We are now approaching the end of 2017. This year has been a very interesting year in the property market for the past 10 years.
2017 has been the year of en-blocs and record Government Land Sales (GLS).
The Straits Times has compiled one in this article below: “Collective Sale Fever – How Much Longer Will It Last?”
Everywhere now people are talking about “en-bloc potential”. This is something we have not heard for a long time.
The last hottest time was back 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.
Now in 2017, it seems that the impact from the cooling measures is gone. We observe 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.
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.
We have kept a close eye on the Jervois Garden en-bloc sale.
The main reason being it was asking for $1297 psf. We felt it was actually quite low – meaning it was a good deal – we 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 we arrive at this number?
A typical calculation is usually as follows:
Assuming a 15% profit of $322 psf, this results in a potential selling or new launch price of $2469 psf.
Let have a look at the newer FREEHOLD development: One Jervois.
Below are the most recent transactions for this development.
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.
About a week ago, we was discussing with a couple regarding Rio Casa en-bloc price of $706 PPR.
And we 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.
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.
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 we can be wrong.
But we believe the developers who bought these plots of land are likely to do their new launches in 2018 at these prices:
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.
Please be clear that we 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 we 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.
Our 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, do give us a call so we can do a detailed assessment.
“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 us to get the latest analysis.