Tag Archives: Design Build and Sell Scheme

Who has been shopping for government land sales sites?

Posted on 11 Jun 2011 | Comments Off on Who has been shopping for government land sales sites?

In 1H2011, the Ministry of National Development (MND) has announced a strong supply of private housing for sale to meet demand. 17 sites were placed on the confirmed list which can yield about some 8,100 residential units. The reserved list had 13 sites which can yield some 6,200 residential units. The supply of land includes private properties, executive condominiums and DBSS properties.

Moving forward, MND is slated to announce the 2H2011 Government Land Sales (GLS) programme. We expect a significant supply of private housing (including sites for Executive Condominiums & DBSS) to address the strong demand.

In addition, a review of the HDB income ceiling is expected to be completed within six months which may impact the demand for private homes, especially in the mass-market segment.

This paper examines the profile of buyers of GLS sites (by tender) since 2010 to 1H2011 in terms of the amount of housing stock that each is holding and the amount of exposure to each housing type.

Amount of GLS housing stock under each developer

To ascertain the housing stock under each developer, a review of all the winning tenderers for GLS sites launched from 2010 to 1H2011 was made. Notably, some of these GLS sites had been launched by the developers for sale.

Henceforth, three factors were considered to arrive at the numbers. Firstly, the number of units in each project as announced by the developer. Secondly, the number of units unsold by the developers based on URA data release[1]. Thirdly, for sites where project details are not announced or finalised, the estimated number of units by the authorities in the land sales package are used.

For sites where joint ventures are undertaken, an even apportionment method is used. For example, if there are 2 parties in a winning tender, it is assumed that the available unsold supply in that project will be evenly split between the two. The same applies for three to four parties in a joint tender. Whilst the apportionment may be different in the actual situation, it is difficult to ascertain the actual interest in the project due to confidentiality issues in some instances.

Chart 1 depicts the top 10 developers based on the estimated housing stock from the GLS sites acquired[2] where the bulk of its stock are ECs (situated at Segar Road (estimated 570 units) and Choa Chu Kang Drive (estimated 490 units)).. Sim Lian Group Limited tops the chart with the highest available housing supply. The Group also has the highest exposure to mass market private homes. City Development is second in term of overall residential supply

Chart 1: Top 10 Developers’ GLS Housing Stock by Property Type

Amount of GLS Land Capital Exposure under each developer
In addition to the estimated housing stock, a rudimentary review is also undertaken for developers based on the potential capital exposure for the land. In this instance, the capital exposure is based on the quantum of the awarded land tender price[3].

A simplistic approach is adopted for this analysis where the land capital exposure is proportionately reduced when the project is launched and sold progressively. The study had not taken into consideration the circumstance where developers break even after achieving a certain sales target which effectively reduces or remove their risk exposure from the capital expended.

The level of debt taken is not considered as the internal leverage policies differ from developers to developers. Henceforth, the total capital exposure is based on the total tender price from the land awarded.

Similar to the earlier section, sites where joint ventures are undertaken, an even apportionment method is used. The amount of capital exposure will be shared among partners where joint ventures are concerned. The amount may differ from actual situation depending on the terms of agreement.

Chart 2 exhibits the top 10 developers with the greatest GLS residential exposure. Not surprising, Sim Lian Group tops the ranking attributed by the high capital exposure from the recent purchase of three condominium sites which collectively accounted for $825 million in land value. City Development fell to the fifth position as their EC sites had a smaller quantum as compared to some other condominium sites. CapitaLand leapfrogged from the ninth position to the third arising from the purchase of the GLS site at Bishan St 14 at $550.1 million.

Chart 2: Top 10 Developers’ GLS Housing Capital Exposure by Property Type

Outlook for mass market residential homes

Regulatory risks to tame the mass market residential market have increased following the post election government statements. If more cooling measures are implemented coupled with any changes to the current HDB income ceiling, demand for private homes, in particular the mass-market segment will be affected.

We expect a significant new supply of private housing for the 2H2011 GLS programme to meet demand. We may expect more new ECs sites to be released arising from the strong take-up for recent EC projects such as Esparina Residences, Prive and The Canopy.

