The Resurgence of Billion Dollar Enbloc Deals?

Since the introduction of new property cooling measures in July, our collective sales market had slowed down considerably. But this week, I am getting excited with the spate of news in the enbloc market. During the week, 4 new collective sale tenders were announced. The most anticipated enbloc sale is the tender for Laguna Park that is about to be launched.

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Laguna Park – Launching collective sale tender @ S$1.48 bil asking price

Laguna Park owners are seeking for a mind-blowing S$1.48 bil from developers. This project is located in District 15, next to the upcoming Siglap MRT station. What is so unique about this site? This development offers panoramic sea view, is located near to educational institutions and has good transportation/road network connectivity. Laguna Park has a huge land area of 669,486 sq ft and has a remaining leasehold of around 58 years.

A developer will have to pay a differential premium of S$453.5 mil and lease top-up of S$416 mil to the Singapore government to redevelop the site. Hence, the overall land cost will be around S$2.35 bil or S$1,253 psf ppr, before factoring the newly-introduced 5% non-remissible ABSD and 4% buyer’s stamp duty that are upfront costs to the developer.

Fernwood Towers, a freehold condo near Laguna Park, has launched its collective sale tender on 12th Sep.  Fernwood Towers has a land area of 148,963 sq ft, with a higher plot ratio of 3.0. Owners at Fernwood Towers are seeking S$688 mil or S$1,540 psf ppr. Comparing with Laguna Park, Fernwood Towers is less attractive as it is located further away from the future Siglap MRT station. Its sea view will also be partially blocked once Seaside Residences is completed. The only plus point for this site would probably be its freehold status.

As these two collective sales tender of significant size prepare for their tender launches, the tender for S$1.1 bil collective sale of Horizon Towers in the prime District 9 closed on 12th Sep 2018 without getting a buyer.  The Horizon Towers collective sale is one of the casualties resulting from the latest round of cooling measures as developers have turned more defensive towards acquiring new development sites.

Hence, collective sales of significant sizes, such as Laguna Park and Fernwood Towers, are likely to face challenges in securing buyers.

But the launch of Seaside Residences Phase 3 on 29th September might have some impact on the collective sale tenders for Laguna Park and Fernwood Towers. During its Phase 2 launch, Seaside Residences achieved an average selling price of S$1,933 psf. However, as reported in the news, the estimated breakeven price for Laguna Park is around S$1,800 psf to S$1,900 psf. This means that the profit margin is thin and it might not be sufficient to compensate for the higher risks that developers face now.

Nonetheless, the response from buyers will an important factor that developers will consider when evaluating a bid for Laguna Park and Fernwood Towers. A strong demand for the Phase 3 units at Seaside Residences should help to improve the odds of a successful collective sales of Laguna Park and Fernwood Towers.

Owners at Laguna Park and Fernwood Towers should be eagerly anticipating the launch of Seaside Residences Phase 3.

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First GLS tender closing since new cooling measures in July. Is the situation as bad as what market watchers think?

This week, there were 3 government land sales tenders closing and these were the first batch of tenders that closed since the government announced the new cooling measures in July.

How were the responses to these tenders?

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Condo site at Jalan Jurong Kechil

There were only 3 tender bids received for the site at Jalan Jurong Kechil and this is one of the lowest in recent times. The low number of bids received reflect the general pessimism amongst Singapore property developers. Some developers may have decided to sit out of the land tenders, in view of the weakened market sentiments.

The highest price of S$1,002 psf ppr from CSC Land and COHL Singapore seems aggressive. Earlier this year, Kismis View, a nearby 99-year condominium development, was collectively sold to Roxy Pacific and Tong Eng Group for S$941 psf ppr. The bid from CSC Land was 6.5% higher than the price paid for Kismis View.

There was a wide disparity in the tender bids submitted. Second highest bidder – Hao Yuan Investment submitted a bid of S$764 psf ppr, which was 23.8% lower than CSC Land’s bid. The lowest bid came from Sim Lian Holdings, which offered S$606 psf ppr for the site (39.5% lower than CSC Land’s bid).

 

Condo site at Dairy Farm Road

The highest tender price of S$830 psf ppr from United Engineers is 22.2% lower than the S$1,067 psf ppr that Hong Leong Group recently paid for a nearby GLS site at Hillview Rise but the large price differential is likely to be a reflection of the differences in selling prices in the 2 area.

