A resurgence of en-bloc sales in Singapore?March 1, 2017 / By
After two quiet years of en-bloc sales in the Singapore residential market, the term “en-bloc” resurfaced in 2016. En-bloc sales in this blog refers to sales of a whole development and bulk strata sales.
We have seen notable en-bloc deals of newly completed developments in prime districts, such as the sales of the 156-unit Nouvel 18 via a profit participation securities platform, and the 30-unit iLiv@Grange through a sale of shares in 2016. En-bloc sales for redevelopment purposes also returned in prime districts with the sale of three apartment buildings at 3 Cuscaden Walk, 120 Grange Road and 8 Hullet Road at end-2016.
What is driving this resurgence of en-bloc residential sales and how likely is it to continue in 2017?
Many of the en-bloc sales in 2016 arose from developers attempting to avoid paying Qualifying Certificate (QC) extension fees, which are chargeable when non-Singaporean developers fail to sell all units in their residential developments within two years from the developments’ completion date. Another driver involves developers’ attempt at avoiding additional buyers’ stamp duties (ABSD) remission clawback. Developers need to pay ABSD if they are unable to build and sell all units in their development within five years from the date of land acquisition.
Such motives are likely to continue driving en-bloc sales activity in 2017. Weak homes sales market due to the raft of market cooling measures has resulted in many developers being saddled with unsold units in their completed developments. They are keen to offload en-bloc or in bulk to avoid QC charges.
As the ABSD ruling was introduced in 2011, the ABSD remission clawback will kick in from 2016. Hence, many developers who purchase land from 2011 and are similarly caught in the weak residential sales market will also be looking towards en-bloc sales to avoid incurring ABSD.
From the demand perspective, now would be a good time for developers/investors to pick up residential properties either for resale or for redevelopment. Prices of high-end properties in Singapore have declined by about 20 per cent since their peak in 2013 and are showing signs of bottoming. Hence, developers/investors would be buying at a substantial discount compared to peak prices and en-bloc purchases would accord further discounts. Developers and investors who purchase now can look forward to reaping profit from the impending upturn of the market cycle.
The large unsold stock of 6,000 units in the core central region (CCR) at end-2016 could pose a risk due to its sheer volume at more than eight times of developer sales volume in 2016. However, if the market recovers in 2017 as expected, the current unsold stock could be absorbed within a shorter period than the current sales volume suggests. After all, the annual sales volume of homes in the CCR was 2,700 units per annum on average from 2009 to 2013. Concern of strong supply of homes in the prime district could also be mitigated if one considers that in the past five years, the government only released a total of six sites in the prime district.
Hence, en-bloc residential sales are poised for a resurgence in 2017.
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