Is The Enbloc Fever Just Starting Or Coming to an End?
Till date, the total collective sales in Singapore is approximately S$2.56 billion with a total of 10 enbloc deals for 2022.
On 19 July 2022, Chuan Park — a 99-year leasehold property located in Lorong Chuan (District 19), was sold to Kingsford, MCC for $890 million. While this amount is below the reserve price, it is higher than the expression of interest (EOI) of $860 million. This would be the fourth attempt for enbloc hopeful owners in Chuan Park. Sitting on a land size of 400,588 square feet, the new development has the potential to house up to 900 units. This will probably be the biggest enbloc sale in 2022 after Tanglin Shopping Centre was acquired in February 2022 for $868 million.
AMO Residence Almost Sold Out on Launch Day
If you’ve been keeping up with the news, you’d be no stranger to AMO Residence which captured media attention by selling out 98% of its 372 units during launch. This is one of the best launch performances we’ve seen since 2021.
Speaking to a few individuals about their thoughts on AMO Residence pre-launch, many felt the price was too steep for an Outside Central Region (OCR) development. The nearest MRT — Mayflower Station, was also a nine-minute walk. The biggest draw? It was within 1 km radius to two prestigious primary school — Ai Tong Primary and CHIJ St. Nicholas. At an average price of $2112 psf, it wasn’t exactly underpriced as well. So why did it sell out so quickly?
1.Shortage in Housing Supply for Residents in Ang Mo Kio
Ang Mo Kio is one of the largest areas by population size. With around 162,280 residents, this is the eighth largest neighbourhood in Singapore, and the third largest in the North-East region.
A large proportion of those who paid the show flat a visit came from applicants of the August 2020 BTO exercise who failed to select a unit at Kebun Baru Edge. At the time, the overall application rate for five-room flats at Kebun Baru Edge was 19.6 times, with the application rate from second-timers at 168.3 times, making it one of the most oversubscribed HDB project.
2.Pricing of AMO Residence Relative to Nearby Resale Developments
Between The Panorama and Thomson Grand, AMO Residence is most similar to The Panorama in terms of unit size. Priced at 23% more than The Panorama, the new launch premium and additional 8 years lease actually makes AMO Residence attractively priced. However, many still felt it was overpriced because it is the first OCR development to be priced above the $2000 psf mark.
Recent Cooling Measures Ineffective? Why Are New Launches Still Selling So Well?
As of the end of 1Q2022, there was a total suppply of 47,415 uncompleted private residential units and 5,333 EC units in the pipeline with planning approvals. Of these, 14,087 private homes and 1,878 EC units were unsold as of the end of the first quarter.
Piccadilly Grand and Liv@MB received overwhelming response in 1H2022. With only 6 units left in AMO Residence, buyers seem unfazed by the recent cooling measures. But were the cooling measures really ineffective? I dig deeper and uncover two observations:
- Majority of buyers are first-time homeowners
- Supply shortage remains a pertinent issue
Given that most buyers are first-time homeowners, the increase in Additional Buyer’s Stamp Duty (ABSD) would not apply to them. When I spoke to a client turned friend — Kelvin, on whether he feels property prices now are too inflated, he was kind enough to share his honest opinion:
“The current price is a reflection of the supply and demand of housing in Singapore. Despite the recent cooling measures, high price and increasing interest rate environment, properties are still exchanging hands because there are just not that many options available. I probably wouldn’t foresee prices to reach such highs if you were to ask me 10 years ago. 10 years later, I hope property prices won’t follow this trend but I wouldn’t be surprise if it does because land supply is indeed diminishing. If property prices now are too inflated, we wouldn’t see such strong demand from buyers. I would like to think that prices now are still affordable. Younger couples nowadays are smarter — they are learning to leverage on assets that continues to grow, something that I wish I had done in my earlier days. The fact that the residential market is heavily regulated by the Government means it is a stable asset, which is why foreigners are still purchasing properties despite the ABSD I guess.”
What’s Next for the Government and Developers?
Based on historical price trends, the result of each cooling measure becomes less effective. After the major cooling measure in 2018, residential property price index decreased for only six months before going back on track. Despite the cooling measures enacted in December last year, the overall private residential property index increased by 3.9% in 1H2022.
The Government has ramped up housing supply through the release of Government Land Sites while developers are acknowledging the supply gap in the market. I believe developers are still less likely to contest for larger plots of land unless the reserve price is reasonable. Let us take a look at the successful enbloc attempts for 2022.
Till date, there has been 10 collective sale sites. The latest site, Park View Mansions, will be the second collective sale site located within the Jurong Lake District that sold enbloc in 2022. It is sold to 3 successful bidders — Sing-Haiyi Pearl, TK 189 Complex (an indirectly owned and linked company of KSH Holdings) and CEL Development (Chip Eng Seng’s business). All 3 successful bidders said they would create a joint venture to rebuild the site into a new residential development with up to 440 units.
Singapore Collective Sale to Remain Active? What Kind of Sites will Developers be Eyeing Next?
The increase in activity reflects a continuation of the collective sales cycle that began in 2020, but was curtailed by the December 2021 new cooling measures. Asking prices for certain collective sale sites have risen but whether developers will bite is another question. I feel that collective sale sites will continue to bridge the supply gap given the relatively limited availability of residential plots through Government Land Sales (GLS).
With the increase in Additional Buyer’s Stamp Duty (ABSD) to developers, pricey collective sale sites may collapse as developers focus on small and medium-sized sites.
Nonetheless, developers now have boosted confidence in re-entering the market due to overwhelming response from new launches like Liv@MB, Piccadilly Grand and Amo Residence. It seems like the general public is acknowledging the resilient nature of real estate in Singapore and are leveraging on it to hedge against inflation.
So is the Enbloc Fever Coming to an End?
The supply gap is far from being bridged. The oversubscription of new launches in the current market will spillover to upcoming new launches, and until the demand is met, developers will continue to actively search for residential plots to redevelop.
I hope this article serves purposeful in helping you make a more well-informed decision, regardless of whether you’re purchasing a property for own-stay or investment. As always, feel free to share your opinion in the comment section and I will take time to address them when I can. Till next time!