Singapore’s residential collective sale market has experienced a rough time with several unsuccessful attempts. Pine Grove condominium, which was making its fifth bid for a collective sales, found that its S$1,95 billion asking price, for a 99 year leasehold site, had no takers.
Developers’ attention and resources will be diverted away from private land markets by the flood supply of government-sponsored land sales.
The Business Times reports that with the property market becoming more risk-averse and condo owners asking high prices, it will be difficult to match them.
Colliers’ report, published in April this year, shows that the residential investment market fell 47.6 percent quarter-on-quarter during the first quarter of 2020 to S$1.8 Billion.
Even so, the property consultant noted that sales were mainly driven by three sites of government land sales, which fetched around S$400,000,000 each.
GLS program for H1 2020 will release 5,450 residential units. It is 5.6% above the 5,160 unit supply for H2-2023, which is the highest amount on the confirmed list in the last three years.
Property head of capital market reckons the larger pool available of state land bodes well to developers, who will have more reasons to prefer GLS site restocking to collective sale.
The GLS programme offers greater certainty and discretion in pricing compared with the collective sale program, which may face many possible complications.
These uncertainties add a new layer of complexity to the process, particularly since developers are already being cautious because of economic weakness and tighter financing conditions.
The prices of 99 year leasehold state land parcels, as compared with valuations in previous years, are also beginning to decline. Some plots are selling for 30 percent less than last year’s state land sale in the same region.
A GLS site is less risky for developers to commit to than an en block site, due in part to the shifting market dynamics.
According to a real-estate researcher, collective sales offer a valuable source of freehold land that is well located. However, some sites are subject to a reservation price, which requires a breakeven at a price higher than the current clearing prices in those locations.
In a few cases, GLS site prices have been much lower that the reserve price for collective sales sites nearby.
GLS prices are based on market forces, not private land owners.
Owners look at GLS land sites and other nearby private land sales.
The collective agreement and reserve price are set once owners sign it. This makes it difficult to change the price even if GLS prices drop.
Pine Grove is a condo whose asking price was S$1.95 billion. This translated into a land cost of S$1,434/square foot per plot rate (psf/ppr).
A lower reserve price of S$1,78 billion, or S$1,335 per square foot per person per year was attempted as prices for GLS properties in the area have been reduced.
A nearby plot (Parcel B), at Pine Grove was sold to a buyer in November 2023 at S$692.4million, or S$1,223psfppr. The price was approximately 7 per cent lower than the winning offer for Parcel B sold next door in June 2020.
However, it was not possible to obtain the required consensus for a reduction in the price.
A property expert has pointed out, however, that today the only way developers can acquire freehold or leasehold land is to buy land via the en-bloc route. This is particularly true of large sites and attractive locations.
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Singapore continues to rely on collective sales as a key catalyst for “driver private-led regeneration”.
GLS’s sites are ideal for “smaller developments of 300 to 750 apartments”, making them more attractive to developers.
In today’s competitive market, agents and property analysts may not want to dedicate resources to promoting a project that is too small.
If the site is large, there’s a risk that the developer will not be able to sell the whole project within 5 years of the award, and therefore incur Additional Buyers Stamp Duty.
Sellers have reasons to stick with high reserve prices.
Experts cite that the price of purchasing a new property for owners has risen significantly. Urban Redevelopment Authority’s overall price index, for example, grew by an astounding 37.5% from Q1 2019 to the Q1 of 2024.
Owners will now pay higher Buyers Stamp Duty, and ABSD. “Collective Sale Premium” is reduced to a level which may not be motivating.
In some cases owners are willing accept a 30% premium when previously it had to be 50%. Some owners prefer to go on the open markets if they feel the reserve price was too low.
While developers continue to face high construction costs, they are also faced with the LBC for redevelopment, and ABSD for large sites.
Pine Grove, for example, would have had a LBC estimated at S$1 billion to upgrade land use for 893 218 sq ft and intensify the site’s lease. This would have brought the cost of acquisition close to S$3 billion.
Both parties (owners and builders) have valid arguments to support their respective price tags, so the standoff will continue.
According to calculations by researchers, a “reasonable” price that a developer wants to see in large projects with more than 799 units at the city edge or suburbs could be “perhaps S$1,750 up to S$1,900” per square foot for its total net saleable area.
Currently, the price per square foot is above S$2,000 and this level will probably remain. However, buyers at the initial launch have tended to buy smaller, less expensive apartments.
In the face of high ABSD rates as well as mortgage rates that are still very high, developers have been more selective. They even bid at prices lower than expected or below expectations in recent public land sales.
Analysts said that the dragnet would be drawn on schemes that were mischievous, like the “99-to-1 tax avoidance arrangement”, that “sought squeeze more blood out of the rocks to increase demand for residential property”.
Developers should also keep in mind that for every Merdeka and Gen X consumer who dips into savings, it means one less person is willing to purchase new launches with prices close to or at record levels.
This pool of buyers is still unknown, so developers need to factor that in when they make their bids.
