En-bloc fever set to cool in a few months, says analyst
The collective sale frenzy that has been sizzling for a year will peak in a few months, says property analyst Vijay Natarajan of RHB.
Mr Natarajan noted in a report yesterday that developers are paying close to asking prices now and are likely to snap up smaller sites as they turn more selective.
While he believes collective sale values this year will exceed the $8.2 billion racked up last year - there are more than 100 sites in the pipeline - Mr Natarajan said the cycle should peak in the second or third quarter.
Developers have become "very selective", he said, while the supply of private homes is swelling.
Recent collective sales will likely add between 15,000 and 20,000 units to the market eventually. Many real estate players have already restocked their land banks, Mr Natarajan added.
"The fatigue is starting to be reflected in the premium developers have paid over the reserve price, which has halved to 5 per cent this year compared (with) 10 per cent in 2017," he noted.
Bidders at recent transactions paid just the asking price, and not a cent more.
These include Brookvale Park, sold to a Hoi Hup Realty and Sunway Developments joint venture for $530 million and CapitaLand's $728 million purchase of Pearl Bank Apartments.
Collective sale projects may also have lost some lustre after tighter rules on redevelopment kicked in.
Moves such as higher development charges are likely steering developers towards "small- to mid-sized sites that have good location attributes and amenities", he said.
On the whole, Mr Natarajan held to an "overweight" call on the real estate sector, with a positive near-term outlook.
Home prices are expected to rise by 5 per cent to 10 per cent this year on a growth of 10 per cent to 15 per cent in transaction volume, he said.