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Analysts concur that the new rules, coupled with hefty additional buyer’s stamp duties charges, will likely result in developers’ submitting less aggressive bids for future land tenders.ST PHOTO: KUA CHEE SIONG

PUBLISHED OCT 19, 2018

 

The new average unit size benchmarks for private non-landed property announced on Wednesday may be the “final nail in the coffin” for collective sale sites that have yet to find buyers or those that have yet to secure the 80 per cent mandate to launch for public tender, analysts say.

Unless developers have already bought land and obtained planning approvals, Wednesday’s more stringent guidelines requiring them to build fewer and bigger units will likely eat into developers’ profit margins, International Property Advisor chief executive Ku Swee Yong said.

“What that means is that sellers still hoping to do an en bloc may have to re-sign their collective sales agreements at lower reserve prices,” he said.

For collective sale sites yet to be launched, 29 are located outside the central area, while 16 are located within the nine designated areas for more stringent controls, according to ERA Realty Network.

For Government Land Sales sites yet to be launched, 14 are located outside the central area, said ERA’s key executive officer Eugene Lim.

The sprawling freehold Pandan Valley estate last month announced it is aiming for a $2.6 billion collective sale. Faber Garden earlier this month relaunched a collective sale exercise at the same reserve price of $1.18 billion, at which its first attempt closed without a sale six months ago.

The July 6 housing curbs already put the brakes on collective redevelopment deals as developers were hit by higher additional buyer’s stamp duties (ABSD) and penalties if they fail to build and sell all units in the project within five years of buying the site.

Cushman & Wakefield head of research Christine Li called the new rules the “final nail in the coffin for the en bloc market in the outside central area”, especially for the nine areas facing more stringent controls.

Analysts concur that the new rules, coupled with hefty ABSD charges, will likely result in developers’ submitting less aggressive bids for future land tenders.

“Land prices could drop by 20 to 40 per cent if developers aim to keep price levels at $1.5 million per unit with a 10 per cent profit margin,” DBS Group Research Equity said.

 

A version of this article appeared in the print edition of The Straits Times on October 19, 2018, with the headline ‘Analysts say ongoing collective sales attempts will be hit hard’.
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