Developers to acquire more residential sites

At least 13 housing site tenders are expected to close for the remainder of the year, reported Singapore Business Review, citing a report from Maybank Kim Eng.

These land plots are projected to yield an additional 3,600 dwellings, with most located in the central part of the city-state, said the research house.

“With a resurgent en bloc market providing many options to acquire fresh sites, we believe developers will be more selective and rational in their bids. We believe winners of accretive land deals could be re-rated on the back of Realisable Net Asset Value (RNAV) upgrades,” said its analyst Derrick Heng.

However, investors remain cautious on the residential sector as vacancy level remain high at 8.4 percent as of Q3 2017. Nevertheless, this could fall next year amid fewer completions and the demolition of projects sold en bloc.

Overall, Maybank Kim Eng estimates that around 7,900 private houses will be available next year.

Assuming 3,000 will be redeveloped, this will equal to a net supply of only 4,900 units, down from about 13,200 units per annum that were absorbed by the market over the past five years on average.

“If the historical rate of absorption is maintained, vacancy rates could potentially improve to 6.5 percent by end-2018,” noted Heng.

Even though rents of residential properties remain constrained due to high vacancy level, it could rebound if occupancy rate improves, said Maybank Kim Eng.

“Recall that during the previous en bloc cycle of 2005, vacancy rates fell from 8.4 percent at end-2005 to 6.5 percent by mid-2006 as households displaced in the en bloc process sought out new homes. A corresponding three percent uptick in rents then sparked the start of an upcycle.”

“We think an improving economy and accelerated demolitions from the current en bloc fever could provide further upside to rents in the next two years,” it added.

 

This article was edited by Keshia Faculin.

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