Collective sales have dominated the Singapore market in both 2017 and 2018.
As a property agent, I can observe there was going to be significant impact but even then I was surprised at the speed and sheer quantity of transactions happening.
Let’s observe what has happened.
In 2016, there was only 7 en-bloc sales transactions happening.
In 2017, there was 32 en-bloc transactions happening – with a vast majority happening only in the second half of the year.
The total value of the en-bloc transactions in 2017 was $8.4 billion.
In 2018, there was 35 en-bloc transactions that closed before the 5 July cooling measures took place.
The numbers might vary from certain news reports due to the status of some of the sales. Some are completed, some are still pending approval and some are being challenged.
The estimated value of the 2018 en-bloc transactions are about $10.5 billion.
Close to $19 billion will be released to these former home owners
Do take note that not all the funds has been released yet. But this is the amount of enbloc proceeds that will be made available to homeowners.
All of them are likely to be looking for a new place and some of their enbloc proceeds will be definitely be used to fund their new home.
2007 holds the record for the biggest year of en-bloc deals which is $12.2 billion.
Sites are being sold at record prices – what does it mean?
It is amazing to see that each new en-bloc deal seems to smash a previous record.
Prices are continuing to increase as developers seem to become very willing to pay more to acquire certain prime land locations.
Some developers are even paying above the asking price!
Record Prices Paid By Developers Means Higher Entry Prices
The prices paid by developers are usually defined by this number: $XXX psf per plot ratio.
From this number, we can estimate what will the expected launch price once the developer is ready to sell the new property development.
Accounting for their construction costs, marketing costs, legal costs and their estimated profit margin – an estimate can be derived on the expected launch price.
Judging from the psf ppr price – we can see that developers are indeed paying higher and higher prices.
Pent-up demand to top up their own landbank as well as rising positive sentiment from late 2017 to mid 2018 has caused prices to hit record levels.
For the average person on the street – this means they need to be prepared to pay more to enter the private property segment.
Will Developers Drop Their Prices?
As you can imagine, some of the costs of a new development will be fixed and some might vary.
Developers are also under pressure to sell their units fast due to the July 2018 cooling measures.
But they also bought the land at a relatively higher prices.
Will their prices drop in the near future?
My answer? It really depends on the developer themselves – are they able to hold out and wait?
But the days of cheap new launch prices might be numbered and limited.
Some Initial Indicators To Observe
Shunfuville was an old development that went through the en-bloc process back in May 2016.
It was recently launched as JadeScape in September 2018.
JadeScape was launched last month with an average psf price of $1700.
300 units were quickly snapped up during the weekend launch.
Despite the July 2018 cooling measures, demand was considered healthy.
Is $1700 psf the new normal?
It might seem so. The most punitive cooling measures were mainly targeted to those who wanted to own and purchase multiple private properties.
But for those who are simply looking to own just 1 single property – the cooling measures are not really discouraging or putting them off fully.
This could be the reason on why demand still remains.
Widening Price Gap between HDB flats & Private Property
At this stage right now, the perception is that it seems that private property is able to offer long-term better value as compared to public housing.
This has contributed to a widening price gap between HDB flats and private property.
There is still plenty of lingering uncertainty regarding the fate of HDB flats as schemes like VERS will only be implemented in 20 years time.
However opportunities are still available if you wish to enter the private property segment.
The July 2018 cooling measures did dampen enthusiasm for awhile and some developers did offer slight discounts.
But it still means that one must be very selective – please do not make the mistake of embracing every single new launch.
Not all new launches are good buys.
If you already have plans to upgrade, be aware that as time passes your HDB flat will continue to depreciate as it becomes older. This will impact the amount of funds you have available if you wish to proceed to upgrade to private property.
Looking to explore your options available? I invite you to contact me for a no-obligation discussion to find out more.