The Great Singapore Sale (GSS) has been an annual event in the little red dot since 1994. However, from 2024 the Singapore Retailers Association will not organize any activity.
Don’t be disappointed. Great Singapore Sale is still on. In fact, it is everywhere around us though appears in different forms.
Singapore inflation under control?
A month ago, a new tranche of CDC vouchers was ready for collection.
Suddenly, happy shoppers packed supermarkets islandwide. What is more exciting than “buying with other people’s money” and “with no money down”?
Don’t bother about Great Singapore Sale. Because GSS promises goods on discount. But CDC vouchers guarantee things are free. This is even more cost-efficient than making a shopping trip across the Johor-Singapore Causeway.
On selected days of the week, wheelchair-bound elderly in pajamas were brought out of the home by their children and domestic helpers. After the shopping spree, they were wheeled to the cashier to earn extra few percentages of discount with their Pioneer or Merdeka Generation card.
Wait. We thought our government has successfully put inflation under control? Didn’t MAS tell us that Singapore’s core inflation slowed more than expected in June, reaching a two-year low at 2.9 percent?
Unfortunately, core inflation is calculated quarter-on-quarter. For instance, the price of a pack of rice has gone up 50 percent from $10 to $15 over the past two years. It may be selling at $15.5 last quarter – an increment of only 3.3 percent. But for the consumers, the price from $10 to $15.5 is still a big jump.
In other words, our government has managed to get the inflation rate, but not inflation, under control.
Nonetheless, we should be grateful that CDC vouchers help to defray rising cost of living against higher GST and inflation. In comparison, after the International Blue Screen Day, CrowdStrike compensated vendors for their repair work around the clock with a $10 Uber Eats voucher. Unfortunately, Uber flagged it as fraud because of the unusually high usage rate.
At least our CDC vouchers work.
1H 2024 GLS Great Singapore Sale
Currently, no bargain in Singapore can beat developers’ value-for-money buys at Government Land Sales (GLS). There were a handful of cash-rich bargain hunters fishing at the bottom for good buys.
1) River Valley sites
On July 18, Allgreen won Zion Road (Parcel B) with a price 20.8 percent higher than the reserved price. However, $1,304 psf ppr (per plot ratio) is 14 percent lower than a smaller site nearby at Irwell Bank Road sold to CDL at $1,517 psf ppr in January 2020.
In June, Wing Tai acquired the River Valley Green (Parcel A) site next to Great World MRT station at $1,325 psf ppr. Again, it was 12.7 percent lower than the Irwell Bank Road site.
2) Upper Thomson Road sites
On June 19, there was no bid submitted for Upper Thomson Road (Parcel A). The residential site incorporating service apartments marked the first time in over 20 years that a GLS site had no taker.
In April, GuocoLand-Hong Leong joint venture bought another Upper Thomson Road site at $905 psf ppr. The price was a markdown of 25 percent lower from the Lentor Central site sold at $1,206 psf ppr in July 2021.
3) Holland site
In May, the highest bid of Holland Drive site was $1,285 psf ppr submitted by a tie-up of CapitaLand and UOL. It was a steal with 32 percent lower than the adjacent One Holland Village mixed development site bought by Far East six years ago in 2018.
In a recent interview with The Business Times, CapitaLand said they are “still very active and optimistic on the (Singapore) market.” Yet for a long time CapitaLand only joined hands with UOL to bid for this Holland Drive site. On the other hand, the developer has been actively buying and developing new projects in China, Vietnam and Japan. Indeed, CapitaLand’s biggest market is China with $4 billion assets in the country.
4) Zion Road plot
In April, Zion Road (Parcel A) for long-stay serviced apartments was awarded to sole bidder CDL-Mitsui Fudosan joint venture at $1,202 psf ppr. With such a low price, the market thought the government would reject it and withdraw the site. After all, it was 26 percent lower than the Irwell Bank Road site awarded in January 2020.
Nonetheless, URA accepted the low bid.
5) Marina South site
On the contrary, the authority rejected the sole bid of $984 psf ppr submitted by GuocoLand, Intrepid and TID for the residential cum commercial site at Marina Gardens Crescent. Last July Kingsford was the highest among four bids and paid almost 30 percent higher at $1,403 psf ppr for nearby Marina Gardens Lane site.
6) Orchard Boulevard site
In February, UOL and Singapore Land won an Orchard Boulevard site at $1,617 psf ppr. It was a whopping 32 percent discount from the nearby Cuscaden Reserve site bought at $2,377 psf ppr six years ago.
