By any measure, the April-May period was eventful – from the sovereign debt crisis of Greece to the further tightening of Collective Sales rules and to the bumper harvest of 2,207 new home units sold in April (in order of occurrence).

However, buyers in Singapore were mostly oblivious to the negative news and rallied behind the opening of the Marina Bay Sands (MBS) Integrated Resort and the jubilation translated into more new home units sold in April, pushing that month’s new home sales volume to 2,207 units and making it the second-highest monthly sales record since the authority started tracking new home sales record on a monthly basis.

However, hopes and sentiments aside, the cumulative effect of the series of state interventions in the overheated market may finally rein in buying activities, now that older apartments have lost their allure to investors who hoped for quick gains from collective sales. (See TABLE [A1] Collective Sales Rule – Introduction of 2-Year ‘Restriction Period’)

The fact that the latest supply-side measure was announced a day before the official opening of the second casino hinted strongly at the government’s intent to stem any speculative fervour that may be intensified by the excitement of the second casino amidst a stimulus-fuelled recovery.

Below is a summary of the slew of anti-speculation measures imposed by the authority since late last year in bid to restore sanity into the property market.

(a) Demand-side measures in chronicle order

• In September 2009, Withdrawal of Interest Absorption Scheme & Interest Only Loan

• In November 2009, MAS tightening of credit risk management and capital requirement

• In February 2010, government introduced ‘Seller’s Stamp Duty’

• In March 2010, extended Minimum Occupation Period (MOP) for HDB resale flats from 1 year – 2.5 years to 3-year MOP across the board

(b) Supply-side measures in chronicle order

• 26 April 2010, further tightening of Collective Sales rules – the most significant of all the changes is the ‘Two-year Restriction Period’.

• On 23 May 2010, the government announced the availability of 31 land sites for Government Land Sale (GLS) Program for the second half of 2010

[A1] COLLECTIVE SALES RULE – INTRODUCTION OF 2-YEAR ‘RESTRICTION PERIOD’

With immediate effect from 26 April 2010, there will be a 2-year ‘restriction period’ for strata developments where there has been a failed en bloc sale attempt, starting from the date of the initial failed attempt, e.g. when the Collective Sale Agreement (CSA) has expired.

• MORE STRINGENT REQUIREMENTS FOR RE-TRY

• The first re-try to convene an Extraordinary General Meeting (EOGM) to reappoint a Sale Committee (SC) will need to meet a higher 50% requisition threshold (by share value or total number of owners); 

• Any subsequent attempts to convene EOGMs within this period will need to meet an 80% requisition level.

At the end of the two-year “restriction period”, the requisition level for an EOGM to appoint an SC will revert to the usual level of 20% by share value or 25% of the total number of owners.  If there is another failed attempt, it will start another two-year “restriction period”.

• IMMEDIATE IMPACT OF THE FURTHER TIGHTENING OF COLLECTIVE SALES RULES

The direct impact of the above measure is the drastic drop in transactions of old apartments that are considered to have ‘collective sale’ potential, e.g. units ready for occupation dating back to 1995 and before. See TABLE [A1] below for analysis.

TABLE [A1] – COMPARISON OF SALES VOLUME OF OLD APARTMENTS WITH ‘COLLECTIVE SALE’ POTENTIAL ON THE FIRST 11 DAY OF EACH MONTH IN 2010

Source: Data gleaned from URA website & analysed by Sam Gian

Due to the time lag in caveat information, only the first 11 days of resale transaction records were available for analysis. However, at a glance, it is not difficult to spot the significant drop in the resale volume of older apartment units as per TABLE [A1] above.

Only 58 old apartment units were transacted in early May 2010, compared with 103 units in April and 148 units in February 2010. In percentage term, the early May figure was a 43.7% drop in the resale volume of older apartments when compared with April 2010.

In terms of overall private resale volume, the first 11 days of May 2010 yielded only 295 resale transactions of condos/apartments, which is a massive 41.4% drop from the 503 units sold in the same duration in April 2010. (Refer to TABLE [A1] )

• MID-TERM IMPACT OF THE CHANGES IN ‘COLLECTIVE SALES’ RULES

Firstly, in view of the threat of a double-dip recession in the European zone and the on-going austerity drive in the United States (and the passing of a bill on 22 May 2010 to restrict Wall Street’s excesses), it is likely that investors will be more cautious and restrained in the months to come.

Secondly, the baseline price support for ‘middle-aged’ apartments and condos will be depressed due to the drop in demand for (and therefore prices of) older apartments deemed to have ‘collective sale potential’. Already, there are telltale signs of 4-page long weekend classified advertisements for private property listings at Districts 9-10 columns and Districts 15-16 columns respectively.

• OVER THE HORIZON – CHALLENGES FOR PRIVATE HOME RENTS

On 23 May 2010, the URA released the largest amount of state land for private homes in response to surging demand. A total of 18 residential or residential/commercial sites have been put on the confirmed list for public tender in the second half of the year, and 13 sites for residential use will be put on the reserve list.

With the generous GLS program which aims to yield another 13,905 new home units, over and above the 30,000 newly completed new home units (mostly in prime districts) that are gradually coming on-stream in the next few months, there may be a supply glut in the near future. That will directly impact private home rents which are already constrained by keen competition among landlords. Brand new quality condo units such as those at One-North Residences, Metropolitan condo, City Square Residences are collecting moderate rents in the first quarter of the year. (See TABLE [B3] at page 16 for details and TABLE [B3-c] from pages 20 to 26 for detailed statistics on Q1 2010 private home rents across the island).  

With the on-going austerity drive in the US and EU, there is nothing exciting on the mid-term horizon for the landlords. [More analyses at [B3] PRIVATE HOME RENT segment at page 16 of this report; and there is a case study on RENTAL YIELD (at page 16) using the most recent median sale price and Q1 median rent at Metropolitan condo.]

However, for argument sake, the further tightening of the Collective Sales rules may have an unintended effect of boosting the new home segment now that expectation of windfall profits from collective sales in the next two to three years is all but evaporated.

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