Jackpot day for Vista Park owners

Yes, Vista Park owners have hit their jackpot this time round.

Vista Park

Enbloc-King Oxley Group announced last night that owners of Vista Park had accepted its tender offer of S$418 mil to acquire all the units for redevelopment. Its tender price is almost 20% above the reserve price of the owners. After factoring in the S$72 mil lease upgrade premium, the offer price from Oxley translates to a rate of S$1,096 psf per plot ratio and approximately S$1,056 psf per plot ratio after factoring in the bonus balcony GFA.

In the earlier blog post titled “Are Vista Park owners hitting their jackpot this time round?”, SPK had pointed out the challenges in the redevelopment and positioning of this site. And that was probably why the site was not as hotly contested as other sites, with just 5 bids and a few expression of interest.

Nonetheless, the final outcome is a good one for all Vista Park owners and within SPK’s thumbs up expectation for the collective sale at Vista Park to succeed.

Pricing in a 9% increment in future prices

Oxley’s tender price of S$418 mil translates to an estimated breakeven price of around S$1,500 psf and SPK expects the launch price of the new project at Vista Park site to be around S$1,800 psf on average. In comparison to the S$1,650 psf that nearby new launches were fetching in today’s market, Oxley could be pricing in a 9% future price increase in its tender offer price.

Jackpot day for Vista Park owners

Vista Park owners are expected to receive 20% that what they had asked for. Each owner could now take back $1.39 mil to $4.2 mil.

Congratulations to the 209 owners at Vista Park!

Are the Developers ‘in two main camps’ or ‘in different factions within one single camp’?

It is always challenging to come out with a research that relies heavily on assumptions. Such reports can open up many questions on the underlying assumptions and data that support such assumptions.


Sun Rosier – The most aggressive land bid year-to-date?


SPK reads the article published in the Business Times today, titled “Developers in two main camps over how much to bid for land”, with much interest. Without the benefit of reading the full report from JLL, there are a couple of questions floating in SPK’s mind.

Are the Developers ‘in two main camps’ or are they ‘in different factions within one single camp’?

This is probably a question relating to the use of words and language. The words ‘in two main camps’ seem to give readers the impression that there are major differences in opinion between the developers. This is probably a good attention catching headline. But if we take a step back and look at the bigger picture, the research is telling us that almost all the new future projects will be launched at higher prices from the current level. In this sense, the developers are probably aligned with their outlook and it is just a matter of how hungry they are to replenish their land bank and bid for land. It might be more appropriate to say that the developers are “in different factions within one single camp”?

How meaningful is the above-mentioned observation? Probably not much, since any developers who succeed in winning the bid would obviously hold an optimistic outlook of the market. If not they would not have bid so high for the land, isn’t it?

What might be a more meaningful study? Probably a study of the winning bidders against the losing bidders, or a study of the active participants in the collective sales market or GLS tender against those developers who have sit out of the recent tender biddings.

Challenges in doing a market comparison on an adjusted basis

To be fair, a lot of effort has been made by JLL in making sure that the comparison of future launch price of new projects against 2017 transacted prices of comparable projects is done as accurately as possible. JLL has adjusted existing transacted prices for differences in age, tenure, location and median unit size. SPK applauds the team for the commendable effort.

But without the benefit of reading the full report from JLL, some questions might come to readers’ mind. How ‘comparable’ are those existing projects against the new projects? How are the 2017 transacted prices adjusted? What is the methodology for the adjustments?

Another question to consider is whether the study has taken into the account of the “market anomaly” of resale units selling at discounts to new launches. Should we factor this into the study to find out the ‘resale discount’-adjusted price increase?

Or should we also compare the expected launch price of these 26 future new projects against each other and also against the recent new launches?


These additional studies might give us further insights on the outlook for the market.


Capitol Singapore Lands In Controversy Again

The Straits Times reported that Russian tycoon – Mr Sergey Vbornov is suing the developer of Eden Residences Capitol Singapore (a JV between Perennial and Pontiac) for the return of more than S$10 million that he paid for a 314 sqm unit in the project. He claims that the unit is “unfit for habitation and does not comply with the promised luxury standard”, nor did it live up to the idea of “paradise found”, as allegedly marketed.


Capitol Singapore – A development marred by controversies and lawsuits

This lawsuit probably brings the level of controversy at Capital Singapore to another level. Things hadn’t been that smooth sailing for the consortium developers. Faced with internal fights between shareholders, delay in the opening of the 6-star Patina Hotel, weak shopper traffic, this lawsuit adds on to the list of issues that the developer is facing.

It is a pity that one of the most iconic places in the history of Singapore has turned into such a sorry state without fulling its fullest potential. This might have put a black mark on the sterling track records of industry veteran – Mr Pua Seck Guan, who is also the CEO of Perennial.

