We are now approaching the end of 2017. This year has been a very interesting year especially for someone like me who has been monitoring the property market for the past 10 years.
I can safely say that 2017 has been the year of en-blocs and record Government Land Sales (GLS).
There are actually a lot more en-bloc sales in 2017 that I didn’t include. The Straits Times has compiled one in this article below: “Collective Sale Fever – How Much Longer Will It Last?”
Everywhere I go nowadays, I will be hearing people talking about “en-bloc potential”. I have not heard this phrase for a long time.
If I’m not mistaken, the last time this phrase became so hot was in 2011.
Based on this article, there have been 12 en-bloc sales in 2017. And this number is set to rise as more condo developments start to offer their own collective sales.
Cooling Measures Were First Imposed In 2013
Now in 2017, it seems that the impact from the cooling measures is gone. My observation is that buyers are getting used to the idea of paying more. This is likely to become the new normal where new launch prices are starting to climb.
In fact, it seems that some developers are even halting sales to perhaps “capitalize” on new launch prices in 2018.
Back in August 2017 – GuocoLand started to reduce the number of units available for sale and held back – they anticipating the pressure of prices going up in 2018.
Taking a Detailed Look At Jervois Garden En-bloc Sale
There are many other clear indications happening that seems to suggest that the property market is recovering and will reach higher highs in 2018.
In the past, only 1-2 plots of land were being sold at record prices. That was considered normal.
Right now, when 10-20 plots of land are being sold at record high prices – this is another clear indicator that we have to deal with this new normal in private property prices.
I have kept a close eye on the Jervois Garden en-bloc sale.
The main reason being it was asking for $1297 psf. I felt it was actually quite low – meaning it was a good deal – and my gut told me it should be snapped up fast.
In August 2017, it was asking for $68 million. Two months later, Jervois Gardens was sold for $72 million.
This meant that it was sold at $1373 Per Plot Ratio (PPR) – higher than the initial asking price.
What it means that in the near future, the launch price could be easily be more then $2400 psf.
How did I arrive at this number?
A typical calculation is usually as follows:
- Land Price: $1373
- Construction costs: $300-$400. But for SC Global it should be around $500 due to the use of high end materials during construction.
- Add another 20% for other miscellaneous cost (Tax, Marketing, Legal) which is $274.60
- Estimated Break-Even Price: $2147.60 psf
Assuming a 15% profit of $322 psf, this results in a potential selling or new launch price of $2469 psf.
Imagine a new launch of $2469 psf coming up at Jervois area
Let have a look at the newer FREEHOLD development: One Jervois.
Below are the most recent transactions for this development.
Latest Transacted Prices for One Jervois
The current average price is $1613 psf for One Jervois.
This means there is a difference of $856 psf – if we assume that my new launch price calculations of $2469 is close.
Which one will you buy if we are planning to buy a property at Jervois area?
Of course, there are still many other factors involved when we want to consider a property purchase. But this price gap of $856 psf makes it a very serious consideration.
This is something we should take note of and if possible – try to take advantage of.
The Significance of Rio Casa En-bloc Price
About a week ago, I was discussing with a couple regarding Rio Casa en-bloc price of $706 PPR.
And my mind started to wander towards the past when Toa Payoh had a GLS a few years ago. That Toa Payoh plot was sold at $755 PPR. This was about 2 years ago.
Now in 2017, Rio Casa has an en-bloc price of $706 – a mere difference of $49 PPR when compared to Toa Payoh.
One location is at Toa Payoh near Braddell MRT – a highly developed area, with lots of amenities and transport links.
While the Rio Casa location is at Hougang with far less amenities and no key transport links.
It seems that a location in Hougang has started to catch up with the psf pricing in Toa Payoh!
In case you are wondering, the 2015 GLS in Toa Payoh was launched in 2016 as Gem Residences.
Which development will you buy?
If you are the developer in Toa Payoh, what will you do to the price?
If you are a buyer, there are basically 2 choices available.
Choice #1: Buy a Toa Payoh development today in 2017
Choice #2: Buy a Hougang development next year when it is launched at the same price as the Toa Payoh development.
Sheer Number of En-Blocs & Land Sales Will Impact 2018 Prices?
There are many, many more Land Sales that has transacted at very high prices. This is likely to mean that next year, we will be seeing record new launch prices at many areas.
The examples listed below are based on my own calculations. And I can be wrong.
But I believe the developers who bought these plots of land are likely to do their new launches in 2018 at these prices:
- Serangoon North Avenue 1 launching at $1650 psf
- Woodleigh Lane launching at $1850 psf
- Upper Serangoon Road at $1900 psf
Today we are at a particular point in time where all the indicators are so much clearer when compared to recent past years.
This is the juncture that we are able to buy something at a relatively lower land price – hence providing us with some leverage to compete in the future.
We could possibly face an all-time high land price in 5-6 years time. Especially when the developers’ current buying frenzy dies down and prices become stabilized.
Developers need to maintain a land bank. At the same time, all these en-bloc sellers will need to find a new place to stay as well.
Is Now The Time To Take Action?
Please be clear that I am not asking you to rush in to buy something. Everyone has their own unique situation.
What is essential is that today – we are very clear on the potential market movement.
What I believe is: clarity leads to power – especially when making decisions.
But true clarity happens only in hindsight – by then of course, it becomes too late to take any action.
We can only look back and say “If only I did….”
My suggestion is that at the very least, we should open up our minds to discover this:
What are the options available for us today? Will these options change in 2018?
No matter what the market conditions are, what is still essential is that we must discover our future end goals – whether is it upgrading, retirement planning, investment or even staying put.
However to ensure you are making a truly informed decision, we will need to sit down and do a detailed assessment.
Have a question in mind? Feel free to contact me to arrange an appointment – I will be happy to assist you along the way.
Disclaimer: I like to highlight that my analysis in this article is based on the current situation in the past few weeks.
If you are reading this article weeks or months from now – the situation might have changed further. Please contact me to get the latest analysis.
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