Another stellar year for the residential en bloc market? - Singapore | April 2018 - JLL Singapore
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Singapore | April 2018 JLL Research Report Another stellar year for the residential en bloc market?
In 2017, the market was astonished by
the upswing in residential en bloc/private
land sales when deals worth SGD 9.1 billion
were sealed, second only to the record SGD
12.3 billion fetched in 2007.
A lack of sites under the government land sales (GLS)
programme, developers’ acute need to replenish land
inventory and a recovering residential property market
were the main driving forces behind the en bloc sales boom
in 2017.
The year 2018 has begun with 21 sales realising SGD 6.0
billion in value in 1Q18, although several sites had tenders
closed with the sales outcome still pending. This review
seeks to understand the factors that will impact the
en bloc sales market in 2018 and its outlook.
2 | JLL
Another stellar year for the residential en bloc market? 3
Launch pipeline was at all-time low and restocking still
in progress
In mid-2017, the supply of unsold units comprising those that However, oversupply concerns led to GLS supply being
were uncompleted with and without pre-requisites for sale as reduced to about 4,000 units per annum on average, under
well as completed ones stood at 16,929 units, the lowest the confirmed list between 2014 and 2017.
level since the data series commenced in 3Q06. Compared
to the new sales take-up of 10,566 units in 2017, it is a rather As of 4Q17, the launch pipeline increased to 20,794 units,
narrow buffer, providing only a year-plus of supply. due mainly to the pick-up in en bloc sales. However, of the
uncompleted units in the launch pipeline, only 4,387 had
The launch pipeline was at a high of 40,430 units in 4Q11 pre-requisites for sale while 14,504 were without sales pre-
but strong take-up in 2012 and 2013 and a cutback in GLS requisites. Launches in 2018 is estimated at around 9,000 to
from 2014 resulted in the supply of units for sale shrinking 10,000 units, much healthier than the 6,020 units launched
significantly. Between 2010 and 2014, the GLS supply based in 2017 but not matching the expected new sales take-up of
on the confirmed list averaged about 9,000 units per annum. 11,000 to 12,000 units in 2018.
In mid-2017, the supply of unsold units comprising
those that were uncompleted with and without pre-
requisites for sale as well as completed ones stood
at 16,929 units, the lowest level since the data series
commenced in 3Q06.
4 | JLL
Launch pipeline of residential units
1Q
2Q
2010
3Q
4Q
1Q
2Q
2011
3Q
4Q 40,430 units
1Q
2Q
2012
3Q
4Q
1Q
2Q
2013
3Q
4Q
1Q
2Q
2014
3Q
4Q
1Q
2Q
2015
3Q
4Q
1Q
2Q
2016
3Q
4Q
1Q
2017
2Q 16,929 units
3Q
4Q 20,794 units
Source: Realis, JLL Research
Another stellar year for the residential en bloc market? 5Demand for sites spurred by positive medium-term outlook
The residential market has been on a down-cycle for about The current market play could be influenced by an optimistic
four years, as reflected by the Urban Redevelopment market outlook for the next two to three years. During this
Authority’s (URA) residential property price index declining period, transaction volumes are expected to increase due to
from 3Q13 to 2Q17. However, with its turnaround since pent-up demand, presenting potentially attractive revenue
mid-2017, the market is recovering and in the early stages of opportunities for developers.
an up-cycle. Perhaps the duration of the past two recovery
cycles may give some indication of how long an up-cycle
could last.
The current market play could be
The most recent past recovery cycle started in 2009 after influenced by an optimistic market outlook
the global financial crisis and peaked in 2013, interrupted
by the effects of the cooling measures, including the Total for the next two to three years. During this
Debt Servicing Ratio (TDSR). Another recovery cycle was that period, transaction volumes are expected to
which started in 2004 and ended in 2008 when an economic
downturn struck with the onset of the global financial crisis. increase due to pent-up demand, presenting
Each of these recovery cycles lasted about four years and potentially attractive revenue opportunities
ended due to market or regulatory events.
for developers.
6 | JLLResidential Property Price Index
URA Price Index
4 years x years
160
150
140 4 years
130
120
110
100
90
80
70
60
123412341234123412341234123412341234123412341234123412341234
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: Realis, JLL Research
Another stellar year for the residential en bloc market? 7But land prices have risen, raising sellers’ expectations
It may not have been apparent earlier but residential land The successful en bloc sales in 2017 at mostly optimistic
prices had been slowly creeping up since 2015, reaching a prices bolstered the confidence of sellers and raised their
crescendo in recent months. The increase was across all price expectations. This has led to reserve prices of en
sub-markets, exacerbated by the reduction of residential land bloc sites not being met and the sales process becoming
supply under the GLS programme, resulting in more intense protracted, with sellers exploring follow-up options such
competition and bidding for sites among developers. as securing a buyer by private treaty. In 2018, we expect a
trend of more protracted or failed collective sales due to
An example in the suburban sub-market is in the West Coast a mismatch in pricing expectations by en bloc sellers and
Vale area where the Parc Riviera site was clinched in August buyers.
