SINGAPORE (Dec 1): The Monetary Authority of Singapore has warned bankers, developers and potential property buyers to tread carefully amid a rapidly growing supply of new residential properties, soft rents, rising interest rates and slower population growth.

See: MAS warns property buyers against weak rental market and interest rate hikes

Private residential property prices have fallen a cumulative 11% since 3Q2013. They increased 0.7% in 3Q2017, but this came after 15 consecutive quarters of declines. Yet, property developers are anticipating a strong recovery in demand in the years ahead, and they have sought to replenish their landbanks through collective sale deals.

MAS says in its latest Financial Stability Review that 20 residential projects totalling about 2,900 units have been sold this year through en bloc transactions. There were only six such deals last year and just one in 2015.

“The redevelopment of these en bloc sites (coupled with supply from Government Land Sales sites) could potentially add another 20,000 new private housing units. This will more than double the number of unsold units currently in the pipeline within the next one to two years,” MAS says in the Financial Stability Review, which was released on Nov 30.

Many analysts and property consultants who spoke to The Edge Singapore say MAS is right to sound the alarm about surging en bloc deals pushing up land prices. In fact, some developers are likely to have to reach for record prices in order to just break even on some of these en bloc deals.

One developer that appears to be making en bloc purchases at prices close to the market value is City Developments. In October, CDL acquired the freehold Amber Park for $906.7 million, or $1,515 psf ppr. The breakeven price for this project would be close to $2,000 psf. Selling prices of new launches on Amber Road are around $2,000 psf.

Another large local developer that appears to be adding to its landbank at reasonable prices is UOL Group.

In January, UOL bought 45 Amber Road, a former nursery, for $156 million, or $1,063 psf ppr. The new development is scheduled to be launched next year.

Most recently in October, UOL teamed up with its sister company, Kheng Leong Co, to acquire Nanak Mansions on Meyer Road for $201 million, or $1,429 psf ppr. It plans to launch the new project in 2019.

What’s next, and what impact will the warning from MAS have on the property market and developers?

To find out, pick up issue 808 of The Edge Singapore (week of Dec 4), which is available on newsstands this week.

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