Property developers to remain cautious for en bloc deals in 2023
30 collective sale sites were introduced in 2022 and more than 20 still unsold.
In Singapore, collective sales often known as en bloc sales, are something that real estate developers intend to approach more cautiously this year.
According to analysts, economic instability will continue to dampen purchasing prospects. In addition, cooling measures and a new limit on gross floor area would decrease the amount of space that may be sold by developers.
The en bloc market may have ended 2022 on a stronger note compared to the years affected by the pandemic, but activity is waning.
After the circuit breaker and the arrival of land bank replenishers in 2021, the collective sales market will genuinely recover.
The most recent property cooling measures were implemented in December 2021, and the additional buyer’s stamp duty for developers was hiked to 40%. This has greatly increased the risk for developers and hindered the en bloc market in 2022.
The number of successfully sold sites decreased from 18 in 2021 to 13 last year. Multiple en bloc properties languished on the market because sellers and purchasers could not agree on a price.
Last year, approximately 30 en bloc sites were introduced, with more than 20 still unsold.
Kensington Park and Loyang Valley are examples of unsuccessful residential transactions.
Kensington Park was listed for sale at over $1 billion, while Loyang Valley was listed for $990 million.
Economic instability, rising borrowing prices, and other activity-retarding measures are anticipated to persist this year.
The new rule enacted in June to regulate floor area definitions across government entities is also causing developers to hesitate. This would result in lesser space for sale in the new launch projects.
For collective sales, the minimum price had been determined… In the absence of this new ruling. Hence, it will be difficult for developers to reconcile the higher reserve price with the lesser saleable area that they would be confronted with.
Consequently, real estate developers would have difficulty reconciling the increased reserve price, which would likely result in reduced sales and sellable areas. That would also require developers to increase the prices of their fresh launches.
But not only developers are expected to be cautious this year. More homeowners of single-family homes may avoid en bloc transactions.
This is due to a recent cooling measure that requires them to wait 15 months after the sale to purchase a resale HDB flat.
According to analysts, residential market headwinds and obstacles could prompt developers to investigate commercial properties.
If the residential plot is fairly priced and has an appropriate bite size, i.e., the investment amount is not excessively expensive, developers may still choose residential.
However, at this time they may be targeting commercial properties. However, there are few venues offering collective sales in the commercial sector.
This year, commercial and residential properties such as Manhattan House near Chinatown, Trendale Tower, and Charming Garden condominium in the central region are up for sale en bloc.