Why Singapore property-holders shouldn’t get too excited by en bloc prospects

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The “stellar” en bloc rally in Singapore’s property market is nearing its peak and should slow heading into the second half of the year, RHB said in a note on Tuesday.

“Key reasons for this are steady build up in supply pipeline, rising land costs, tighter policy framework and sufficient restocking of landbank,” it said. “Moving ahead, we expect developers to be selective in their bids with preferences for relatively smaller and well-located sites.”

RHB said that the developer “fatigue” for en bloc deals was reflected in the premiums that they’ve been paying over the reserve price, which is down to 5 percent this year, compared with 10 percent in 2017.

To be sure, other analysts are expecting the collective sales will continue.

Not everyone agrees

Tang Wei Leng, managing director at real-estate services company Colliers International, said in a note earlier this month that the “brisk” en bloc activity in the first quarter — 17 deals worth S$5.83 billion, up nearly 30 percent from the fourth quarter — was set to continue.

“The premiums paid on land price by developers for some sites signaled that there is still a healthy appetite for well-located developments,” she said, but added, “given the deluge of sites on the market, we think the balance has tilted in favour of developers, who are likely to cherry-pick the best sites and/or those that are realistically priced.”

Unlike RHB, she said she expected the larger sites would appeal more to developers for the ability to add more facilities and landscaping.

“Young families, local and expatriate, increasingly appreciate more sizeable and spacious residential developments that offer recreational as well as social areas where residents can mingle and build bonds,” she said.

Additionally, Tricia Song, head of research for Singapore at Colliers International, said in the same note that while the premiums developers were paying appeared lower, it wasn’t necessarily mean collective sales were cooling.

“We think this could have been due to higher indicative prices, higher development charges and more selective bidding by developers,” Song said. “Attractive sites with realistic asking price still find ample bidding interest, such as Katong Park Towers, which saw 10 bids and a top bid of 20 percent premium.”

Top property picks

To be sure, while RHB was downbeat on the collective sales’ outlook, it still said it expected property prices to climb 5 percent to 10 percent this year, although it wasn’t certain how sustainable the increases would be.

“The near-term market remains well supported – with ample liquidity from en bloc sales, a lower unemployment rate (2.1 percent), and higher GDP growth,” RHB said.

But on the longer term outlook, it noted tighter immigration policies were restricting population growth, and that the rental market and public housing apartment resale prices were weak, and in the latter’s case declining.

RHB said it was sticking with an Overweight call on the property market. It tipped APAC Realty as its preferred pick as it benefits from both higher primary and secondary sales volumes.

Among big caps, it said its top pick was CapitaLand as a laggard play, and it also said it expected City Developments to benefit from its “strategic landbanking” and better prospects for its hospitality assets.