En Bloc hopefuls have to compete with a steady supply from Government Land Sales
In the first half of 2024 alone, there are ten government land sales (GLS) sites that will be released for sale progressively. And with each tender, developers have submitted bids that are lower than market expectations having to account for the higher cost environment and slower sales.
The current GLS programme for H1 2024 will see the release of land that will yield 5,450 private homes. This is 5.6 per cent more than the 5,160-unit supply for H2 2023 and is the highest supply on the confirmed list since 2013.
And with property developers turning more risk-averse, condo owners’ high asking prices will be even harder to match.
As seen in the recent state tenders for Clementi Ave 1, Pine Grove (Parcel B), Holland Drive, Toa Payoh Lorong 1, developers are forming joint ventures or consortiums to manage development risk.
The GLS programme offers greater certainty of deal completion and pricing discretion compared to the collective sale process, which can run into potential complications.
“Such uncertainty adds an additional layer of complexity, especially since developers have already turned cautious amid economic weakness, tighter financing conditions and elevated inflation.” said Michael Tay, CBRE’s head of capital markets.
Land prices of 99-year leasehold state land parcels are also starting to come down, compared to valuations seen in previous years. Some plots have sold for up to 30 per cent less than the last state land site sold in the same area.
While en bloc sales provide a source of valuable, well-located freehold land, some sites attach a reserve price that would require a breakeven price at above local buyers’ expectations. The current 60% ABSD rate on foreign purchasers has dampened demand from this pool of buyers.
For a potential en bloc to take place, the owners have to be realistic about the current market prices and take into account the smaller pool of buyers after the multiple rounds of cooling measures, high interest rate environment, GFA harmonisation etc.
As it stands, there is very low competition for GLS land tenders hence developers stand a high chance of getting the land provided their bid is accepted.
(Source: The Business Times)
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