The Sumang Walk Executive Condominium (EC) land plot has got a lot of attention lately. Besides attracting 17 bidders and one of the highest prices in the market, it’s already got attention from home buyers. Those who are looking to buy in a few years will be watching the site closely, even if it seems the resulting development could be pricey.
What’s the buzz surrounding the Sumang Walk EC site?
The EC site at Sumang Walk (in Punggol) attracted 17 bids among developers. The top bid was $509.37 million, and came from a joint venture between CDL Constellation (a subsidiary of City Developments) and TID Residential (owned by TID Pte. Ltd.)
This comes to about $583 per square foot, which is the highest recorded land price to date (for an EC unit). Based on the high bid, the estimated launch price for the upcoming development is estimated at between$1,100 to $1,150 per square foot. If that’s correct, it would set another record – this could be the most expensive EC in the Punggol area to date. Assuming an average unit size of 1,000 square feet, we might be looking at million-dollar condo units in the Punggol area – an area generally known for more affordable housing.
The Sumang Walk EC site measures 27,056.4 square metres, and is on a 99-year leasehold. The latest news from the winning developers is that they’re considering a project of 13 blocks, of between 10 to 17 storeys, with a total of 820 units.
What makes this site so desirable?
Three factors work to raise the price of the Sumang Walk EC site so high. These are:
– It was the only available EC site for developers right now
– Confidence in ECs and recovery in the residential market
– Development of the Punggol Digital District
It was the only available EC site for developers right now
To be clear, there are three more EC sites available for land sales in 1H2018, but Sumang Walk is the only EC that will be launched in 2019. The other sites will only be launched in 2020.
In addition, JLL National Director, Mr. Ong Teck Hui, mentioned in a Business Times report that “The absence of EC land tender for one-and-a-half years, a severely undersupplied market with a paltry unsold stock of less than 1,000 EC units (including the upcoming 628-unit Rivercove Residences along Anchorvale Lane in Sengkang) and a rising private residential market are contributors to the bullish outlook for the EC market among bidders.”
Confidence in ECs and recovery in the residential market
The residential property market seems to be turning around this year. Home prices were up one per cent in 2017, after declining 3.1 per cent in 2016. We also saw a rise in sales volumes for private homes, at 23,113 transactions between January and November 2017. The beats the total sales for the entire year of 2016, which were just 16,378.
At the same time, developers have always been bullish on the sales of ECs. In just the first seven months of 2016, for example, 2,697 EC units were sold by developers. This was more than the 2,550 EC units sold in the entirety of 2015.
In 2016, ECs like Wandervale sold half of its 534 units on the opening weekend, whilst Treasure Crest sold 72 per cent of its 504 units on the opening weekend.
ECs are popular because, despite being full suite condos that are fully privatised after 10 years, buyers can still get CPF grants when purchasing them. They are, in effect, a form of “government subsidised private housing”.
As the Sumang Walk EC will be the only housing type of its kind to launch in 2019, demand is sure to be high.
Development of the Punggol Digital District
Punggol itself is picking up steam, as a desirable location. Once known for affordable housing and relative seclusion, it’s now undergoing the same kind of transformation we once saw in Jurong West.
The government has plans to expand Punggol Town Centre toward the waterfront, and develop it as a mixed-use district (commercial, residential, and business park). The new Singapore Institute of Technology (SIT) campus will be located here, and the area will be developed into a “digital district” for tech innovation.
In addition, the area will have a new hawker centre, revamped community club, and a new childcare centre.
The Sumang Walk EC may be the beginning of a new era for Punggol, which may no longer be seen as just the place for affordable housing in the years to come.
Singapore’s housing market is ticking all the right boxes for revival. Except one.
Private residential prices are up, quarter on quarter, after almost four years of continuous declines. Land prices are rising, both in government tenders and in bids to redevelop old condos — an activity known as en bloc sales that has picked up to the point where it’s beginning to feel like 2007 again. That year saw a record S$12.2 billion ($9 billion) of deals; 2017 may come close.
In the process, two things are happening: Some capacity is coming out of the system, and some former homeowners, flush with cash, are exploring new options. Throw bank financing into the mix, and the demand side of the residential real-estate equation is beginning to look strong.
Then there’s the disconnect between newly built homes and resale property. As Jefferies analyst Krishna Guha points out, the wider the discount on existing homes versus new stock, the higher future prices, if history is a guide. That discount is currently 23 percent. When the gap widened to 36 percent in 2005, prices rose 50 percent by 2008, Jefferies data show.
So what’s missing from this pretty picture? A one-word answer: wages.
The average monthly household income from work for condominium and apartment dwellers was S$20,213 last year, a small decline from 2015. Divide that income by the median sale price of newly built homes, and the effective wage in terms of housing units works out to 1.6 square meters per month. That’s one-sixth lower than the average for the past 16 years.
For there to be a durable cycle, incomes must rise. Otherwise, politicians will be reluctant to encourage a new round of property mania by removing the myriad restrictions on buying, selling and financing of residential real estate they’ve imposed since 2009.
Even with sluggish wages, the island’s economy, tightly integrated with global trade, may start heating up in 2018. If that happens, the Monetary Authority of Singapore, which manages financial conditions by setting a path for exchange rates, would probably have to allow the Singapore dollar to appreciate against trading partners’ currencies. That would make real estate even more attractive to global buyers, and even less affordable for locals.