The Dairy Farm Road site is located further away from the Hillview MRT Station and some of the nearby condominiums in the area include Tree House, Foresque Residences and Eco Sanctuary. A 2-bedroom 797 sq ft high floor unit at Tree House was recently transacted at S$855,000 or S$1,073 psf.

The Hillview Rise site is located nearer to the Hillview MRT Station, with supporting retail amenities nearby – HillV2 mall. Some of the nearby condominiums in the area include The Hillier and Kingsford Hillview Peak. At Kingsford Hillview Peak, a 2-bedroom 829 sq ft high floor unit was recently transacted at S$1.2 mil or S$1,448 psf.

The difference in pricing implies that residential properties on the Hillview side could potentially sell at a premium of 30% to 40% above the prices of properties on the Dairy Farm Road/Petir Road side. This is a likely reason for the wide difference in the tender prices between the GLS sites at Dairy Farm Road and Hillview Rise.

The tender bid submitted by CSC Land for the Dairy Farm Road site also supports this view. CSC Land had also participated in the earlier tender for the Hillview Rise site, submitted a bid of S$935 psf ppr for the site. In comparison, the tender bid of S$804 psf ppr submitted by CSC Land for the Dairy Farm Road site was 14% lower than its bid for the Hillview Rise site. CSC Land has continued to bid aggressively for land since the recent cooling measures. Hence, the lower bid for Hillview Rise site is unlikely to be a reflection of the group’s conservatism towards land acquisition, but more likely to be a reflection of the weaker attributes of the site in comparison to the Hillview Rise site.

This government land sales officially marks the return of United Engineers to the residential development scene in Singapore. The last residential development by United Engineers was in 2012 when it launched 8 Riversuites in District 12.

It is evident that sentiments among property developers have weakened and this is reflected in the fewer number of tender bids received. Prior to the introduction of cooling measures, there are usually around 10 bids received for GLS tenders on average. For this Dairy Farm Road land tender, there were only 5 bids. Some developers may have decided to sit out of the land tenders, in view of the weakened market sentiments.

 

Executive Condominium site at Canberra Link

The highest tender price of S$558 psf ppr from Hoi Hup & Sunway is 4.3% lower than the record price of S$583 psf ppr paid by CDL and TID for the Sumang Walk EC site. Nonetheless, the tender price for the Canberra Link EC site is still very aggressive if we take into consideration the differences in executive condominium pricing in the 2 areas. Sumang Walk EC site is located in the North-east region and Canberra Link EC site is located in the North region.

In the North-east region, Rivercove Residences, an Executive Condominium development launched in April 2018 (another development by Hoi Hup & Sunway), achieved an average selling price of S$975 psf. In the North Region, Parc Life, an Executive Condominium developed by Frasers, was selling at an average selling price of S$850 psf this year.

Hence, the lower land price for the EC site at Canberra Link reflects the discount in the average selling price of executive condominium in the North, compared to the North-east region.

At the tender price of S$558 psf ppr, the estimated breakeven selling price of the development will be around S$900 to S$950 psf and the expected launch price should be around S$1,000 psf to S$1,050 psf. This is a 10.5% to 17.6% increase in the selling price of executive condominium in the area (using Parc Life as a reference).

Demand for this site is relatively strong in comparison to the number of bids received for the other 2 residential sites, but it was not as strong if we compare it to the last EC tender for Sumang Walk site. A total of 9 bids were received for the Canberra Link EC site, less than the 17 bids for the Sumang Walk site. All 9 tenderers for the Canberra Link EC site participated in the Sumang Walk EC site tender back in Feb 2018.

However, several developers and consortiums that submitted bids for the Sumang Walk EC site were missing in this Canberra Link EC tender – 1) Yanlord/Soilbuild consortium; 2) Sing Holdings/Far East Consortium/Koh Brothers; 3) Frasers Property/Keong Hong; 4) Nanshan Group; 5) GuocoLand; 6) Amara/Santarli/Kay Lim; 7) MCL Land; and 8) Ho Bee Land. This could be attributable to a more conservative land acquisition approach by these developers after the July cooling measures. It is also possible that some of these developers might have preferred to tender for the other EC site at Anchorvale Crescent instead. Tender for the Anchorvale Crescent EC site will be closing on 14th Sep.

