Beware the en bloc bubble: Redas chief
Bullish land acquisitions not sustainable because demand for new private homes may well soften, he warns
The current en bloc fever shows no signs of abating with Amber Park condominium in Katong fetching a record $906.7 million yesterday in the largest freehold collective sale to date.
This follows a 0.5 per cent rise in private home prices in the last quarter for the first time in four years, and a flurry of collective sale deals this year with a total value of $4.5 billion.
They include Tampines Court at $970 million, Rio Casa in Hougang at $575 million, Serangoon Ville at $499 million, and Sun Rosier on Bartley Road at $271 million.
The first three are former Housing and Urban Development Company estates.
The numbers may signal an upturn in the private property sector, but Real Estate Developers' Association of Singapore (Redas) president Augustine Tan yesterday warned that the fast rate of recent land acquisitions at high prices by developers is "not sustainable".
Mr Tan, executive director of Far East Organization, said at the Redas' Mid-Autumn Festival lunch this was risky because "we do not see a runaway demand in sales transaction volume and property prices in the next few years", citing slower economic and population growth as reasons.
He said demand for new private homes may well soften because buyer sentiment amid rising interest rates, the lukewarm economic climate and slow jobs market may not match the "bullish" land acquisitions.
"Many, including displaced sellers from collective sales, may downgrade to public housing," he said.
Raising the possibility of "increasing supply and high vacancy", Mr Tan noted there were 15,000 unsold units in the pipeline at the middle of this year and another 24,000 new units by year-end from en bloc deals and government land sales.
Property analyst Nicholas Mak, executive director of ZACD Group, told The New Paper that Mr Tan had brought up "sensible points" and the property sector is tied to Singapore's economic growth.
"The economy is growing slowly, and whether or not property sales will get higher in the next few years depends on our economic performance," he said.
Asked for his take, Mr Mak said developers are being "cautiously optimistic".
"Some developers are buying land at high prices, based on expectations that prices will rise," he said.
PropNex Realty chief executive Ismail Gafoor warned that the high prices of sales of late does not mean every development will succeed.
He told TNP: "We have seen record prices as developers outbid each other to secure prized development sites, and many developments are trying to jump on this bandwagon.
"But what is not certain is the sustainability of the demand. Not all developments will be in the radar of interest of all developers, and not all will enjoy the success of Amber Park, which is an attractive location."
Amber Park, which was sold to City Developments Limited (CDL), is located in a private residential area popular with both expatriates and locals due to its closeness to East Coast Park, the airport and several popular primary schools.
In a media release yesterday, a CDL spokesman said it sees "tremendous potential" in the Amber Park site.
He said: "We expect healthy demand for the new project at the Amber Park site given its excellent locational attributes and rare freehold status."
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