Already, the frenzied bidding for land seems to be indicating a liquidity glut — Singapore’s 3-month interbank rate has held below Libor throughout this year. That’s one more reason for the authorities to try to damp developers’ enthusiasm, at least until household incomes show a more meaningful increase.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
SINGAPORE: Amber Park, a 200-unit freehold condominium in Katong, has been snapped up for S$906.7 million in Singapore’s largest freehold collective sale by dollar value, marketing agent JLL said on Wednesday (Oct 4).
The condominium, which was built in 1986, was bought by City Developments Ltd (CDL), through its wholly owned subsidiary Cityzens Development, and joint-venture partner Hong Realty.
This is the fourth time that Amber Park has been put up for sale. The sale comes as the local en bloc market continues to heat up, with the tender for Amber Park receiving as many as eight bids.
The sale price reflects a land rate of about S$1,515 per sq ft per plot ratio, based on the allowable gross plot ratio of 2.8, JLL said. At this sale price, the owners would expect to receive gross sale proceeds of between S$4.3 million and S$8.3 million, it added.
Subject to approval, CDL and Hong Realty plan to redevelop Amber Park into a luxury condominium development comprising four 25-storey blocks with close to 800 units and a basement carpark, CDL said in a separate statement. The current site has an area of 213,675 sq ft, and an allowable gross floor area of about 598,290 sq ft.
Mr Tan Hong Boon, regional director at JLL, said: “There are not many sites of similar size that are available for redevelopment in the Amber Road location … Amber Park could possibly be one of the last collective sale sites with a land area above 200,000 sq ft in this precinct.”
The site is also within 1km to Tanjong Katong Primary School and 2km to CHIJ (Katong) Primary, Haig Girls’ School, Kong Hwa School and Tao Nan School, which are popular primary schools.
Connectivity will be further enhanced when Tanjong Katong MRT station, located 200m from the site, is completed in 2023.
Mr Sherman Kwek, CDL CEO-designate, said: “This is one of our most significant investment deals in the Singapore residential market in recent years. CDL was the original developer for Amber Park in the 1980s and we are honoured to be able to redevelop the site into yet another iconic landmark.”
Read more at http://www.channelnewsasia.com/news/singapore/amber-park-sold-for-s-906-7m-in-record-freehold-en-bloc-sale-9277902
SINGAPORE: Jervois Gardens has been sold for S$72 million in the latest en-bloc sale in Singapore, announced marketing agent Colliers International on Tuesday (Sep 26).
The freehold development, which had an asking price of around S$68 million, comprises two low-rise blocks of 14 maisonettes and three apartments located at 30F and 30G Jervois Road. The property was snapped up by Brownstone, a subsidiary of SC Global.
It was Jervois Gardens’ third attempt at a collective sale.
“We received a total of eight bids for the prime freehold site, a testament to its strong redevelopment potential,” said Colliers’ managing director Tang Wei Leng.
She added that the winning bid translated to about S$1,373 per plot ratio. Depending on the size of their units, each owner can potentially receive between S$3.3 million and S$4.5 million, said Ms Tang.
Jervois Gardens, which sits on a freehold land area of 3,162.3 sq m, could yield a gross floor area (GFA) of 4,870 sq m, including an additional 10 per cent GFA for balconies. Between 50 and 70 homes can potentially be built on it, Colliers said.
The property is located between the Redhill MRT station and the future Great World City MRT station.
Singapore property prices are set to jump 10 per cent by the end of next year, according to United States banking giant Morgan Stanley.
The bank’s in-house experts expect private home prices to start rising next month – instead of early next year as it stated in a previous forecast. The forecast does not relate to Housing Board flats.
The significant upswing in prices would reverse a four-year downcycle after a range of cooling measures was introduced to slow the market.
“We see signs of an imminent turnaround from sharply rising transaction volumes, which suggest a narrowing of buyer and seller expectations, growth in prices from late June implied by the upward revision in the Urban Redevelopment Authority’s price index value in the second quarter, and price increases in the resale segment as evidenced from higher frequency monthly indices,” said the report.
The bank explained that rising prices, along with developer sales volumes “sustaining a growth rate of more than 50 per cent year on year so far this year, suggest a much improved outlook for property developers after what has been a four-year downcycle”.
It also cited other positive market behaviour such as a recent surge in collective sales. It said this has displaced some 1,500 home owners across seven projects – estimated to get average proceeds of $1.8 million each. “With leverage, this adds up to $13 billion of potential capital inflows that could find their way back into the property market, more than the entire value of developer sales in 2016.” The bank said more collective deals could be around the corner.
Maybank Kim Eng analyst Derrick Heng had said in a separate recent report that more than $3 billion in collective-sale deals have been concluded so far this year, with another 30 properties at various stages of the en bloc process.
Morgan Stanley noted unsold inventory has fallen to a record 22-year low of 17,000 units as of June, or 1.4 years on current sales volumes. “Inventory absorption accelerated on improving buyer sentiment and as households deployed excess cash after staying on the sidelines through the 2014 to 2016 lull…
“Underpinned by rising demand outpacing tight supply, we believe the coming property price upcycle supports a combination of street revalued net asset value upgrades and narrowing revalued net asset value discounts, driving a further re-rating in developer stock prices,” said Morgan Stanley.
The bank noted City Developments has the largest land bank among its listed peers, at six years’ worth, “and we believe, the highest earnings sensitivity to rising Singapore average selling prices, as well as highest share price sensitivity to rising property prices empirically”.