 

What does the latest round of GLS tender tell us?

Firstly, the absence of several property developers which had been active in GLS tenders prior to cooling measures, as well as the decrease in the number of bids reflect the general cautious sentiments among most property developers in replenishing their land bank. No surprise here.

But this is unlikely to be a doomsday scenario yet. Some developers, especially those that had not replenished their landbank, may view this as an opportunity for them to acquire new sites at more reasonable prices. Both CSC Land and United Engineers had not acquired sites during the 2017/18 collective sale cycle and both companies managed to secure new development in the absence of fierce competition. This will sustain some interests in land acquisition activities but developers are likely to remain conservative in their offer prices for land as they factor in higher development risks when bidding.

Executive condominium seems to be the only bright spot in the residential property market. EC sites continue to be highly sought-after by developers. The existing stock of EC units in the market is almost fully sold. With the recent property cooling measures, executive condominium sites are looking even more attractive for developers. But, with the next round of EC launches likely to hit prices of S$1,000 psf to S$1,100 psf, which is close to some of the new condo launches, I’m just wondering how sustainable this will be.

Who knows, maybe the Government may be targeting the EC market next?

Collective Sale Activities Hint At A Shift in Landbanking Strategy

The collective sale market in Singapore continues to perform strongly. Property developers snatched up 26 sites worth S$8.5 bil for the year to date. This has already exceeded the collective sale transactions for the entire 2017. There is one noticeable fundamental shift in developers’ land banking strategy. There is now a shift of preference away from suburban sites towards freehold sites in prime districts. Redevelopment of all the collective sale sites will yield close to 22,000 new units, but this will not cause an oversupply situation yet as these units will enter the market over a period of time within the next 1 to 2 years.

This insight first appeared on Singapore Investment Research and SmartKarma – a global independent research network .

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The collective sale market in Singapore continues to perform strongly. For the year to date, property developers have snatched up 26 sites worth S$8.5 bil and this has already exceeded the collective sale transactions for the entire 2017.

This insight provides a review of the activities in the collective sale market in Singapore for the year to date:

Collective Sales Data at a Glance
  • 27 collective sale transactions were concluded for the year to date, surpassing the 26 transactions done in the entire year of 2017
  • The combined value of the collective sale transactions for the year to date was S$8.5 bil, 5% higher than the combined value of all collective sale transactions in 2017
  • Average value per transaction for the year to date was S$315 mil per transaction, similar to that in 2017 (S$311 mil)
  • There were 2,564 en-bloc sellers who benefitted from collective sales for the year to date, 22% lower than the number of en-bloc sellers in 2017. This was due to the concentration of collective sale transactions in the higher value prime properties in 2018
  • Out of the 27 collective sales transaction for the year to date, 17 of them are in the prime districts, 9 of them are in the city fringe area and 1 of them is an industrial building. No suburban collective sales were done for the year to date. This is in stark contrast to the situation in 2017, when 9 out of the 26 collective sale transactions were suburban condominiums, accounting for 41% of the total collective sale transaction value in 2017
Districts with Most Collective Sale Transactions
  • Redevelopment sites in prime District 10 were the most sought-after sites by developers for the year to date, with 8 out 27 collective sale transactions involved condominiums in District 10 and total transaction value of condominiums sold en-bloc in District 10 was S$2.26 bil. This was in stark contrast to the situation in 2017, when redevelopment sites in the suburban District 19 were the most popular among developers.
  • Freehold estates are back in favor, with 25 out of the 27 transactions involving freehold/999-year leasehold estates. There are 2 possible explanations for this phenomenon. Firstly, a developer that acquires a leasehold property for redevelopment is subject to the payment of lease top-up premium that is dependent on the Development Charge set by the government, which is revised semi-annually. The long collective sale process may expose the developer to an upward revision in Development Charge and potentially higher land cost. Buying a freehold redevelopment site would remove this element of uncertainty in developers’ profit planning. The second reason relates to the current trend of land-banking of prime land by developers. The target market of these high-end redevelopments is likely to be the HNWIs in the region. For these buyers, purchase considerations are more driven by the unique attributes of a development and they are less price sensitive. Hence, a freehold prime development might be more appealing to such buyers, instead of a leasehold property.
  • The average premium over reserve price paid by developers for the year to date has fallen to +5%. In 2017, developers paid a higher average premium of +13% above the reserve price. Declining premiums could be a case of higher reserve prices set by sellers and greater supply of redevelopment sites available for collective sale this year.
  • The 26 residential developments collectively sold for the year to date could potentially yield up to 8,650 new units for future launch, of which 3,669 units (42.4%) were in the prime district and 4,982 units (57.6%) were in the city fringe. No new supply (via collective sale) was added to the suburban area for the year to date.
  • Out of the 26 collective sale transaction for the year to date, 13 of these sites were acquired by consortiums of developers. These sites tend to be the bigger sites with higher transaction value. By forming consortiums, developers can mitigate their risk exposure in a single large-scale development project.

