Singapore sellers: time to adjust your enbloc sale ambition

Singapore’s collective sale market continues to be hindered by a mismatch in buyer-seller price expectations. The only non-landed residential collective sale in 2024 succeeded after five attempts and at a 15% discount off the original asking price. In the current sluggish market conditions, it is crucial for homeowners to set realistic price expectations. 

The Urban Redevelopment Authority’s (URA) rules on harmonizing the floor area definitions (effective 1 June 2023) have reduced housing developers’ saleable area by approximately 4 to 5%, shrinking revenue potential.

Meanwhile, development costs have surged. Post COVID-19, construction costs rose by 60 to 70%. The sharp interest rate spike since late 2022 has also increased developers’ borrowing costs. Additionally, since 16 December 2021, the Additional Buyer’s Stamp Duty (ABSD) for developers has risen from 25 to 35%, on top of the existing 5% non-remittable ABSD. Like other cost components, developers’ tax liability has expanded, albeit with the possibility of a remission if they complete and sell all units within 5 years from the acquisition date. Adding to these cost pressures, Budget 2023 introduced a 2 percent increase in Marginal BSD for residential properties exceeding S$3 million, effective from 15 February 2023. This further raised upfront acquisition costs for developers, particularly for collective sale sites.

Compressed revenue and heightened development costs inevitably depress residual land values. To better manage pricing expectations, sellers of collective sale sites should be cognizant of these challenges that developers face. 

To replenish their land banks, developers can either acquire plots through the collective sale market or bid for GLS sites. The latter is straightforward, given it’s a greenfield site, the associated tender conditions are transparent, and the need to overcome legal hurdles inherent in the collective sale process is eliminated. Developers opting for the sale of GLS sites avoid the risk of objections or High Court applications that could cause suspension and further delay the land acquisition outcome.

In response to the resilient housing demand, the Singapore government ramped up the Confirmed List of private housing sites in the GLS programme for 2023 and 2024. In 2023, there were an estimated 9,250 units on the Confirmed List, the highest supply in a decade. The record was immediately broken with the injection of another 10,490 units in 2024. The ramping up of GLS sites, with their more straightforward land acquisition process, sidelines the collective sale market. For collective sale sites to attract developers, it is essential for sellers to price themselves competitively.

There is growing unmet demand in the market. Based on the URA data, the average annual supply of non-landed private housing (excluding executive condominiums) from 2020 to 2024 is 9,556 units, lower than the 10-year average of 13,915 from 2010 to 2019. Combined with homebuyers’ decision to hold off on purchases due to the high-interest rate environment that began in late 2022, unsatiated demand for private housing remains, likely intensifying developers’ appetite for new projects.

It is time to review your asking price.