All good things come to an end, and there is mounting evidence that the latest bout of en bloc fever is drawing to an end. The current cycle of en bloc sales has so far lasted approximately two years, compared to the last one which ran from 2005 to 2007 and continued for three years, so if it is declining it could be indicative of the state of the property market in general.
Since the start to the calendar year over thirty sites put up for collective sale have yet to be sold. Put another way, more than a third of all en bloc properties put on the market in 2018 have failed to find a buyer. To make matters worse, the recent cooling measures introduced by the government on 5thJuly have further dampened appetite. Not one single collective sale has gone through since that date (at the time of writing), and as many as ten tenders have closed not having been able to secure a sale.
Those cooling rates hit developers hard. Entities were already charged 15% ABSD, but since then the rate has risen to 25%, with an additional non-remissible 5% put on top for developers.
The slow down seems to be indiscriminate when it comes to the size of properties affected, with both larger and smaller sites failing to attract buyers. Larger, blue ribband sites such as Orchard’s 54,000 square foot Elizabeth Towers and Spanish Village located on Farrer Road and boasting 330,000 square feet, had asking prices of S$610 million and S$882 million respectively, but both closed within a fortnight of the new measures coming in, without success.
At the other end of the market, Jansen Mansion, a former 12 unit property in Kovan on the market for S$22 million, and Geylang’s 9,000 square foot Blossom Mansions on for S$32.8 million also failed to secure a buyer, before closing in the final week of July.
The fact that the smaller sites struggled is perhaps a bigger indication of a slowdown, as these are generally considered to be a simpler sale, due to it being easier for the developer to sell all of the units within the 5 year time frame and hence apply for ABSD remission.
There are people however who are far from certain that things are looking that gloomy for the en bloc market. So far this year, the total value of en bloc sales is already in the region of S$10 billion. With more than a third of the year left, that is still almost S$2 billion more than the total for the whole of last year. More than a billion dollars of business was closed between the 1stJune and when the government announced the cooling off measures.
It is likely that as opposed to the market having fallen off a cliff, it is more a case of developers taking a step back, assessing the situation and the market, before putting future plans and strategies in place.
New launch condos that were sold via government land sales to the developers