DECEMBER 18, 2012
The 10% Additional Buyer's Stamp Duty (ABSD) has been a cooling measure so more going for smallish land parcels
Prudence is the word that springs to mind when one talks about the outlook of the collective sales market in 2013.
Given the less-than-buoyant demand for collective sales sites this year, market analysts expect the same in the coming months, with developers favouring smaller sites, as they did throughout 2012.
Chia Siew Chuin, director at Colliers International, said the imposition of a 10 per cent Additional Buyer's Stamp Duty (ABSD) on the acquisition of development land from December 2011, resulted in increased caution among developers who channelled their attention to smaller land parcels. "Developers find greater flexibility and ease to redevelop on smallish sites within five years, thus enabling these acquisitions to be eligible for remission of the ABSD," she added.
With the ABSD still in place, Ms Chia expects small-to mid-size land parcels of below $200 million to be the most appealing for developers.
Although the ABSD might have resulted in more cautious transactions in the en-bloc market this year, a couple of records were still broken and new highs set.
For example, the sale of Thomson View condominium) at $712 per square foot per plot ratio (psf ppr) or $590 million, was the largest residential collective deal since June 2007 when Farrer Court on King's Road made headlines for its staggering $1.34 billion price tag.
While Thomson View gave a boost to a market that had seen mostly smaller collective sales of under $100 million in recent years, it was a one-off deal and did not set off ripples in the market. It was successful in its third collective sales attempt partly because of the newly announced Upper Thomson MRT station nearby (part of the upcoming Thomson Line), said market analysts.
Said Jeremy Lake, executive director, investment properties of CBRE: "The developers who paid the heftiest prices to some sites were not the regular players - they could have few land banks in their stable and are willing to pay a premium in order to win the sites and stay in business."
Referring to Thomson View, he said it was a one-off deal and the developers (Wee Hur Development and Lucrum Capital) were new entrants who probably were prepared to take a commercial risk because of the relatively low break-even cost.
Tan Hong Boon of Jones Lang Lasalle (JLL) said: "Mixed-use sites will continue to find favour and residential sites near MRT stations are expected to draw keen interest."
Data compiled by JLL showed that the year-to-date value of transactions is expected to be around $2 billion, about two-thirds of last year's $3.2 billion.
This is from the 24 sites sold to date this year, compared with the 51 transactions recorded in 2011. Only three out of the 24 sites sold were in the prime districts of 9,10 and 11, with the rest mainly from sites in the suburban areas and city fringe.
Karamjit Singh, JLL's head of investments and residential, had said in a report in September that the dominance of collective sales in the non-prime districts was due to the change in pattern of end-user demand.
Tracking sales trends over the years, the report found that 14,811 private residential units were sold by developers in 2007, with the core central region, rest of central region and outside central region, accounting for 33 per cent, 30 per cent and 37 per cent, respectively.
By 2010, 75 per cent of the 16,292 units sold by developers were attributable to the rest of the central region and outside the central region, while the core central region's share had slipped to 25 per cent.
Demand for homes outside prime districts strengthened in 2011, when nearly 90 per cent of the 15,904 units sold by developers were in the rest of central region and outside central region.
Not surprisingly, similar robust demand was seen in 2012 in the rest of central region and outside central region, which accounted for 95 per cent of developer sales, with the rest coming from the core central region.
"The market cooling measures imposed in the last few years have been skewed against short-term investors and speculators. Owner-occupier buyers including HDB upgraders, who are less affected by the measures, tend to buy homes outside of prime districts, which are relatively more affordable," explained Mr Singh.
JJL's Mr Tan said the lack of reasonably good sites and a more cautious attitude among developers towards projects in the mid-tier segment compared with mass-market ones where demand continues to be strong, also contributed to the lacklustre performance of the market this year.
But with land prices likely to inch up next year, Mr Tan thinks over-prized sites in prime locations will most probably be shunned by developers.
Several of the bigger collective sales this year, besides Thomson View, were successful only after having been on the market more than once, evidence of the anxiety among developers to take on such projects in these uncertain economic times.
For example, Chateau Eliza, which was transacted in September at $9.2 million or $1,743 psf ppr, had been on the market three times previously.
The property was first put up for collective sale in 2007 at an indicative price of about $115 million to $120 million. It was then launched for sale again in December 2011 with a guide price of $111 million to $115 million, and a third time in May this year at a reserve price of $108 million before it was successfully sold in September.
Ms Chia noted that capital flows from the third round of quantitative easing (QE3) and the low interest rate environment could help sustain demand for homes and in turn keep demand for land fairly stable despite the challenging market conditions ahead.
Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C
Senior Sales Director
DTZ Debenham Tie Leung (SEA) Pte Ltd (L3006301G)
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