With recent property market in Singapore, there are few warnings of oversupply in year 2018 and luxury home like Archipelago price increased. Over the past few years, the government has stepped into regulating the cooling measures for the property market. However, the recent one in July by tightening the loan-to-value and raising additional buyer stamp duty (ABSD) rates.
Besides, way before the measures are implemented, there was an en bloc fever going strong with the rise of property stocks late last year. Every developer are doing shopping looking for en bloc to buy but after the announcement of the cooling measures, the fever of buying has gone slow.
So, if all this depressing news still hasn’t curbed your appetite for collective sale. There still be opportunities for en bloc in the subsequent cycle. It is always worth keeping a look out and to be prepared even if it is 10 years early.
Tips to spot collective sales
1. Small sites
Smaller sites will be more attractive to developers because it involves smaller risks. The factors that will influence developers decision from buying the sites are transaction costs, construction costs and the current cooling measures how it will affect the development profit.
For instances, large developments like Braddell View where owners are hoping to get $2billion for it, huge sum that any developers could digest. The size of the project looks like substantial risk although the sprawling size of the land with very near proximity and accessibility to several MRT stations. The latest cooling measures which is the raised of Additional Buyer Stamp Duty (ABSD) is now 25% plus interest.
Well, if the developer fails to compete project or sell all its units within 5 years of buying the site. So imagine if the project has 2,000 units, developers are under pressure into selling off all the 2,000 units and it is not the easiest task.
Thus, the smaller the sites, the less risky to developers due to amount of capital needed as well as the amount of units that need to be sold and built. Lucky that Archipelago has got only 577 units, less density and small site.
2. Undersupply of new homes
Look around for the area that has few or little new residential properties or that has not had a new condo launches in some time. One way to search for this is by researching by finding the condos and looking at those areas that are lack of supply for new homes. Developers will be looking for areas that are in need of residential housing for some opportunities.
3. Plot ratio
Plot ratio is crucial to look at it for the collective sale to happen. This is due to plot ratio in Singapore the main factor to determine the land’s values. Thus, the higher the plot ratio, the higher and more you can build.
For example, if the developer is looking at the potential value of development, plot ratio is taken and multiply it by the land size to find Gross Floor Area (GFA). So, with a plot ratio of 2.8 and land size of 100,000 square feet which will result in a GFA of 280,000. You can find out the plot ratio of the land from URA by simply searching the property and it will extract out the location and plot ratio for you.
4. Older developments
Plentiful of young buyers shun by older developments due to the look or lack of facilities but truth is many older developments have great value. If you’re looking to stay in certain area where most of the older development time has lower PSF than the newer units nearby. Developers are more interested into buying older developments due to the PSF range will be lower and cheaper to purchase and redevelop.
Besides the plot ratios of the older developments are set back then but it can be change over the years by Government in the Master Plan which it will be revised upwards. Apart from that, the constant upkeeping and maintenance for the older developments are not cheap which causes the residents to sell off and upgrade their property.
5. Redevelopment area
Property’s value increase through potential redevelopments in the area. With the new transport development like new MRT line and stations or branded schools permanent relocation or even the line of amenities like shopping malls that will increase the property value.
Just like recent earlier this year the Punggol digital district was announced to open from 2023 that creates 28,000 new jobs and additional leisure and retail spots that will spillover into residential units around the area. The redevelopment of the location will be taking place.
