Amber Park, Royalville en bloc sales pushing up prices in vicinity.
RESALE prices of existing condos and private apartments in District 15, which includes the Katong and Amber Road areas, as well as District 10 have risen significantly following news of the Amber Park and Royalville collective sales last year.
Edmund Tie & Co's caveats analysis of URA Realis data also showed that in some instances, prices of larger units in the resale market have seen a bigger price hike compared with smaller units.
Analysts say resale prices of existing homes are being driven up by strong demand for replacement homes by cash-flush individuals and families who have sold their homes through collective sales in the nearby areas, among other factors.
ET & Co's senior director and head of research, Lee Nai Jia, said: "Based on feedback from agents, those who sold their homes through collective sales are forming the bulk of demand in the secondary market, especially if they need a home that they can move into immediately."
Another factor causing resale prices to go up is that most sellers have upped their asking prices - benchmarking them against bullish land bids in the vicinity, Dr Lee added.
Putting things in perspective, JLL senior consultant Karamjit Singh said: "The Amber Park and Royalville collective sales were instrumental in an upward re-rating of land values in their respective areas. So what we are seeing is a trend of resale prices playing catch-up with anticipated prices at which new homes are going to be marketed in these locations."
The collective sale of Royalville, near Sixth Avenue MRT Station, was awarded at S$1,960 per square foot per plot ratio (psf ppr). Amber Park was awarded at S$1,515 psf ppr. When the deals were announced, they set a new high in unit land prices for their respective locales in the current en bloc cycle.
Agents said another factor sending resale prices up is that some owners have withdrawn their listings in anticipation of a collective sale. This has shrunk the pool of available units.
ET & Co's caveats analysis found that unit psf resale prices for 42 freehold projects in District 10 have risen by 7 per cent on average since the award of Royalville's collective sale was announced on Dec 1.
In District 15, resale prices of 46 freehold projects have risen 5 per cent on average following the announcement of the Amber Park sale award on Oct 4.
The property consulting group studied resale transactions in the 2017-2018 period and compared deals before and after the two collective sales; it excluded outliers.
For District 15, it compared psf prices for transactions from April 1 to Oct 3 last year against sales from Oct 4, 2017 to March 20, 2018.
ET & Co used April 1, 2017 as the start date of the "pre-Amber Park" period instead of Jan 1, 2017 to factor in the fillip to private home prices from the launch of Seaside Residences last April.
For District 10, the property consulting group compared psf prices for transactions from Jan 1 to Nov 30, 2017 against sales from Dec 1, 2017 to March 20, 2018.
The firm also did comparisons to control for unit sizes and floor levels. This showed that for resale deals on levels 1 to 5 in District 15 among projects of various tenures, on average prices of smaller units (700 to 1,000 sq ft) rose 2 per cent following Amber Park's award.
Prices of units of 1,000 to 1,500 sq ft and 1,500 to 2,000 sq ft increased 7 per cent and 6 per cent respectively.
In District 10 too, it was the bigger units that fared better, following Royalville's en bloc sale.
Among units on levels 1 to 5, the average price for units of 1,000 to 1,500 sq ft went up by 10 per cent and that for units of 1,500 to 2,000 sq ft rose 6 per cent. In contrast, prices of 700-1,000 sq ft units fell 2 per cent.
Mr Singh of JLL said: "I am not surprised by the fact that bigger resale units are seeing a more pronounced price increase. As a result of collective sales, the market is losing bigger apartments because the newer generation of apartments tends to be much smaller than those built, say, 30 to 40 years ago."
Families looking for a replacement home following an en bloc sale, would naturally prefer a bigger unit, said Mr Singh, who is also CEO of Showsuite, a new homes portal.
ET & Co's study also found that developments at some stage of en bloc sale are also enjoying higher premiums. For example, transacted prices at Mandarin Gardens for all unit sizes and levels have gone up by an average of 12 per cent since the Amber Park deal.
Dr Lee of ET & Co said: "There are some owners who may not want to wait or face the uncertainty of whether the collective sale can go through. Hence they are willing to part with their units provided they get a premium to compensate them for forgoing a shot at an en bloc sale."
JLL's national director for research and consultancy Ong Teck Hui told The Business Times that high asking prices by many owners of existing homes has led to some buyers retreating, resulting in a drop in resale transactions of private homes in the first quarter.
Dr Lee expects the trend of rising resale prices to continue as the demand for homes will be supported by households seeking replacement homes when they sell their existing properties through en bloc sales. "The overall optimistic mood in the property market will also help to support the trend."
Market watchers told BT that a potential implication of an upward spiral in resale prices is that owners in projects that are going for en bloc sale will cite the rising cost of replacement homes to set higher reserve prices.
However, developers will pick only sites that are reasonably priced and not too big following their recent land-buying binge and given the already-strong pipeline of 140-150 collective sales at various stages.
Adapted from: The Business Times, 30 March 2018