2015 for SGD 551 per sq ft per plot ratio, only to be surpassed
by the SGD 592 per sq ft per plot ratio paid for the adjacent
Twin Vew parcel in February 2017. The Twin Vew land price It may not have been apparent
was further overshadowed by the SGD 800 per sq ft per plot
ratio winning bid in January 2018 for another site in the same earlier but residential land prices had been
location. slowly creeping up since 2015, reaching a
In the prime sub-market, the Martin Modern parcel fetched crescendo in recent months. The increase
SGD 1,239 per sq ft per plot ratio in June 2016 but keen was across all sub-markets, exacerbated
demand saw the Jiak Kim Street site command SGD 1,733 per
sq ft per plot ratio, a more optimistic bid, notwithstanding the by the reduction of residential land supply
commercial use allowed on the first storey. under the GLS programme, resulting in
more intense competition and bidding for
sites among developers.
Rising land prices ($ per sq ft per plot ratio)
Suburban sub-market Prime sub-market
Martin Modern Site at
site Jiak Kim Street
Parc Riviera Twin Vew Site at
site site West Coast Vale
$551 $592 $800 $1,239 $1,733
August 2015 February 2017 January 2018
June 2016 December 2017
8 | JLLStrong en bloc pipeline
While more en bloc sales could end up being protracted in 80% or 90% consensus. Currently, around 10 en bloc sites are
2018, a strong pipeline of these sites is likely to maintain or waiting for their tenders to close while another 10 sites are
increase the momentum of launches. As can be seen in the under private treaty negotiations following non conclusive
table below, the launch and sales momentum in the en bloc offers after their tender closing. Some of these were sold
sales market has been rising on a quarterly basis since 2017. recently, e.g. Cairnhill Mansions, Riviera Point, Pearl Bank
There are currently about 140 developments in varying stages Apartments and Brookvale Park. Since a sustained supply of
of sales preparation, although some of these could be non- sites is expected, bids are likely to stabilise and the volume of
starters while others may not secure the required minimum successful collective sales could possibly increase.
Momentum of Residential Collective Sales
1Q17
2Q17 $ 1,507
3Q17 $ 2,091
4Q17 $ 4,593
1Q18 $ 5,830
No. of fresh sites launched No. of sites sold $ Value of sites sold
during the quarter during the quarter during the quarter (SGD million)
Source: Realis, JLL Research
While more en bloc sales could
end up being protracted in 2018, a strong
pipeline of these sites is likely to maintain
or increase the momentum of launches.
Another stellar year for the residential en bloc market? 9Outlook
The recent increase in the top marginal rate of the Buyer’s In 2017, investments in GLS residential sites amounted to
Stamp Duty (BSD) from 3% to 4% for amounts exceeding $1 $5.97 billion while collective/en bloc/private land sales
million of the property value is unlikely to dampen demand fetched $9.1 billion. Investments in GLS residential sites in
for residential sites. Although developers might trim their bids 1H18 is estimated at $4 to $4.4 billion and is expected to
for sites slightly, taking into account the BSD increase, there be moderate for the full year as the 2H18 GLS programme
are other factors that could have a preponderant effect. is unlikely to be aggressive. Therefore en bloc sale sites will
continue to be a major source of residential land supply for
In reality, any computational reduction in bid assessment, will developers in 2018.
be subject to how attractive the site is, its reserve price, the
competition involved, a rising market outlook (as is currently As the medium-term outlook is positive, developers are likely
the case) or other factors. to continue restocking their land inventory. Coupled with a
firm pipeline of potential en bloc sites, the sales momentum
witnessed in 2017 is expected to be sustained, with 2018
primed to be another astonishing year.
As the medium-term outlook is
positive, developers are likely to continue
restocking their land inventory. Coupled
with a firm pipeline of potential en bloc
sites, the sales momentum witnessed in
2017 is expected to be sustained, with 2018
primed to be another astonishing year.
10 | JLLAuthor
Ong Teck Hui
National Director
Research & Consultancy
JLL Singaporejll.com.sg CEA Licence No. L3007326E © Copyright 2018 JLL. All rights reserved. This report has been prepared solely for information purposes and does not necessarily purport to be a complete analysis of the topics discussed, which are inherently unpredictable. It has been based on sources we believe to be reliable, but we have not independently verified those sources and we do not guarantee that the information in the report is accurate or complete. Any views expressed in the report reflect our judgment at this date and are subject to change without notice. Statements that are forward-looking involve known and unknown risks and uncertainties that may cause future realities to be materially different from those implied by such forward-looking statements. Advice we give to clients in particular situations may differ from the views expressed in this report. No investment or other business decisions should be made based solely on the views expressed in this report.
You can also read
