Investment opportunities in the market recovery

By EdgeProp Singapore
/ EdgeProp |
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Despite the upturn in the residential market this year, prices of high-end properties are still looking “quite attractive”, with some at levels comparable to those of properties in the city fringe, says Alice Tan, director and head of consultancy and research at Knight Frank, who thinks they are “gems”.
“If you are looking for new private homes, look for sites where developers got the land cheap and not those that were bought at a high price,” she says. “Keep a lookout for properties in suburban areas where developers bought at a good price.”
From left: Boon, who chaired the panel discussion; Cheong, Knight Frank’s Tan and FundPlaces’ Tan.
One such project is in Tampines, at a site bought by City Developments Ltd, she says. In April, CDL paid $370.1 million for the 233,767 sq ft site, which translates into $565 psf ppr.
The other is at West Coast Vale, where China Construction paid $292 million ($592 psf ppr) for a 176,295 sq ft site in February.
“I think that’s a good project to watch, because it is close to Jurong Lake District. This is also China Construction’s first development project and they will want to do their best,” says Tan.
She was speaking as a panellist at the Edge- Prop Breakfast Talk: Decoding the Property Market Recovery event on Nov 25. Boaz Boon, founder and principal of THRED and director of Vestasia, chaired the discussion, which was also joined by Alan Cheong, head of research and consultancy at Savills Singapore, and Tan Kok Keong, CEO of REMS Advisors and co-founder of FundPlaces.
FundPlaces’ Tan says he would keep a lookout for residential developments located at junctions of MRT stations.
Cheong’s tip is that some upcoming project launches on the recent government land sales (GLS) and collective sale sites will see prices approaching those of older freehold terraced houses, and are thus likely to drive up prices of the latter.
On the residential market recovery, Knight Frank’s Tan notes that it has come earlier and stronger than expected. “Even developers are caught by surprise, and the upturn is very much driven by factors like GLS and en bloc sales, which have achieved record prices,” she says.
The improving economy is also reflected in the property trend. “It’s a good [time] to start taking positions,” adds Tan.
The EdgeProp breakfast talk on Nov 25 drew a crowd of 300.
There is a growing “wealth creation” effect from the economy and the en bloc craze, says FundPlaces’ Tan. “Just imagine this — people have been collecting $2 million to $3 million from the en bloc sales. This will have a big effect on property prices.”
About 3,000 households will be displaced from the en bloc sites that have already been sold and that will add an estimated 12,000 units to the supply of private homes.
Expanding on this point, Savills’ Cheong says that when fully developed, many of the projects at en bloc sites will see the number of their units multiplied from the existing number, which could lead to traffic congestion.
To address this problem, he says, “the government fired a shot across the bow when it imposed a new rule that now requires property developers of newly acquired collective-sale sites to obtain the Pre-Application Feasibility Study”.
On Nov 13, URA and LTA mandated the new traffic feasibility study, which is to be submitted to the Land Transport Authority for approval before an Outline Application or Development Application is submitted to URA.
“If there is no way to rectify or mitigate the traffic congestion, the number of units will [be reduced],” Cheong explains. Therefore, the measure also acts as a check on the supply of units. “If it doesn’t work out, there are many other [measures the authorities] can impose to slow down collective sales,” he adds.
People are wary of more measures to curb prices and en bloc activities, notes Knight Frank’s Tan. Nonetheless, in the long term, the government would want to see a stable rise in prices and asset values, she adds.
This article appeared in EdgeProp Pullout, Issue 808 (Dec 4, 2017)

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