Probably not the best way to defend a case?

Lawyers from A&G, who were defending the developer, claimed that the unit was not sold under the agreement as a “luxurious apartment” and/or “paradise found”. Well, technically, A&G is correct as probably no developer would put in its SPA such ambiguous and open-end claims that could potentially result in liabilities in future. In addition, developers would have put a lot of disclaimers in fine prints in their sales brochures to disclaim against whatever that is being shown in the brochures.

Looks like it is a tough case for the buyer to fight using his argument. But if his intention is to damage the developer’s reputation, he might have succeeded. This would also serve as a good reminder to all buyers to take what you read or see on sales brochures with many pinches of salt.

Whilst A&G is probably correct in their argument, SPK thinks the argument could have a negative impact on the developer’s businesses and reputation in future. Are they telling people not to believe what they put in their marketing brochures? Are they telling people that a S$3,000 psf apartment is not necessarily a “luxurious apartment”? If a S$3,000 psf apartment isn’t a “luxurious apartment”, then what could it be? A mass market apartment?

They might succeed in winning the case, but what about the developer’s reputation? A case of winning the battle but losing the war?

Quality of Development is the heart of the issue

Without in-depth knowledge of this case, it is difficult to ascertain which party is right or wrong, or what kind of misunderstanding might have happened in between. Was it a case of poor workmanship? Is the buyer unreasonable? We will probably find out more when the case goes to trial next year.

But once again, this case highlights the critical issue of quality of developments, which is something that SPK brought up in his earlier post (“Are Singaporean property buyers discerning enough?”).

Let’s hope that Capitol Singapore can shed away all the negative publicities one day and return back to its former glory soon!


Jalan Besar Plaza Collective Sales – What went wrong?

It was probably 3rd time unlucky for the owners of Jalan Besar Plaza.

The Business Times reported that no bids were received for the property at the close of the enbloc tender on 10th November 2017. However, there was an expression of interest from a developer to purchase the property.


An attempt that is doomed to fail from the start?

It is probably no rocket science to guess why there was no bidder for Jalan Besar Plaza despite the enbloc craze. Owners were asking for S$390 mil or S$2,170 psf ppr for this freehold mixed-use development. Whilst the price quantum is still within the investment appetite of most developers, its high per square foot price would probably mean very little (or no) profit potential and higher risk for a developer to redevelop this place.

Based on SPK’s estimation, a new development on the site will have a breakeven price point of around S$2,800 psf to S$2,900 psf. Such a pricing might still be achievable if the developer can strata-sell small retail units, like what we had seen a few years back in the early 2010s. But with the strata-retail resale market as good as dead now, this leaves developers with one less trick in their bags and hence making it more difficult for developers to achieve the required selling price to justify the high enbloc acquisition price.

At this asking price, SPK believes that it will be a tough sell for the owners of Jalan Besar Plaza.

Hopefully, the owners can strike jackpot if they can conclude a deal with the developer that expressed interest in the property. Anyway, there is probably no pressure for owners to sell since they are sitting on a freehold land. Owners can always sit back and wait for a good offer to come. But let’s hope they will not wait too long for it!

Keep calm and carry on waiting!


Are Vista Park owners hitting their jackpot this time round?

Vista Park owners have jumped on the enbloc bandwagon and launch the tender for enbloc sale today. Vista Park sits on a big plot of rectangular-shaped land with an area of 319,250 sq ft. The site has a plot ratio of 1.4 and height limit of up to 5 storeys. Maximum potential plot ratio (before bonus) would be around 446,951 sq ft. The site has a remaining leasehold of 61 years and the buyer will have to pay a lease top-up premium of S$66 million to top up the leasehold to 99-year.

Vista Park owners are asking for at least S$350 mil, which translates to S$969 psf ppr. If bonus GFA is included, price per plot will reduce to S$903 psf ppr. Each owner could take back S$1.16 mil to S$3.5 mil, and this is 60% more than what they can sell in the market.

Vista Park

News report on Vista Park enbloc can be read here.

Vista Park will be an interesting and yet challenging project for developers

Why does SPK say so?

If you look at Vista Park’s location, it seems to lack the factors to sell, such as proximity to MRT and transportation, amenities, shopping centres and schools etc. But let’s not discount the location too soon yet. Vista Park does have some unique attributes, such as its proximity to nature, exclusivity of the estate and unique hill location that offers Pasir Panjang container port views (for port lovers?).

The typical build-small-and-sell-cheap strategy may not work for this site as the location would not be particularly attractive to investors and there could also be potential issues relating to the new policy relating to traffic impact on surroundings (SPK shall discuss more on this in the next section).

