'Calibrated' GLS, falling condo inventory could revive en bloc market: analysts

Fri, Dec 04, 2020

VIVIENNE TAY


THE "conservative" and "calibrated" release of residential supply under the first-half 2021 government land sales (GLS) programme is likely to revive interest in the en bloc market, analysts said on Thursday.

Supply will rise by 17.2 per cent for H1 2021. There will be three private residential sites - one in Lentor Central and two in Slim Barracks Rise - and one executive condominium (EC) site in Tampines among confirmed list sites.

JLL senior director of research and consultancy Ong Teck Hui said more developers are expected to consider collective sale sites as the healthy momentum in the private residential market is expected to continue into next year.

This also comes as the number of unsold residential units under development declined in Q3 2020 to 26,600 units, signalling undersupply in the primary market.

Christine Li, head of research for Singapore and South-east Asia at Cushman & Wakefield said the start of the previous en bloc cycle was in Q2 2016, when inventory fell to 23,000 units. "Should the unsold inventory continue to fall, a possible return of the en bloc cycle can follow."

She also noted that this is a "calibrated approach" by the government, after having considered the overall economic fundamentals and the current state of the residential market.

"Although we are in the middle of a pandemic, the residential property market has surprised on the upside, especially given the ultra-low interest rate environment, the government's record stimulus package, as well as the safe-haven effect that has moved capital around the world to countries like Singapore, given the heightened geopolitical issues," she added.

"The confluence of these factors has supported the housing prices in Singapore. The momentum does not seem to be slowing down."

Property analysts mostly said confirmed list sites will likely generate a healthy level of bidding. In October, the Tanah Merah Kechil Link parcel closed with 15 bids, for example.

The Ministry of National Development (MND) said on Thursday that the four confirmed-list sites can yield about 1,605 private residential units (including 590 EC units) and 9,200 sq m in gross floor area (GFA) of commercial space. This is up from the 1,370 units and 1,500 sq m GFA of commercial space in H2 2020.

The 2.37-ha EC site, Tampines Street 62 (Parcel A), as well as the 1.72-ha Lentor Central plot, were carried over from the reserve list of the H2 2020 GLS programme.

The remaining two Slim Barracks Rise plots, located in one-north, are new. Parcel A has a site area of 0.79 ha, and Parcel B, 0.59 ha. The plots are expected to yield about 265 and 140 residential units respectively.

ERA Realty's head of research and consultancy Nicholas Mak expects Parcel B to be the most popular, given that it is the smallest of the four confirmed-list sites, requiring the least capital investment from developers.

Desmond Sim, CBRE South-east Asia's head of research, said three of the four sites have commercial components, which could inject vibrancy and convenience to the new estates.

Wong Siew Ying, PropNex's head of research and content, noted that there is a keen demand for development sites in the outside of central region (OCR) - where the Lentor Central and Tampines sites are located.

"Our analysis of the supply and demand patterns suggests that there is a greater imbalance in the OCR, where a larger demand pool has helped to absorb supply in the mass market," she said.

Analysts were mixed on whether or not the increase in housing supply was significant, but most agreed that the government's move to raise the number of residential units was in response to healthy demand in the market.

Huttons Asia's director of research Lee Sze Teck said the rise in supply is the first significant increase in the supply of units since the second half of 2017.

But JLL's Mr Ong said that, when considering the matter in absolute terms, the increase in supply is not significant, with the government still concerned about uncertainties in economic and labour market conditions.

Meanwhile, the GLS reserve list comprises five private residential sites, including one EC site, three white sites and one hotel site. These sites can yield about 5,440 private residential units (including 700 EC units), 92,000 sq m GFA of commercial space and 1,070 hotel rooms.

Three of the residential sites, the white sites and the hotel site were carried over from the second half of the 2020 GLS programme.

Sites on the reserve list are triggered for tender if a developer's indicated minimum price in its application is acceptable to the government. This is opposed to confirmed-list sites, which are launched according to schedule, regardless of demand.

Given the continued uncertainties in economic and labour market conditions, the government plans to maintain a moderate supply of private residential units on the confirmed list and will not introduce new sites for predominantly commercial or hotel use in the H1 2021 GLS programme, MND said.

Amendment note: The chart on unsold residential units has been amended to reflect that there were 23,300 unsold units in Q2 2016 and 26,600 unsold units in Q3 2020.