There has been a fundamental shift in developers’ land replenishing strategy in 2018. Developers have shifted their focus from the mass market segment to the luxury property segment and building up their development landbank in the prime districts. This comes as no surprise as new launches of luxury properties in Singapore (such as New Futura) have done surprisingly well despite the high price quantum and there is growing evidence of foreign buyer returning to the Singapore property market.

Despite the surge in collective sale activities in the prime districts, potential new supply in the prime district does not look excessive at this stage, with an estimated 4,405 units that could potentially enter the supply pipeline, probably a year later. The actual number of units could be lesser as it is likely that developers may build bigger size luxury units for sale.

In the mass market segment, potential new supply from collective sale transactions does not look excessive as well, with an estimated 6,946 units that could potentially enter the supply pipeline. Developers will start launching some of these units as soon as within the next 1 to 2 months. According to public announcements, Oxley Holdings Ltd (OHL SP) is planning to launch Rio Casa and Serangoon Ville redevelopment in 1H 2018.

Most of the future supply from collective sale transactions are in the City Fringe area, with an estimated 10,480 units that could potentially enter the supply pipeline. These developments tend to be in well-established mature estates that are highly sought-after by buyers.

Potential Supply of New Units for Future Launch

In total, the supply of new units from collective sale sites is estimated to be around 21,830 units. This is subject to change, depending on the final submitted plans and approvals from authorities. This new supply will enter the market in a staggered manner, depending on the speed of getting Strata Title Board’s approval for the collective sale transaction and relevant authorities’ approvals for redevelopment.

New Launch Review: Are the 1-BR and 1+S at The Tapestry good for investment?

Tampines Avenue 10 is already a well-established private residential area, well served with a neighborhood retail centre near Tampines West Community Club, schools, and recreational areas (Bedok Reservoir). SRX has done a very nice drone video of the area:

And at such attractive price point, there is no doubt that The Tapestry will appeal to families who are looking to upgrade from HDB to a private condominium.

What about for investment? The absence of MRT and shopping centre within short walking distance may make the idea of buying a unit there for investment questionable. There might not be a big catchment for tenants here given that there is only an industrial area nearby. But it might surprise you that the 1-Bedroom and 1+Study units of the completed developments in the area are doing decently well in terms of rental demand and yield.

Rental

The table above shows the number of rental contracts and average rental rates of the condominium in the area from January 2017 to January 2018. This information has been extracted from URA. Do note that under URA’s classification, a 1+Study unit is also considered as a 1-Bedroom unit.

It is to my surprise that there is a good demand for 1-Bedroom and 1+Study units in the area. During the period, there were 110 units rented out, which translates to 38% of the existing completed stock of 1-Bedroom and 1+Study unit in the area. 2-Bedroom units seem to be more popular, with 177 units rented out during the same period, but as a % of the existing completed stock of 2-Bedroom unit in the area, the number of units rented out is 21%, less than that of the 1-Bedroom unit.

Moreover, there are only 472 units of 1-Bedroom and 1+Study apartments in the area, whereas, for 2-bedroom units, there are a total of 1,095 units in the area. With healthy rental demand and less competition among 1-Bedroom and 1+Study units in the area, it looks like 1-Bedroom and 1+Study at The Tapestry are good investment choices.

