Zooming in on small, prime GLS sites

By Lee Nai Jia / EdgeProp | September 8, 2017 8:00 PM SGT
In 1H2017, activity in the residential market continued to pick up, with sales volume returning to levels prior to the introduction of the total debt servicing ratio framework in 2Q2013. The fine-tuning of the seller’s stamp duty in February 2017 catalysed the improvement in sentiment, which was further reinforced by the successful collective sales and aggressive land bids. With more buyers on the sidelines entering the market and the good take-up rates of recent launches of well-located projects, the market may be bottoming out.
The economic outlook for Singapore is more optimistic, owing to a recovery in the electronics sector. However, the economic fundamentals have remained largely unchanged from last year and the global economic environment remains uncertain. Interest rates are likely to normalise over the next few years. Therefore, any increase in residential property prices is likely to be moderated.
Land parcels in the 1H2017 Government Land Sales programme saw aggressive bids from many developers. There were 24 bids for the site on Toh Tuck Road, which set the tone, and this was followed by bids for the sites on Stirling Road, Upper Serangoon, Woodleigh and Serangoon North. The sales momentum of the 1H2017 GLS programme is likely to spill over to the 2H2017 programme.
Why smaller sites are attractive
Developers do not have to pay additional buyer’s stamp duty on the purchase of land if they complete and sell all their units within five years of the acquisition date. However, developers who fail to do so, even if they are left with just one unsold unit, will incur a 15% ABSD for land purchased on or after Jan 12, 2013. A 5% interest rate per annum will also be levied. Therefore, some developers may choose to focus on smaller residential projects as it is easier to sell all the units within the five-year period, which helps to reduce the risk of incurring ABSD.
Smaller projects also offer new developers an entry point into the market. In addition, it takes less time for developers of smaller projects to break even. Overall, smaller projects mean less risk to developers, given the uncertain external environment.
For buyers, a smaller project means more exclusivity and fewer residents sharing the common facilities. Rental investors should also note that larger developments usually face pressure to lease within the first year of completion.
Identifying the best sites
Edmund Tie & Co Research has studied the...