As the Singapore property market continues to heat up, more projects are expected to be released for collective sale this year.
This is good news for all developers eager to spice up their land banks, but one expert says that they are not rushing into the en bloc market just yet.
“The problem in the en bloc market is the gap between what sellers want and what developers are prepared to pay,” said Ms. Chua Chor Hoon, head of South-east Asia research of DTZ.
Ho Eng Joo, executive director of investment sales for Colliers International, said that “developers are hungry, but they would not take too high a risk to acquire land. The prices en bloc sellers are asking now may not yet be justified by what the new projects nearby are fetching.”
“Given a choice, they would rather bid for a government land sales site than a private plot,” he added.
He stressed that government land sale sites are typically situated in established residential areas with ready comparable projects, making it easier for property developers to work out their sums. The sale process is also faster and neater.
Moreover, experts said that the collective sale process can drag on if developers are strong dissenters.
In the past, several minority owners have taken their estate’s collective sale case to the High Court and Court of Appeal, which means that timing with the collective sales can be a big problem.
In such a sale, both developers and sellers want to protect their interests. Ms. Chua said that property developers would not want to bid too high if the market does not turn out to be as strong as they expected.
However, sellers aim for a higher price to ensure their position when the deal is made, in case prices continue to rise and they are unable to afford a similar replacement property, Ms. Chua added.
But according to Mr. Ho, the en bloc market may not take off in a significant way yet, until the prices of new private home launches improve further.
In the meantime, many property developers will still be very keen on government land sales sites, particularly in mass market sites, given that most of the new projects are in the mass- and mid-market segments.
Ms. Chua said the decline in developers’ residential stock was noticed late last year.
She noted that stock of unsold inventory of developers has improved from Q3 last year, when they had 36,481 units on hand, to about of 40,224 units at the end of 2009.
But Ms. Chua stressed that developers still need to replenish and purchase at a fairly aggressive pace if they continue to sell a lot.
Research conducted by DTZ showed that half of the 16 major property developers in Singapore had fewer than 1,000 residential units left in their land banks as of end-February.
Sales of new private homes have been brisk in the first quarter, with estimated sales of nearly 4,000 units.
Nevertheless, Ms. Chua said that if such sales hit a more sustainable level of fewer than 3,000 units a quarter, the tight supply situation in the country should gradually ease, now that the government is pushing out more land sites for sale.