1 Bedroom and 1+Study units command an average rental of around S$1,750 per month. This translates to a gross rental yield of 3.5% based on the starting prices of S$600,000 for 1-Bedroom units at The Tapestry. This gross yield is considered decent and in line with the yield in the property market today. As market experts are anticipating rentals to bottom-out and recover this year, The Tapestry could potentially enjoy a better rental yield by the time it achieves TOP.

 

What are the available 1-Bedroom and 1+Study in the area?

Out of the existing 6 condominium developments in the area, only 3 developments – Q Bay, The Santorini and The Alps, offer 1-bedroom and 1-Bedroom+Study units targeting the property investor market. I estimate that only approximately 13% or 472 out of the 3,660 units in the 6 developments are 1-BR and 1+S units. Developers had generally positioned their developments to capture the upgrader’s market in the Tampines area and hence, unit sizes tend to be bigger to cater for families. The property investment market is under-served in this area.

Let us take a look at what are the 1-BR and 1+Study options in this area for investment:

 

Q Bay

Q Bay offers 78 units of 1-BR and 47 units of 1+Study, out of a total 630 units in the project. Typical size of a 1-BR unit is 527 sq ft and 1+Study is 517 sq ft. Personally, I like the layout of the 1-BR and 1+Study units at Q Bay as they are very efficient with minimal space wastage and no unnecessarily big air-con ledges and balconies. They are of a very comfortable size for own-stay but in today’s context, the sizes are considered ‘big’ as typical unit sizes of 1-BR and 1+Study have shrunk to 500 sq ft and below in the new norm.

The per square foot price of a 1-BR and 1+Study at Q Bay ranges from S$1,200 psf to S$1,300 psf in today’s market. Even though it may be cheaper than The Tapestry on a per square foot basis, but due to the bigger unit size, it might cost a buyer as much as S$50,000 more to buy a 1-BR or 1+Study at Q Bay instead of The Tapestry. I would expect the incremental rental income from the bigger unit size to be minimal, if not, none at all, since tenants in this area are likely to be middle management level without a big budget for accommodation.

Qbay

 

The Santorini

There are 165 1-BR units at The Santorini, out of the total 597 units in the entire development. The typical size of a 1-BR unit is 463 sq ft (open kitchen concept) and 527 sq ft (enclose kitchen concept). In terms of layout, the smaller 1-BR unit layout is typical of most 1-BR, but this layout comes with a long and narrow balcony that runs from living room to the bedroom, meaning that the actual usable area is much lesser.

For the bigger 1-BR unit, having an enclosed kitchen differentiates this unit from the rest of the 1-BR in the market. But one might question if there is really a need for an enclosed kitchen in a 1-BR unit. I feel that the developer could have tweaked the internal layout and design the existing kitchen area as a study room and have an open concept kitchen outside. That might have made the unit look more attractive to me. Just like the smaller 1-BR unit, this bigger unit also comes with a big balcony. And this unit also comes with 2 aircon ledges and a small planter on the balcony. Hence, the actual usable area will also be significantly lesser than the strata area.

In terms of pricing, the 1-BR units were sold at S$1,150 psf to S$1,200 psf on average during the initial launch and the price quantum is in the range of S$550,000 to S$650,000 per unit for most of the units. This was the pricing 2-3 years ago during the launch of the project. There aren’t any transactions made for 1-BR units during last half year. The current asking price for the 1-BR units on PropertyGuru is around S$1,250 psf to S$1,300 psf. The big sizes of the balcony and aircon ledge in the units should be taken into consideration when comparing the prices of the 1-BR units in the area.

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The Alps

The Alps has 56 units of 1-BR apartments and 126 units of 1+Study apartments. There are more 1+Study units in The Alps, probably because the developer – MCC Land took into consideration that its earlier project The Santorini did not have any 1+Study units when designing The Alps. The typical size of a 1-BR unit at The Alps is 441 sq ft to 463 sq ft (with a long living room). The typical size of a 1+Study unit is 506 sq ft.

Without much surprises, the 1-BR and 1+Study units do come with big aircon ledge that runs across the entire bedroom’s window width and the balcony seems to be almost 75% of the size of the living room. This point about a high proportion of non-useable balcony and aircon ledge spaces is something that I point out earlier about The Santorini, another MCC Land’s project.

