say that en bloc sellers and developers are at an impasse. Deputy director of NUS’ Institute of Real Estate and Urban Studies (IREUS), Lee Nai Jia, highlighted that quite a number of the residential projects have been relaunched for sale at the same asking price, despite the increased development risks.
Dr Lee said: “Sellers are concerned that if they lower their price, they may not be able to find a replacement home or find a place to park their capital. For developers, the risk of land acquisition is much higher given the volatility, especially in the prices of building materials. There’s also the question of how housing demand will fare in the next six to seven months. It seems developers appear unwilling to go in at existing prices.”
Savills’ Lake shared a similar sentiment, saying: “If sites are not priced correctly, they won’t be successful.”
Lake noted that the price gap between the reserve price and the price that developers are potentially willing to pay has widened, amid the property curbs and challenging external environment.
However, at the same time, unsold inventory has depleted significantly and developers remain keen to acquire sites. Nonetheless, “developers need to (maintain) some discipline to ensure projects are profitable,” Lake pointed out.
Dr Lee reckons that developers on the hunt to replenish their landbank may turn to the Government Land Sales (GLS) programme as their first port of call as it offers a comparatively straightforward process, with greater certainty and more manageable risk. While this will lead to some jostling in the GLS tenders, he expects that the bigger or more established developers will focus on larger or mixed-use sites, areas where the smaller or medium-sized players may come up short in terms of resources and expertise.
Overall, Dr Lee sees the outlook this year for the residential collective sales market as cloudy.
“We may see some developers restructuring their property portfolio,” he said. “They may go overseas or choose to acquire commercial properties, such as office assets, for recurring income. I think they will be very cautious, unless there’s a deal that’s very appealing.”
At the same time, Dr Lee reckons that Chinese developers who already have a foothold in the Singapore market will remain active as they seek to recycle their earnings and reinvest them.
Credit: Business Times
