DBS Group Research analysts Derek Tan, Rachel Tan, Dale Lai and Geraldine Wong say they believe that the Singapore government will keep a keen eye on further price index movements.
“The chances of further tightening of property-cooling measures will remain high, especially when we see a further acceleration in the index,” they write in a Sept 13 property flash note.
As at end-June, the Singapore Property Price Index (PPI) rose some 7.1% over the past year to a new high at 204.2, bringing it to levels even before that of the Covid-19 pandemic.
Similarly, the HDB Resale index had risen by an even higher 10.9%, note the analysts.
They add that the last time the cooling measures were invoked in July 2018, the PPI ran up by 9% over the course of one year.
The analysts’ remarks also come as a joint venture (JV) between Hoi Hup Realty and Sunway Developments purchased the freehold Flynn Park for $371 million on Sept 10.
See: Hoi Hup and Sunway jointly purchase Flynn Park en bloc for $371 mil
The amount translates to each family receiving around $5 million.
The size of the transaction makes this the first major one in 2021.
The 72-unit condo was built in 1986 and sits on a freehold plot of 208,443 sq ft with a plot ratio of 1.4 times. It is located at Yew Siang Road in the Pasir Panjang area. It is also located 350 metres from the Pasir Panjang MRT station on the Circle Line.
The price translates to a land rate of $1,355 psf per plot ratio or $1,318 psf ppr including the bonus gross floor area (GFA).
On this, the analysts surmise if Singapore is returning to the en-bloc fever that swept the island in 2016 and 2017.
“Developers seeking alternative ways of land-banking are expected, as overall unsold inventory starts to wither down to around 19,000 units (as of 2Q2021),” they write.
“While the government has moved to infuse more choices for developers to bid through a slight increase in the number of sites in the public land tender (GLS) in the pipeline, the robust participation in recent land tenders (ranging 7-13 per tenders) indicates that many remain hungry for land,” they add.
Diving into historical data, the current figures indicate similar datapoints prior to the start of an en-bloc upcycle from 4Q2016 to 2Q2018.
“Overall unsold units hit a low of 19,000 units and fell to 16,000 over the course of a year till 2017,” they write.
At the time, developers who had a fear of missing out (FOMO), saw the bidding up of land prices, coupled with en-bloc millionaires returning to purchase replacement homes.
The moves led to upward pressure on house prices, and tempered somewhat by the cooling measures in 2018.
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“As of 2Q2021, we saw similar trends after a robust year of transactions, with unsold units falling to a low of 19,000 and based on the pipeline of projects, unsold units are likely to head lower given the uptick in property sentiment,” write the analysts.
“On the other hand, projects in the development pipelines remain limited. Developers will likely continue to landbank and possibly foray into in the collective sales market,” they add.
That said the recent hikes in development charges may deter developments from bidding up land prices too high, as less of the proceeds will be channelled to owners.
Photo of Flynn Park: Savills Singapore from EdgeProp Singapore
