Residential en bloc market poised to pick up: Analysts
SINGAPORE: The residential collective sales market is poised to pick up this year, with analysts citing the limited supply of private housing sites at state tenders and strong demand for land by developers as key factors.
A collective sale, also known as an en bloc sale, refers to a combined sale by the owners of property units to a shared purchaser with sale proceeds divided amongst the unit owners.
In 2016, three such en bloc deals valuing more than S$1 billion went through, up from S$380 million in 2015.
Market watchers told Channel NewsAsia the pick-up is due to the stabilising of private home sales following the imposition of property cooling measures, with new private home sales growing by 7.2 per cent year-on-year, from 7,440 units sold in 2015 to 7,972 units in 2016.
“Market conditions seems to support this confidence among developers to perhaps now look at en bloc sales,” said ERA Realty Network key executive officer Eugene Lim. “The residential private market is now seen to be bottoming out. The rate of price decrease has slowed down, and we are seeing a very steady pace in new project sales.”
“So we’re seeing a very steady momentum this year, and generally this has boosted the confidence of developers to perhaps increase their appetite to acquire more land for the future,” he said.
The residential en bloc market has also been boosted by a limited supply of residential sites released under the Government Land Sales (GLS) programme, with only five sites on the confirmed list in the first half of this year.
“The main source of land traditionally has been GLS sites, (which) are seeing huge competition, because amongst developers, especially those who do not have enough land, they are building up their land bank aggressively,” said Mr Lim.
“So it’s a push factor for developers to extend their options by looking at the en bloc sales market,” he added.
According to data provided by JLL Singapore, at least 21 residential projects are in the pipeline to go en bloc this year.
These include former Housing and Urban Development Company (HUDC) estate Eunosville, which has obtained majority approval from its residents to proceed with its sale, and Amber Park condominium, which is in the process of signing its collective sale agreement after failing multiple attempts at an en bloc.
Among them are 12 collective sale hopefuls, which are in the process of forming their collective sale committees, such as Lakeside Tower and The Balmoral condominiums.
NEED FOR “REALISTIC” EXPECTATIONS: MARKET WATCHERS
But while the outlook for the en bloc market may be picking up, market watchers also called for a tempering of expectations.
“What we are seeing right now is a situation where many developers are going after sites, but at the same time they are also blighted with the problem of moving the sales at a higher price,” said JLL Singapore capital markets director Tan Hong Boon.
“They need sites but they’re not going to pay exuberant prices … I think for en bloc sales to go successfully, owners’ expectations have to be realistic so as to meet bidders’ capability to pay for the site,” he said.
While a total of 25 sites were launched for en bloc between 2014 and 2016, only five sales were successful.
“Out of the 20 sites that failed, I would say that they failed because of too high an asking price in going to the market,” Mr Hong said.
Mr Lim agreed: “At the end of the day they are not going to buy the site now to build based on current market sentiments, it’s going to be the market that they’re probably going to probably launch two years down the road. So it’s something for the future and they’re going to be carrying the risks all the way.”
In total, 221 developments have been sold via collective sales over the last 10 years, with their value adding up to more than S$21 billion as of end-2016.
Does one really make money from buy potential en-bloc Real estate? There was a time whereby many people made a huge pile of $$$ from buying properties which are later en-bloced by private developers. It depends on the purchase price which you agreed to pay for and the developer offer for en-bloc. If the latter is lower and its a negative sale, you would have to top up cash for the outstanding loan.
What do you think of entering a potential en-bloc estate now? Share your views in the comment below