SINGAPORE (Mar 23): Bukit Sembawang's second successful en bloc for the group after laying dormant for almost 10 years is a sign of developers’ overall confidence of the rebound in Singapore home prices for 2018-2019, says DBS Group Research.
Bukit Sembawang on Thursday announced it had won the tender for the en bloc of Makeway View Estate at the reserve price $168 million.
See: Bukit Sembawang scores second en bloc deal in March with $168 mil bid for Makeway View
See also: Bukit Sembawang acquires Katong Park Towers for $345 mil in en bloc sale
This translates a land rate of $1,626 psf ppr, which is inclusive of development charges (DC) of $21.26 million. Current owners of the 28 apartments and four penthouses will pocket between $3.86–$10.74 million from the sale.
"We estimate that a new development of up to 154 units (assuming an apartment size of 70 sqm) can be built on the site," says Suvro Sarkar in a Friday report.
Based on estimates by DBS, Bukit Sembawang would have committed close to $600 million of capital so far to acquire new land in Singapore, which can be funded by internal sources and borrowings.
For Makeway View, DBS is estimating a breakeven price of close to $2,000 psf with launch prices at $2,300 psf and above. This assuming the land rate can be lowered to $1,480 psf after factoring 10% balcony bonus.
This also implies a total potential Gross Development Value of $294 million for the project and average price quantum per unit of closer to $1.9 million.
DBS says transactions in the Newton vicinity while ranging widely from $1,400 psf-$1,800 psf, easily cross $1.8-million mark and often hit the $2.0-million mark.
Makeway View is located across from the Newton Food Centre and is within 1 km of Anglo-Chinese School (Barker), Anglo-Chinese School (Junior) and St Joseph’s Institution Junior, which will be a key attraction for potential buyers.
Overall, Sarkar still sees a window of opportunity in the next 6-9 months for developers to launch their projects in Singapore.
With proceeds from over 40 en blocs to date, households have the funds to buy a replacement home which will drive transaction volumes in the near term.
However, DBS is turning cautious given the supply of new units in the pipeline which now tops 30,000 units, of which more than half will be launched in 2019 onwards.
With more home choices, Sarkar expects home-owners to be more discerning in their purchasing decisions.
But while Bukit Sembawang have made its land bids more than a year into the start of the current cycle, he notes that this development is fairly small, thus mitigating its exposure.
Shares in Bukit Sembawang are down 9 cents at $6.10.