The 1-Bedroom units were sold at S$1,100 psf to S$1,200 psf on average during the initial launch and the price quantum is in the range of S$500,000 to S$550,000 per unit for most of the units. The 1+Study units were also sold at S$1,100 psf to S$1,200 psf on average during the initial launch and the price quantum is in the range of S$550,000 to S$600,000 per unit for most of the units. As The Alps was only launched in 2016, buyers are subjected to the 4-year SSD rule if they had bought during the launch.

The Alps

 

Is the 1-BR and 1+Study units at The Tapestry better investments than the ones in surrounding projects?

Yes, the 1-BR units and 1+Study units at The Tapestry are considered better choices for investments for the following reasons:

  • Good affordability
  • Efficient and functional layout
  • Less area wastage from aircon ledge
  • Better preservation of value as it is developed by a renown developer
  • Comprehensive list of fittings provided – cost embedded in price and finance by mortgage, also means lower ‘upfront’ capex for renovation upon TOP, improving returns

If you missed my earlier review of The Tapestry, click here to read!

Do you feel the enbloc heat?

The enbloc craze just keeps getting crazier. There were many significant developments in collective sale market over the past week.

The Next Enbloc Blockbuster – Mandarin Gardens

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First, we have a potential blockbuster collective sale exercise coming up! Mandarin Gardens is one step closer to being put up for collective sale. A mind-blowing reserve price of S$2.45 billion has been set for Mandarin Gardens. This price has not even taken into account of the additional lease upgrade premium that a developer will need to pay the state for a fresh 99-year leasehold.

If Mandarin Gardens is successful in its collective sale attempt, it will set a new record as the most expensive collective sale transaction in Singapore.

In a Business Times news article, Mr Raymond Khoo from C&H Realty mentioned that “Chinese developers might want to showcase what they have done in Johor Baru and want to bring it over to Singapore”. Chinese developers such as Guangzhou R&F Properties and Country Garden Holdings do come to my mind as what Mr Raymond Khoo had described as possible bidders for the site.

Other potential bidders named by another “industry specialist” includes big names like Capitaland, Qingjian, Longan Property and Nanshan Group. Capitaland is probably still in an early stage of its landbank replenishing exercise, having only acquired 1 site since the market recovers.

It seems that the strategy is already in place in search of buyers for this mega-site and if Mandarin Gardens succeed in its collective sale attempt, the risk appetite of developers may be raised to a higher level and there will be a significant amount of enbloc money to flow back into the property market and hence sustaining the sales momentum.

The date for an extraordinary general meeting to approve sale conditions for Mandarin Gardens has been set for March 25. With a requirement of 80% approval from the over 1,000 owners in the development, this is not an easy task to achieve. I will definitely be looking forward to the EGM results next week!

Achieving 20% Premium over Reserve Price – Katong Park Towers

katong park

Sitting on a piece of prized land? Don’t worry, developers are still willing to pay a good premium for your land.

Last Friday, Bukit Sembawang acquired Katong Park Towers for S$345 mil, a 20% premium over the reserve price of the development.

Katong Park Towers is located along Arthur Road in District 15, near the future Katong Park MRT station. It is within short driving distance to town and CBD via East Coast Parkway expressway. The property has a 99-year leasehold tenure from 5th April 1982. An estimated lease upgrade premium of S$60 mil is payable by Bukit Sembawang to top up the leasehold to a fresh 99-year. Including the LUP, total land acquisition cost payable by BSEL will add up to a total of S$405 mil or S$1,280 psf ppr.

Prior to the collective sale of Katong Park Towers, there were 4 collective sales concluded in District 15 around Amber/Meyer Road since last year. These sites were sold at an average land price of S$1,442 psf ppr. Katong Park Tower’s price of S$1,280 psf ppr is 11.2% below the average land price of a freehold land in the area reflecting a fair discount due to the difference in the land tenure.

Looks like we have 116 happy owners at Katong Park Towers now. And the redevelopment by Bukit Sembawang is definitely a project to look forward!

