En bloc sales hit $5.2b

This year’s transactions beat last year’s records with the sale of $970m Tampines Court.

En bloc sales are on their way to lift the Singapore property market up, as they have reached $5.2b YTD with a total of 12 deals, UOB revealed.

Transactions this year have surpassed last year's record highs with the sale of Tampines Court for $970m and Amber Park for $907m. In 2016, the highest paid en bloc site was Shunfu Village at $638m. However, the amount has yet to reach the $11.9b peak in 2007.

Additionally, UOB sees that the current cycle could extend another 12-24 months with around 60-80 pending en bloc projects.

Singapore's private residential property price index is also experiencing a recovery. It rose during Q3, the first time in 16 quarters, bringing the index to positive 0.1% gain YTD.

UOB analysts Suan Teck Kin and Ho Woei Chen said, "We attribute the recovery to: (1) pent up demand, (2) stronger macroeconomic outlook and (3) pick-up in en-bloc activities."

The affordability ratio which measures mortgage payment compared to household income has also continued to improve since 2009. The ratio has fallen to around 22% in 2Q2017.

"Aside from the correction in the per square foot prices since the peak in 3Q13, smaller residential unit size which helps to maintain purchase quantum, wage growth and low interest rates have all contributed to the improvement in Singapore’s private residential affordability," Suan and Ho added.

The government has responded to the recovery of en bloc sales by raising the development charge (DC) rates for condominiums in September.

UOB said as the government is keen to keep the property prudential measures, more en bloc sales could sustain the rebound in the property market.

Here's more from UOB:

Removal of residential units due to en-bloc activities will contribute to demand as en-bloc sellers look for replacement homes. YTD en-bloc deals are expected to translate to more than 2,000 units in replacement demand.

Furthermore, over-supply situation has eased, based on the decline in the unsold private residential units to a low of 16,929 in 2Q17 (15,085 uncompleted and 1,844 completed), down 27% from 2Q16. The total unsold private residential units are only 1.6 times of the 10,336 units of primary sales over the past year compared to an average of 2.7 times in the past five years.

Thus, we expect the private residential vacancy rate which had peaked at 8.9% in 2Q16 to continue to moderate as the supply-demand gap narrows.