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Thread: Blockbuster land deals signal property boost for next year

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    Default Blockbuster land deals signal property boost for next year

    Blockbuster land deals signal property boost for next year

    Nov 15, 2017


    A series of blockbuster land deals in Singapore this year signal the property market is set to break out of its prolonged slump next year.

    A Chinese group lobbed a winning record bid for a residential plot, while Guocoland paid a record per-square-foot price for an office development site in the Central Business District. Office rents last quarter rose for the first time in 2 years and home prices ended a four-year slide.

    The spending spree may not be over, with more than $3.3 billion of land deals set to be completed by the end of the year, pushing the annual total to $14 billion, the highest since 2011, according to Cushman & Wakefield.

    "Singapore's residential and office market has passed its inflection point, embarking on an exciting recovery journey," said Cushman director of research Christine Li.

    "With brighter economic prospects and improved market sentiment in the next two to three years, developers are increasingly sourcing land sites to ride the wave of growth for the rest of the decade."

    Singapore in March relaxed some home-buying restrictions, unleashing pent-up demand in a market where property ownership as a proportion of household assets is near a record low.

    Home prices could rise as much as 10 per cent next year, according to analysts from Morgan Stanley, BNP Paribas and UOB Kay Hian.

    Brokers including Cushman and CBRE Group predict office rents will climb 7 per cent to 9 per cent as an oversupply of space eases.

    The resurgence in deals suggests Singapore is on course to emulate Hong Kong's red-hot property market, where home values have surged to record highs - following a jump in land prices last year - and office towers have fetched eye-popping prices.

    With housing affordability much better in Singapore, there may be a surge in demand next year, according to BNP Paribas.

    "Singapore's property market has largely turned the corner, underpinned by a brightening economic outlook," JLL Singapore head of research and consultancy Tay Huey Ying said.

    Residential and Grade A office assets are poised to remain investor favourites for the rest of this year and next year, she said.

    Residential land sales were boosted by redevelopment deals, or so-called collective sales, where a group of owners band together to sell entire apartment blocks, allowing developers to knock them down and build anew in a city where new residential land sales are tightly controlled by the Government.

    These deals have topped $6.3 billion this year, the highest since 2007.

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    Value of land deals 'set to hit record in 2017'

    But analysts say the bumped-up number is a function of land prices having doubled in the last decade. They also say developers, anticipating an upturn, are banking land

    Wed, Nov 15, 2017

    Lee Meixian


    WITH still a month and a half left to 2017, land transactions in Singapore, including collective sales, government land sales (GLS) and private sales, have hit a six-year high of S$12.6 billion.

    If all the pipeline deals, both public and private, materialise, the figure will be bumped up by another S$3.4 billion, bringing the total value of land transactions this year to S$16 billion - a historical record.

    These numbers were compiled from Real Capital Analytics (RCA) by Cushman & Wakefield (C&W) Research.

    The figures did not, however, faze some analysts, who pointed out that the record transaction value was not so much a function of sheer volume as it was the fact that land prices have doubled in the past 10 years.

    Enormous plots of land that changed hands this year, mostly from privatised HUDC sites, further ramped up the numbers.

    CBRE head of research for Singapore and South-east Asia Desmond Sim said: "I am not surprised because land is finite in Singapore. With developers pricing in a future price recovery, there is a slight exuberance in the market, which explains why land transactions in 2017 have been done at higher prices."

    The Interlace (formerly HUDC estate Gillman Heights), for instance, was sold to CapitaLand for S$363 per square foot per plot ratio (psf ppr) in 2007, he noted. Ten years on, Normanton Park nearby was sold to Kingsford Huray Development last month for S$969 psf ppr - a clear indication of how prices have jumped in a decade.

    C&W also did a comparison between land transaction prices in 2017 and other land deals completed in the last few years.

    It found that the average premium paid for the top five residential sites over comparable sites to be 22 per cent in 2017; the premium was even higher for commercial sites - 36 per cent.

    C&W research head Christine Li said: "This does not come at a surprise, as land-starved developers have been ravenous in acquiring well-located choice sites, as investment sentiment has picked up substantially from a year ago."

    Eighteen residential collective-sale projects with a total value of S$6.34 billion have been sold so far this year - the highest in 10 years.

    Ms Li said Singapore's residential and office markets have crossed their inflection points and are headed for an upturn.

    The brighter economic prospects, which bring with them expectations of improvements in office rents and home prices, are motivating developers to source for land sites to ride the wave of growth returning to the property market.

    In C&W's statistics, residential land deals made up about 70 per cent of the total transaction volume in value terms; mixed-use, commercial and industrial made up the rest.

    The seven pending pipeline deals expected to close in what is left of this year include two GLS sites - at Jiak Kim Street and Fourth Avenue - as well as the launched collective sales tenders of Royalville, Mayfair Gardens, Crystal Tower, Cairnhill Mansions and an adjacent site, and Pearl Bank Apartments.

    Commenting on the findings, JLL head of research and consultancy Tay Huey Ying agreed that the land sales market has indeed staged a strong rebound this year, driven largely by the surge in collective sales on the back of developers' hunger for residential development land.

    This is especially so in light of the recovery in home sales and limited state land supply. JLL's research showed CBD Grade-A office rents bottoming out in Q1 this year and recovering 5 per cent by Q3.

    "Given the sharply tapering pipeline supply over the next two years amid steady demand, CBD Grade-A office rents look poised to stay on the growth trajectory over the next two years," she said.

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