En bloc hype slows down

Recent deals sold via private treaty after an unsuccessful public tender appear to bring fatigue.

Four private en bloc sale projects were sold recently, bringing YTD en bloc sales to eight sites, worth a collective $3.5b.

According to DBS Equity Research, whilst the total value for January 2018 is almost half that was achieved in 2017, there appears to be a bit of “fatigue,” especially when most of the recently concluded deals are sold through a private treaty after an unsuccessful public tender.

The 160-unit development at Sunset Way, Brookvale Park has been sold for $530m or $932 psf ppr, which is the minimum price the owners have set. Cairnhill Mansion was also sold en bloc for $362m.

DBS Equity Research analyst Derek Tan said, "The fact that most of the sites have also been awarded at reserve price levels, rather than a premium, may indicate that developers are turning more choosy in adding to their landbank and becoming more cautious in their pricing strategy."

Tan added that the slowing momentum is positive as it means lower upward pressure on final selling prices when these projects are launched. Based on estimates, the built-up in new supply (from en-bloc and government land sales) of close to 28,000 units, with another potential 8,000 units from the H1 2018 government land sales (GLS) programme, represents a "still-healthy" absorption rate, measured by supply divided by the estimated annual primary sale, of around 2.4-2.7 years.