The new cooling measures announced on Thursday night may well have doused the current bout of collective sale fever, with analysts expecting mega sites such as Braddell View, Mandarin Gardens and Laguna Park to face an uphill task in luring developers who have just been hit with heftier land acquisition costs.
Even before the measures were announced, Colliers International data showed that 21 collective sale tenders, valued at $5.6 billion, closed in May and last month without being sold, as developers took a breather to assess the large number of redevelopment sites available, evaluate potential risks and take stock of their development pipeline.
Besides raising the Additional Buyer's Stamp Duty (ABSD) for entities by 10 percentage points to 25 per cent - which can be waived if developers fulfil several conditions including completing and selling all their units within five years of acquiring the site - the Government has imposed an extra 5 per cent ABSD that cannot be waived.
Mr Desmond Sim, CBRE head of research for Singapore and South-east Asia, said: "While we are not surprised by more measures given the emergence of warnings and calibrated measures since the fourth quarter last year, we are surprised by their severity, which suggests the Government is evidently fearful of a bubble building amid a rising interest rate environment and sizeable unsold launch pipeline."
However, there is no turning back for some mega sites like Pine Grove, which has garnered 76 per cent of signatures so far, said Huttons Asia's head of investment sales Terence Lian, who is marketing it. "But we do expect more resistance from developers. Once we have the mandate to launch the tender, we will go ahead with the reserve price of $1.72 billion, and leave market forces to deal with it.
"The site has good attributes, but sellers' expectations have to be managed," he said.
Typically, owners receive a 50 per cent to 60 per cent premium from selling their property collectively. They may now have to accept a lower premium if they want to get the deal across the line, said Colliers managing director Tang Wei Leng.
"Developers are expected to be more selective, but redevelopment sites in mature estates or areas where there have been few new launches could still be appealing," she added.
Market watchers are also eyeing the closing of tenders in September of two Government Land Sales (GLS) sites - a plot in Jalan Jurong Kechil that can yield about 280 homes, and the executive condominium site in Canberra Link - for the strength of developers' bids and the number of bidders.
Heftier acquisition costs will put a major dampener on developers' appetite. This is especially so for high-unit-yielding sites where selling within the five-year period is more challenging. "Developers are likely to take a cautious stance in their bidding for both en bloc sites and GLS sites before the dust settles," said Cushman & Wakefield's senior director of research Christine Li.
offers come in lower than the reserve price for the tenders that have closed, those selling en bloc have, within 10 weeks of the tender closing, to get a fresh 80 per cent to accept the lower offer, said OrangeTee executive director Alex Oh.
"We will likely see more of this happening," he added.
Home buying sentiment will also be watched in the next few months. New launches will be a critical litmus test of whether there is any adverse effect on buying sentiment.
"If these projects can still move, there is confidence in the market. If the new launches don't do well, there is little confidence for developers to continue to buy land," said Mr Oh.
But Qingjian Realty (South Pacific) Group, which is launching its Jade Scape this year at the site of former Shunfu Ville, remains unfazed.
Its deputy general manager, Ms Yen Chong, noted that "an overexuberant market is not sustainable". But she added: "We are not overly concerned about the measures' impact on our upcoming launch."
CapitaLand, UOL Group and GuocoLand declined to comment.
Adapted from The Straits Times, 7 July 2018.