How do Government Land Sales work and why is there talk of an en bloc wave?
Every 6 months, developers, property investors and realtors alike all wait with bated breath for the list of sites to be put up for sale by the government, with the Urban Redevelopment Authority (URA) as the sales agent. The state land released for development is known as the Government Land Sales (GLS) Programme. Developers with their eagle eyes survey the land sites for suitable plots they are keen to bid on, for commercial or residential development. Investors and real estate agents carefully monitor the successful price bids to gauge the estimated prices for new launches. There are GLS sites under both the ‘Confirmed’ list and the ‘Reserve’ list, and the latter will only be released if developers initiate them for development with a bid price that the URA would accept. Interested developers will bid for the land sites through an open tender, and the land will typically be awarded to the developer with the highest bid.
For the second half of 2021, the supply of private homes from confirmed sites under the GLS has been increased by 24.6% to 2,000 units, from 1,605 units in the first half of the year. This increase moderately caters to the demand for land-thirsty developers whose inventory lists of new launch units have been steadily dwindling in a buoyant property market. New launch sales for the first 9 months of this year, at 10,111 units, have already exceeded the sale of the whole of 2020 (9,982 units). However, because of the economic recession of 2020, and headwinds in the economic and labour market situation with the ongoing Covid pandemic, this increase in the supply of land for GLS is still seen as a rather conservative upward adjustment by the government. As such, we saw as many as 15 bids for the 99-year Ang Mo Kio Ave 1 site in May 2021, with the top bid at nearly $1,118 per square foot per plot ratio (psf ppr). There were also record bids for the Tampines Street 62 EC site, with the highest at $659 psf ppr, which broke the previous highest bid for an EC plot at Tengah Garden Walk at $603 psf ppr. The Lentor Central site’s highest bid was even higher than the Ang Mo Kio site, at $1,204 psf ppr. Such strong demand and competitive bids from developers indicate their confidence in the continued sustained demand for private residential housing in the near future.
But what about the developers who did not manage to bid successfully for land? Their next option is to look at brokering collective sales deals, or buying up current private residential developments known as en bloc sales. Now, you know, it is not easy to get an 80% mandate in a private residential development so that the development can be put up for a collective sale bid. The land to be sold may not be cheap as well given that strata owners need to be sufficiently enticed by the sale price to give their go-ahead for the en bloc sale. However, given the limited supply of land for new condominium developments, we are indeed starting to see the comeback of the en bloc wave. The largest collective sale site sold so far this year was the freehold Flynn Park in Pasir Panjang, with a price tag of $371 million, which works out to $1,355 psf ppr. What’s interesting to note is that the tender exercise was “keenly contested”, according to Savills Singapore that brokered the deal, indicating that developers are in fierce competition for land for new residential developments. But Flynn Park may not turn out to be the biggest collective sale in 2021, as Watten Estate Condominium is also up for a collective sale with $500 million as a minimum price. Chuan Park Condominium has also collected the 80% mandate amongst its owners last month, and is now put up for a collective sale, with its reserve price of $938 million. We see a similar trend happening with commercial properties such as Maxwell House that was sold en bloc in May this year, and Siglap Shopping Centre, Peace Centre and International Plaza launching their en bloc sale bids in recent months.
Now, property investors hoping to have a windfall from an en bloc sale will be staring at the real estate crystal ball again to gauge which properties are most likely to go en bloc, and hence, worth investing in, in order to ride on the en bloc fever. That is, if they are not already too late for the en bloc wave that is already surging in.
Are there any other topics you would like me to write about? Or do you have any questions?
