Tuesday, December 27, 2011

Collective sales surge past $3b mark

Straits Times: Tue, Dec 27
THE value of collective sales this year has surged past the $3 billion mark, powered to a great extent by the sale of smaller sites.

Data from Credo Real Estate showed that 49 sites were sold this year for a total of $3.04 billion - well ahead of the 36 sites sold for $1.77 billion last year.

Most of the sites went for prices below $100 million, with only 12 sold above the $100 million threshold. But these 12 sites had a combined value of $1.71 billion, making up 56 per cent of total sales.

Credo Real Estate's head of research and consultancy, Mr Ong Teck Hui, said most of the 12 larger sites are in attractive locations in the prime to mid-prime districts.

'Some of the bigger developers have begun to look at such sites to avoid putting all their eggs in mass-market sites under the government land sales (GLS) programme,' he added.

'There are other developers who are frustrated with the often-intense competition over the GLS sites and decide to secure en bloc sites instead.'

But market conditions are expected to be more challenging next year due to the expected economic slowdown and the fresh round of cooling measures which took effect on Dec 8.

Credo, which says it has a 31 per cent share of the collective sale market this year, expects total sales to be lower at about $2 billion next year.

This is because developers will now be slapped with a 10 per cent stamp duty if they fail to build and sell all their units within five years. This applies only to land parcels bought on or after Dec 8.

'This is a one-size-fits-all requirement, which discriminates against big sites. As the five-year time frame will be rather onerous for large sites, developers will be wary of purchasing them. Hence this rule requires a review by the Government,' Mr Ong said.

Other experts also noted that the collective sales of prime sites, in particular, will struggle to get off the ground next year as the Government's curbs cast a shadow on the luxury market.

Kim Eng property analyst Ooi Yi Tung said in a research note last Wednesday that the additional buyer's stamp duty is more than just a tax on home buyers and will effectively put a ceiling on luxury home prices.

'In our view, this poses a hurdle for the high-end segment, which sources land mainly from the en bloc market and typically takes more than five years for redevelopment,' he noted.

He cited SC Global Developments' Hilltops in Cairnhill Circle and The Marq on Paterson Hill as examples of such projects.

With today's asking prices implying a slim margin of less than 20 per cent, the stamp duty will essentially place a cap on luxury prices, Mr Ooi said.

Mr Shaun Poh, DTZ's head of investment advisory services and auction, acknowledged that developers might now have to be more price-sensitive in their high-end launches if they want to meet the five-year deadline.

This will have a knock-on effect on the collective sales of prime sites, and it will be 'quite a challenging' time for such sales, he said, as foreign buyers, who make up a sizeable chunk of luxury home buyers, will now have to fork out an extra 10 per cent stamp duty on all home purchases.

'The high-end market is already seeing a slow market volume and these new rules are likely to make it even worse,' Mr Poh added.

The tender for Dunearn Gardens in Newton, for example, marketed by DTZ, closed last month without any bids.

But it received three indications of interest from developers and is now in the allocated 10-week period for the negotiation of private treaties.

Mr Poh said the District 11 project might be relaunched for sale next year.

He added that while the sale has been made 'harder' by the new rules, whether the reserve price will be lowered will depend on the decision by 80 per cent of the residents.

Source: The Straits Times © Singapore Press Holdings Ltd

Team Marshe
Martin Koh/ Sherry Tang
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