En bloc sales drive demand and supply

En bloc sales drive demand and supply
Rebuilt projects could yield 40% of new homes in next few years: CB Richard Ellis
By ARTHUR SIM

(SINGAPORE) Collective sales of residential developments are becoming a major driver of the property market boom, creating demand as well as potential supply of up to 40 per cent of the projected new homes in the next few years.
The trend is likely to continue despite last week’s hike in development charges. Each en bloc sale temporarily sucks some supply off the market as the sites are redeveloped. But an analysis by CB Richard Ellis shows that the collective sales will yield more homes than they take away.

The 154 collective sales that have been reported since the start of 2006 will translate into a demolition of 10,249 units. But these, in turn, will be replaced by new supply of up to 21,719 homes through fresh construction on these sites.

This will account for almost 40 per cent of the 54,746 new uncompleted units that the Urban Redevelopment Authority has projected by 2011 or so.

The collective sales will automatically create new buyers. CBRE executive director (residential) Joseph Tan said: ‘The search for replacement apartments will generate new demand for residential units in the near to medium term.’

In a typical collective sale deal, there is a time frame of about nine to 14 months before an existing development is taken off the market.

Adding a proviso to the figures, Mr Tan said: ‘Depending on demand, developers may change their mind and delay some of the launches. In addition, developers, especially the major ones, still have an existing landbank to fall back on. Therefore, it is hard to tell how long the supply of 21,719 units will last. It may well be spread over more than five years.’

But current demand is very high. CBRE believes total take-up of new homes in 2007 is likely to exceed 14,000 units. If demand remains at this level over the next three years, there could be a shortfall in supply. Some 22,000 of the units projected by URA have already been sold.

A spokesman for URA said: ‘Based on historical take-up rate, the 32,700 units that were still unsold as of 1Q 2007 should be able to meet demand for the next four to five years. Even if we refer to the take-up of 10,360 units in 2006 which was the highest recorded, the 32,700 units can meet demand for the next three years.’

The URA also said there are 1,900 additional units from recent Government Land Sale (GLS) sites, and more than 8,000 potential units from sites in the second half of the 2007 GLS programme. Whether any shortfall is taken up by future collective sale sites or future GLS sites will affect both supply and demand.

The URA said: ‘As a new GLS programme is decided every six months, the government is able to ensure that there will be sufficient supply to match any surge in demand.’

A total of about 42,200 new private residential units from projects in the pipeline are expected to be completed from the second half of 2007 to 2010. Of these, about 16,400 units will be in Core Central Region, 12,700 units in Rest of Central Region, and 13,100 units in Outside Central Region.

CBRE’s analysis has broken down its projected supply of new units from collective sale sites into districts. Not surprisingly, District 10 has the highest number of potential new units at 4,800. The second highest area is the combined districts of 2, 4, 5, 8 and 12, which can be collectively known as the West Coast, with 4,068 units. District 9 came third with 4,055 units followed by the combined districts of 15 and 16 (East Coast) with 3,772 units.

Mr Tan said: ‘The new supply in the past two years has been mostly concentrated on prime projects, and will continue to be so as developers still hold a number of sites in the prime districts.

‘New supply in fringe and suburban locations has been limited because developers have very few of such projects to cater to upgraders and middle-income group. Therefore, it is natural for them to be looking for these sites for future development from now on, in anticipation of demand coming from this segment of the market.’

Mr Tan noted that recent suburban launches like Casa Merah, Seafront On Meyer, Parc Mondrian, Northwood and The Riverine have been selling well. ‘This shows that the residential market is seeing a broad base recovery compared to a year ago, when recovery was only seen in the high-end segment.’

Source : Business Times - 23 Jul 2007

Property charge hike not meant to cool collective sale fever: Mah

Property charge hike not meant to cool collective sale fever: Mah Minister says overall impact of higher DC is likely to be minimal By Maria Almenoar ST PHOTOS: LIM SIN THAI & ALPHONSUS CHERN THE Government’s recent move to raise development charges (DC) was not a reaction to the current collective sale fever, the Minister for National Development, Mr Mah Bow Tan, explained yesterday. Rather, the move is because the ‘property market is now booming’ and it is ‘timely to return’ to the position before 1985 when the market went down and a recession ensued, said the minister. Though the move could affect some collective sale developments, Mr Mah said the overall impact is likely to be minimal. In a surprise move last Wednesday, the Government raised the tax it levies on property redevelopment - from 50 per cent to 70 per cent of the rise in land value - similar to what it was in 1985. This DC is payable only if the developer is building a bigger project on the land. Some market observers have said the move has abruptly cooled a sizzling market, especially for collective sales, and shifted market sentiment - although the government agency in charge has said that this was not the intention. There were also worries - especially among those hoping to sell their properties en bloc - that the DC hike might just be the first of more such cooling measures from the Government. Market watchers spoke of expecting ‘a second whammy’ on Sept 1 when the Government is expected to announce higher DC rates under its regular six-monthly review of the charges. Analysts said last Wednesday’s DC hike had already made some developments more attractive and others less so - depending on how high their DC component was. Most of those affected would be 99-year leasehold properties outside prime areas such as the slew of privatised HUDC estates trying for a collective sale. For these sites, the DC hike could add 6 per cent or more to the land cost, so developers would be inclined to offer less in a collective sale after taking into account the increased expenditure. Mr Mah yesterday described the new DC rates as a ‘a sharing of the gains and of the increase in value of the land as a result of the Government’s planning approval’. Some of the increase in revenue will be used to provide infrastructure such as roads, rail and power. ‘When you increase the plot ratio, when you build more flats, when you build to a higher level, you need to provide the infrastructure,’ he said. Mr Mah was speaking to reporters after an event for at-risk youth organised by the north-east mosque cluster in Tampines. He also assured the public that the Government was closely monitoring the property market and the balance between supply and demand. If supply falls short, it will step up its land sales programme. He said: ‘My assessment is, over the next two to three years, there will be ample supply coming into the market in various categories…But in the short term, within the one year or so, there may be an imbalance in supply-demand and some pressure on prices.’ On rising rental rates, Mr Mah said there had been reports of reasonable prices still being asked in good areas. The high prices, he said, were generally due to people focusing on particular properties. He emphasised there were enough flats available for purchase or rental. Of the roughly 800,000 Housing Board flats, about 600,000 are eligible for rental under HDB rules. Mr Mah said all parties - developers, analysts and the Government alike - need to make information about the market available to the general public. Source : Straits Times - 23 Jul 2007