According to the latest findings, the collective sales market is supposed to be nearing the peak of its cycle currently. This happens one year after the boom of the collective sales market. The slowing down is attributed to major real estate figures choosing to scale down and going for smaller estates and smaller premiums as well. The report conducted by RHB came out on Tuesday, April 10. The market is bigger than ever and its overall value is expected to easily cross the figure of S$8.2 billion that existed over the last fiscal year. The peak of the market is expected to take place in the second or third quarter, as all developers get their land banks restocked after a supply pipeline steadily maturing.
How the developers are acting
The peak comes due to the developers becoming increasingly selective and taking less ricks. Their newly formed tight policy measures happen to be leaving a negative mark on the appeal collective sale projects normally hold. According to the report, these policies and actions will lead to a shift towards small and medium sized properties that happen to have favorable attributes in both location and amenities. The exhaustion of the market can be seen in the fact that most premium developers have been paying well over the reserve priced. One that had been halved to 5% instead of 10% in the previous year.
According to the report, developers are keenly keeping an eye on the locations that will be released in June by the government under their land sales program. The incoming surge of new land will provide alternatives to the highly interested developers. The collective sale market has seen some tightening moves of late, which include an increase in development charges for residential projects that happen to be non-landed. These charges were increased in February this year by a might average of 22.8 for each cent. At the same time redevelopment proposals have been coming out with traffic impact studies since November 2017.
Bank financing for developmental projects happens to be under close scrutiny by authorities as well. However, all of this balances out since around 20 properties have been sold in 2018, compared to 28 in the entirety of 2017. There are still a 100 sites that happen to be up for sale.
The report pointed towards a positive outlook on the real estate sector, especially in the coming time. With property prices supposed to increase by 5 to 10%, the real estate sector has seen a favorable outlook with help from the liquidity provided from collective sales, a decrease in unemployment, and an increase in economic growth. However, the report calls for caution as well, especially in the long term. With such steep increases in prices, the sustainability of the existing model and the existing market comes into question. Factors associated with it are population growth, a declining rental market, a weak resale market, and the possible chance of interest hikes. Hence, one should tread lightly in the world of Singapore real estate in the coming years.
Learn more from
http://www.straitstimes.com/business/property/en-bloc-market-will-cool-around-mid-2018-amid-developer-fatigue-rhb
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