Advertisements

Singapore Property Kaki

A place for sharing property, investments and financial management ideas among kakis

Raising the bar for Collective Sales: Who are the winners and losers?

It is reported in the Business Times and the Straits Times today that with immediate effect, potential buyers, interested parties, developers or real estate agencies acting on behalf collective sales committee are required to consult the Land Transport Authority (LTA) and submit a Pre-application Feasibility Study (PAFS) on traffic impact to ascertain the number of units they can build, before submitting an Outline Application or Development Application to URA for the redevelopment of a collective sale site.

17026698

Will this new measure derail the enbloc boom?

There is no doubt that this new measure is going to create an additional hurdle and process for the developers/owners to acquire/sell collective sales sites going forward. But let’s not forget the key fundamental that has led to the resurgence of enbloc trend so far, which is developer’s shortage of landbank. Will a developer put on hold its collective sale acquisition plans and run the risk of doing no business over the next few years? Probably not, when they have their families and staff to feed.

What is the true cost of this new measure to developers?

With so many old developments gunning for enbloc now, the current collective sales market is a ‘buyer’s market’. Developers have a lot of options to choose from. As the Business Times article rightfully pointed out, the cost and responsibility of engaging a traffic consultant to assist in the PAFS submission and approval could ultimately shift to real estate agencies marketing the sites and the owners of the collective sale sites. Owners probably wouldn’t want to be ‘penny wise, pound foolish’ in this instance, when they could potentially reap millions in profit by spending a small sum of money to prepare a traffic impact assessment to for potential buyers.

So what is the true cost of this measure to developers? Probably zero (and comes with a free TIA report)!

Are there winners and losers from this policy change?

Of course, there are!

Collective sale sites located in landed estates with only a 2-way road (single lane each way) are at high risk of facing restrictions in the allowable number of new units in redevelopment. This is, in fact, nothing new as the government had already introduced measures in the past to curb the intensity of developments in some landed areas such as Telok Kurau, Kovan, Joo Chiat and Jalan Eunos.

Typically, such developments are small in land area and they come with limited facilities. Hence, developers tend to keep the unit size as small as possible in order to keep price quantum attractively low but yet selling at a high per square foot price. To do so, developers need to be able to build as many units as they can at the smallest possible size to achieve their business objective.

In the event that developers are not allowed to build to the highest potential number of units, this means that developers have to build less units that are bigger in sizes (in order to maximise the GFA) and sell at a higher price point. It would probably be difficult to attract buyers in such a scenario and the risk to developers will be significantly higher.

So what will the developers do?

It will be business as usual, but developers will now probably chase for better located collective sale sites that have better access to public transportation, MRT and located along multiple-lane roads or near expressways (in general). Such sites have a better chance of clearing the LTA on traffic assessment impact requirements. With a re-direct of resources towards such sites, the chance of collective sale success for sites with better traffic access seems to be higher with this new policy.

It will be interesting to observe the outcome of some of the collective sale tenders over the next few months to assess whether this policy change has any effect on developer’s strategy.

Advertisements

Categories: Enbloc, News

Tags: , , ,

1 reply

Trackbacks

  1. Are Vista Park owners hitting their jackpot this time round? – Singapore Property Kaki

Leave a Reply