Developers with sizeable mass market homes in their land bank are likely to be more selective. Some may choose to off load their existing land bank before acquiring new sites creating a window of opportunity for others.

In the absence of any new cooling measures, residential sales are expected to remain strong as developers are expected to launch new projects in the coming few months. In April, developers sold 1,788 residential units, the highest monthly volume since November 2010.

[1] Table 1 in appendix 1 depicts the list of GLS sites sold to developers, its subsequent project name, the number of units sold and the remaining stock.
[2] Actual Numbers and Further details in Appendix 2
[3] Actual Numbers and Further details in Appendix 3

Source: Knight Frank Research – 1 Jun 2011

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Little short-term impact from public housing moves

Posted on 3 Jun 2011 | Comments Off on Little short-term impact from public housing moves

It has not been a week since National Development Minister Khaw Boon Wan made his move to make housing and the Housing and Development Board (HDB) popular again but already some private property investors are feeling anxious.

Can their nerves hold out for a whole month? The irony is that Mr Khaw has not even begun to reveal his thoughts on the private housing sector.

Last Friday, Mr Khaw announced that the HDB would roll out 4,000 new flats -the largest supply ever in a single launch. Supply for this year would also be ramped up from 22,000 to 25,000 units with the new pace of building sustained for next year.

Two days later, Mr Khaw said Singapore would need to build “tens of thousands” of subsidised rental flats to meet the demand – the sooner, the better.

In another blog post a day later, he said home buyers can expect HDB to offer more new flats in mature estates from next year.

The big question is: What possible negative impact will these moves have on the HDB resale and the private housing market? In reality, over the short term, not much.

For one, all of the new ramped-up supply will not enter the HDB resale market for the next seven to nine years at least, assuming a construction period of two to three years and a minimum five-year occupation period. An oversupply problem can only happen then. Between now and then, anything can happen to make this discussion redundant.

In the immediate term, it will take buyers away from the HDB resale market. But building statistics show that the problem with the resale market presently is one of supply rather than demand. The fresh supply of resale flats in the current market is very thin, most probably at its historical low.

At the same time, the usual numbers upgrading to private housing are staying put because private prices are not affordable. And for reasons of their own, some private property owners are even downgrading to HDB resale flats.

Therefore, any easing in demand for resale flats actually helps alleviate the problem of a shortage of supply. Do not expect resale prices to drop.

As for a possible drop in rental demand, those who qualify for rental flats probably cannot afford market rates anyway and were never in the market in the first place. What is not there cannot be taken away.

More new flats in mature estates will draw away demand from newer estates. Flat prices in the newer estates need to be suitably lower or cheaper to compensate for location and fewer amenities. There will always be trade-offs.

There will be those who will opt for cheaper or bigger flats in newer estates. Alternatively, a longer minimum occupation period, say, 10 years instead of the current five, for flats in mature estates can discourage applicants who are mainly interested in the capital appreciation potential.

If HDB resale flat prices are kept stable while private housing prices continue to climb, this may affect the pool of upgraders. But really, how big is this group today?

Which group is driving the private housing buying today – investors or upgraders?

Have income levels of upgraders risen in line with or higher than private property prices for them to afford one? Are true upgraders really interested in buying one or two-bedders and shoebox units? The reason for the robust demand for Design, Build and Sell Scheme (DBSS) flats and Executive Condos – which surprised many – is because genuine owner-occupiers want them affordable as well as liveable.

If you agree that the bulk of buyers are investors, are they your conventional types? Normal investors would have reacted to the ramped-up supply and shied away from buying. Even investors themselves tell me that they are worried but continue to purchase anyway.

The market is liquidity-driven and will continue to be so. Nothing has changed – yet. For the private market, I expect Mr Khaw to be consistent and come up with moves to help people fulfil their aspirations. Interestingly, he has left HDB flat prices alone, for now at least. That speaks volumes and may indicate how he may tackle issues in the private housing sector.

Source : By Colin Tan – head, research & consultancy at Chesterton Suntec International

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