Will the en bloc fever cool soon?

The collective sale market is having an excellent run with the steady flow of successful deals sealed this year.

Normanton Park highest priced 99-year leasehold site sold thus far

The latest and one of the larger-scaled en bloc sales was of Normanton Park just last week. It was sold to Kingsford Huray Development for $830.1 million. Despite having to top up $231.1 million to extend the lease to 99 years and a premium of $283.4 million for site redevelopment, the Chinese firm was happy to have scored the deal. With a $969 psf per plot ratio price tag, it is the highest land rate for a 99-year leasehold land site this year.

These quick and hungry responses from developers mean higher land prices. It also means that developers are land-starved and eager to jump on what is available out there. The government has held back on the release of sites via the Government Land Sales (GLS) programme to help clear unsold stock in the market. Now that the latter has diminished, developers are eager to get their hands on more land for the half a decade ahead, at least.

What does higher land prices mean for the future market?

The inventory of unsold private homes has gradually dwindled over the course of the past year or so. The number of unsold units stood at 15,085 in June this year, down 29.8% from the 21,489 units last year. But will the number and size of land sites sold this year mean a supply glut 3 to 5 years down the road?

There were 17 residential collective sales since January 2016. These would ultimately yield an estimated 10,000 to 11,600 new homes. Most of these new units are expected to launch next year. Property analysts expect the collective sales fever to continue should consumer respond positively to these new launches.