2nd biggest enbloc sale in Singapore – Pacific Mansion

pacific mansion

Just this morning, Guocoland and Hong Leong Group announced the acquisition of Pacific Mansion for S$980 mil, 4.5% above the reserve price of S$938 mil. This is the most expensive acquisition made by developers in this round of collective sale cycle, and the 2nd biggest enbloc sale ever in Singapore property market. The S$1.3 bil sale of Farrer Court still holds the record as the largest enbloc transaction (for now).

Base on my estimate, the breakeven price for Pacific Mansion is approximately S$2,400 psf to S$2,500 psf and eventual selling price for the project could be more than S$3,000 psf.

Each owner of the development’s 290 apartments will stand to receive a gross payout of S$3.26 million to S$3.48 million, while the owners of the two shop units there will pocket between S$2.2 million to S$4.5 million each. Units at Pacific Mansion were just going for S$1.7 mil to S$1.9 mil less than a year ago! You would have made a huge profit if you bought a unit there last year!

290 happy owners out there!

 

Looks like the collective sale market is heating up and not cooling down. Let’s see if Mandarin Gardens can bring the heat up to the next level. Akan Datang!

Paying S$1,300 psf for a EC in future? Are you serious?

How much hotter can the Singapore property market get?

Rivercove-Residences-EC-Main-Facade

Few days back, CDL put in a top bid of S$583 psf ppr for an Executive Condominium site at Sumang Walk in Punggol.

It was not just CDL’s tender price that set a new record price for an EC land. In fact, all the 17 bids were above the previous record price paid for the Lake Life EC site in 2013.

According to industry experts, breakeven selling price for the Sumang Walk site is likely to be around S$1,000 psf to S$1,100 psf. Hence, CDL is likely to launch this EC at around S$1,300 psf, which would be as much as a what a private condominium in the area fetches today.

The recently launched Parc Botannia was only selling at an average of S$1,280 psf and Sing Holdings acquired the land at only S$517 psf ppr less than 2 years ago. Do bear in mind that Parc Botannia is a private condominium and not EC.

For the upcoming EC launch  – Rivercove Residences, the developer Hoi Hup paid only S$355 psf ppr for the site. With an indicative price of S$800 psf to S$900 psf, Rivercove Residences do look like a good bargain now, if the Sumang Walk EC is going to be launched at S$1,300 psf.

Now, how would the buyers react to this news? Are buyers going to rush in and buy now in anticipation of an expected rise in property prices?

The upcoming new launches will give us the answer.

Buyer’s Stamp Duty has just been raised. What should I do?

Oh no! The government has just raised Buyer’s Stamp Duty for residential properties! What should I do? Should I exercise my option now before the clock strikes 12? More cooling measures coming up? Is the market going to CRASH???

BSD.jpg

Fret not. I am here to give you (my) answers!

First of all, let’s not get confused. The additional 1% BSD is applicable for property value in excess of S$1 million. So if you are looking to buy a property below S$1 mil, please go back and have a good rest and not fret over this BSD hike.

What if you are upgrading to S$1.2 mil condo? Sad to say, you will be affected by this new rule if you do not exercise your option by midnight. How much more BSD do you need to pay? That will be S$2,000 payable to our tax man. Is there a need to rush? Please think twice. If you miss the deadline before midnight, at most you pay an additional S$2,000 in BSD. But if you make a rash decision and have to forfeit your option fees (partial), then that will be more than the additional S$2,000 for BSD.

But if you are a multi-millionaire who wants to buy a New Futura? Then maybe you should act now, if not you might end up paying as much as S$20,000 more in BSD. But maybe this S$20,000 is considered ‘peanuts’ to you, maybe?

My personal thought is that this increase in BSD rates is not going to hurt most of us unless you are going for a high-end property. In fact, prior to the Budget, the market was expecting the government to introduce more drastic measures to cool the heated enbloc market. This mild measure seems to be a good news for the market.

So, keep calm and carry on!

So I was wrong

I have to admit that I am wrong this time round.

This morning, property giant Capitaland announced that it has acquired the iconic Pearl Bank Apartments in Outram Park area for S$728 mil, at the reserve price of the sellers. The site has a land area of 82,376 sq ft and plot ratio of 7.45, translating to a permissible GFA of approximately 613,701 sq ft. Capitaland will pay an additional S$201.4 mil to the government to top-up the land lease to a fresh 99-year. The total cost of the site will be S$929.4 mil or S$1,515 psf PPR. Capitaland plans to build around 800 units in the new development.