Primary target market would probably be the well-to-do families staying in the surrounding landed estates, upgraders in the neighbourhood, and nature lovers. Hence, this project may require an experienced and creative developer who can come out with an interesting product to leverage the uniqueness of the location. And this would probably mean that there might not be strong competition among developers for this site, since there are so many enbloc sites to choose from and some developers would probably go for the easier-to-sell enbloc sites.

Any potential issue from the traffic impact assessment?

Access to Vista Park is via the 2-way road (single lane each way) – South Bouna Vista Road. As SPK had flagged out in his previous blog post, Vista Park seems to fall into the category that is considered at higher risk of facing restrictions in the allowable number of new units in redevelopment.

Vista Park Road

Having said so, is this a cause for concern?

Not really if the developer is not going to build to the maximum number of units and this is likely to be the case for the buyer of Vista Park if the project is positioned for owner stay rather than for investment. A sigh of relief for Vista Park owners?

Can developer still make money after paying S$350 mil for the site?

Yes, SPK would think that it is possible. SPK estimates that the breakeven price for the redevelopment of Vista Park would be in the region of S$1,350 psf to S$1,400 psf. A nearby comparable project would be the recently launched 24 One Residence, a freehold 24-unit development by Tee Land. This project was sold at around S$1,630 psf on average. If we assume that the redevelopment of Vista Park is being sold at S$1,650 psf which is at premium considering its size and probably a unique positioning of the project that could more than compensate the premium of 24 One Residence’s freehold status, the developer could potentially make a nice profit margin of 15% to 18%! Not bad isn’t it?

Thumb’s up or down?

Yes, SPK would probably give the potential enbloc of this project a thumb’s up. Good luck to all the Vista Park owners!


What is the October developers’ sales data telling us?

URA released the latest October data on prices of private residential units sold by developers. No major surprises from the headline data, but let’s put on our analysis hat and dig deeper to gather further insights from the data!


Source: Straits Times


Developers’ housing stocks are clearing up at a very rapid pace

In October, developers sold some 969 new private residential homes and executive condominiums (ECs), an increase of 7 percent from September. Yes, nobody mentions that this was 37% lower than the same period last year since such a statistic is meaningless to talk about during a time when everyone is talking up the property market. (Just an interesting point for everyone to note!).

If we talk about non-landed private residential sales (i.e. excluding ECs and Landed), a total of 727 non-landed private residential units were sold during the month. But, what is probably more interesting to note (other than the headline sales figure), is that developers’ unsold inventory is clearing up at an alarmingly fast pace. Considering that there were only 242 units being launched in October, the implied take-up rate of new condo units is at 300%! This means that the monthly new units release by developers are not able to satisfy the demand of home buyers and older stocks are now selling very rapidly!

Number of unsold units have reached multi-year low

As at end of October, developers were left with only 6,670 non-landed private residential units to sell. Out of these 6,670 units, 2,296 units are from projects that have already been launched and ready for immediate purchase. There are 1,758 unreleased units from launched projects and the remaining 2,616 units (Parc Botannia included) are from future projects that have not been launched yet.

To have a better view of how the market had moved, let’s go back to the beginning of 2017. At that time, there were close to 13,000 unsold non-landed units and within a short span of 10 months, the number of unsold units has declined by half! If we go further back in time to 2015 and 2016, the number of unsold units were in the range of 15,000 to 20,000 units at any point in time. Talking about the current supply crunch? Yes, it definitely looks real.

Supply of private homes to double. So what?

My apologies for sounding too complacent in my headline. But let’s not consider this statement ‘supply of private homes to double’ at face value and try to understand in its complete picture.

On first look, this statement looks pretty worrisome but let’s not forget that this ‘doubling’ of supply is actually coming from a low base now. If we talk about supply doubling from developers’ existing unsold stock of 6,670 units, this would mean that future supply could go up to 13,000 units. Is this a major cause of concern? Not when historically our unsold inventory is around 15,000 to 20,000 units. This doubling of supply would probably bring us back to where we started at the beginning of 2017, in terms of housing supply.

What is the list of immediate future new launches telling us?

So, what are the big new launches that might happen in the near future? We have already witnessed the launch of Parc Botannia, that moved 230 units over the last weekend. Some of the other possible bigger new launches in the near future would include 1) 8 Saint Thomas (St Thomas Walk; 250 units); 2) South Beach Residences (Beach Road; 190 units); New Futura (Leonie Hill Road; 124 units); and Parksuites (Holland Grove Road; 119 units). These are projects with more than 100 units for sale.

There is one striking observation from the above statistics. There is no mass market new launches in the immediate pipeline! This is likely to create a pent-up demand and probably some of the enbloc sites might be able to catch this demand if they time their launch early.


Looks like better times ahead? Keep Calm and Carry On!


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.


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.