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When I was writing my earlier post on Pearl Bank , I felt that the high asking price of the owners and the large investment quantum are major hurdles for a collective sale to happen at Pearl Bank and risk-reward is not optimal for the developer. Based on my estimate, such a project would probably breakeven at S$1,900 psf to S$2,000 psf and developer will need to sell at S$2,200 psf for a decent margin. Assuming an average unit size of 750 sq ft at S$2,200 psf, an average unit at the redeveloped site will cost a whopping S$1.65 mil! Mind blowing numbers for a district 3 property! For this amount, you could actually get a prime district property instead.

But it looks like this is turning into reality with CapitaLand’s bid and the aggressive land acquisition strategy by developers seem to have even exceeded my expectations. With this new development possibly setting a new record price in District 3, it is likely that the nearby District 9/10/11 properties will get to enjoy the spillover effect. A rising tide lift all boats!

Probably one thing that I got it right is that Capitaland is finally jumping on the enbloc bandwagon, which I mentioned in an earlier blog post. With CEO Lim Ming Yan expecting property prices to rise up to 10% this year, it is unlikely that Capitaland’s acquisition spree will end here.

Let’s also not forget that some of the big boys have not started playing this enbloc game yet! Wanna make a guess who they are?

 

Weekly Kopi Talk (3/2/18 – 9/2/18)

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8th Feb 2018 – Singapore budget not expected to target property upswing

SPKI agree. As of now, there is already a very stringent set of rules and penalties (Qualifying Certificate extension charge and Additional Buyer Stamp Duty remission clawback) if developers cannot sell all their units within 5 years from the date that they acquire the site. Even though the Singapore government is getting concern on the activities in the collective sale market, it is still too early to take actions as the activities are happening on the supply side of the property market. On the demand side, things are improving but not at a heated level yet.

7th Feb 2018 – For China’s Wealthy, Singapore is the New Hong Kong

SPKThe return of foreign buyers could be a potential wildcard to fuel additional property demand and price increase in the property market. Property purchase by foreigners is recovering but it is still below the long-term average level. Chinese buyers will be an important group to watch out for. Based on 2017 statistics, the three most popular locations with Chinese buyers were districts 19 (Serangoon Garden, Hougang, Punggol), 23 (Hillview, Bukit Panjang, Choa Chu Kang) and 5 (Pasir Panjang, Clementi New Town). Oxley might have a good chance to sell its upcoming developments in District 19 – a 1,450-unit development at former Rio Casa site and 1,050-unit development at former Serangoon Ville site to Chinese buyers!

6th Feb 2018 – Oxley beats over 80 parties to buy Huang Clan Association site

SPKOxley, my favourite developer, is in the news once again! I would say that this is a very shrewd transaction by Oxley. The landowner is carving out a 99-year leasehold of the land and selling it to Oxley in return for a cash consideration of S$13 mil and the 2nd and 3rd floor of the completed development. Oxley will retain 4th to 8th floor of the development for sale. As the upfront cash payment is low, the return on investment for this project should be much higher. I’m impressed by Oxley’s strong business acumen, evident in its ability to beat over 80 parties to buy the site!

6th Feb 2018 – Developers paid S$380m in ABSD, QC extension charges

SPK: What a difference a year makes! Just a year ago, everyone was waiting for developers to give ‘special discounts’ to sell their old inventories in order to avoid paying QC extension and ABSD remission. Sad to say, that didn’t really happen unless you happen to be a member of the Wee family (who bought up all the remaining units at The Nassim from Capitaland) or some big funds who managed to bulk purchase remnant units during Feb/March last year.

Today, there are only around 80 developments (with a total of about 750 unsold units) that could be subjected to these fees and charges in 2018. This has come down significantly if we compare to last year when a total of 4,230 units were affected by the rules last year. With the recovery in the property market, concerns on the penalties due to QC extension and ABSD remission claw-back has since abated. In fact, developers may be more than happy to hold the units if they expect prices to increase further during the year!

4th Feb 2018 – Proposed home-sharing rules to be released for feedback by Q1

SPKYou can read my earlier analysis on this topic here!

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