“The awarded bid price is 32% less than the $2,377 psf ppr paid for the nearby Cuscaden Road GLS site six years ago … The site has been developed into the 192-unit luxury project Cuscaden Reserve.
Cuscaden Reserve’s breakeven price was around $3,200 psf. In 2019, the launch price was between $3,300 to $3,700 psf. Although it was completed in 2022, as of today, the project only managed to sell 12 out of 192 units. In other words, 94 percent of total units remain unsold.
After the award of the 32 percent cheaper plot, developers of Cuscaden Reserve had to face the reality. It recently started marketing the unsold units at a loss of $2,9xx psf.
– “Just sold at record high!”, PropertySoul.com
GLS Great Singapore Sale – willing seller but unwilling buyers
In the first half of 2024, Singapore’s new home sales volume (1,889 units) is the lowest in 20 years. Property investors have long disappeared while home buyers are sitting on the fence.
Poor new launch results and mounting unsold units continue to afflict the private home market. Under the threat of 40 percent ABSD and high borrowing cost, developers have turned cautious about acquiring new sites.
This year URA has released 11 new plots for tender so far. With lukewarm response from developers, six of them received only one bid. In contrast, for the whole year of 2021, out of seven residential GLS, three plots attracted ten bids from developers. Another two sites received 15 and nine bids respectively.
The current GLS scene is interesting. Developers have no confidence to launch new projects and no guts to bid for new sites. In other words, the buyers are not interested to buy but the seller is very keen to sell. Despite getting few and low bids from the buyers time and again, the seller never loses heart but continues to inject new supply to the market.
On June 25, the government announced the 2H2024 GLS Programme with 10 sites on the confirmed list and nine on the reserve list. Together, these sites could yield about 8,140 private residential units. GLS Great Singapore Sale is on again.
In two years, URA released a total of six new sites in Lentor (with each site awarded at lower price) that can potentially build 3,443 new units. It is not strong demand but strong supply and obviously oversupply. Imagine the number of owners and landlords selling and leasing at any single point of time in the future.
Putting the brakes on residential collective sale market
The en bloc market has slowed down for quite some time. In 2023, residential collective deals were down 69 percent to $574.3 million. Similarly, mixed-use and commercial deals also slipped 15 percent to $1.53 billion.
In the first half of this year, only eight out of 32 properties put on the en bloc market were successful. Also, most were commercial projects. Actually, the residential collective sale market has not seen any deal closed since last May.
For one thing, URA’s long list of GLS sites poses strong competition to collective sale. GLS sites sold with attractive prices are great bargains. So why the hassle of dealing with en bloc hopefuls who have difficulties getting consensus, yet reluctant to lower their price expectation?
This resulted in en bloc project owners trying multiple times, slashing asking prices up to 30 percent, but still end up with no bid from any developer.
This month Thomson View launched for sale for the 6th time after failing in 2013, 2018, 2022 (twice) and this April. In May, Pine Grove lowered the reserve price from $1.95 billion to $1.78 billion. Again, the tender ended with no bid. This is already the owners’ 5th attempt.
Elias Green launched a failed collective sale in 2018 at $780 million failed. Now owners raised the price tag 19 percent higher to $928 million. It is likely that owners may need to try the 3rd or 4th time.
The last en bloc wave was 2017 before the mid-2018 additional property cooling measures. The previous en bloc craze was 2007 before the global financial crisis. If a collective sale cycle is ten years, perhaps residential en bloc hopefuls can wait till 2027 or 2018 to try again?
GLS Great Singapore Sale ≠ Private home Great Singapore Sale
Under the Great Singapore Sale of GLS, will developers pass on the savings in land cost to homebuyers for the new projects?
For one thing, these days developers are facing high interest rates and building costs which squeeze their profit margins. Developers are not charity. Selling homes is a commercial activity. In fact, when margins were high in the 1990s and 2000s, did any developer ever forgo their profit and offer big discounts to buyers?
“Before 2013, developers enjoyed a comfortable net margin of 20 to 35 percent. Ater 2013, it was down to 10 to 13 percent. Now it’s probably a single digit percentage!
… report by Cushman & Wakefield mentioned that developers are paying an average of 29 percent more for residential sites over comparable sites sold in the past 5 years. In the 2nd half of 2016, developers were paying only 13 percent on average in premiums.
In 2009, developers’ margin stands at an average of 35.7 percent. It drops to 11.8 percent in 2014 and 4 percent for ECs.
– “The showflat in my dreams”, PropertySoul.com
Besides, market mechanisms influence prices of private residential homes with many uncontrollable factors, including population growth, supply and demand, local and global economy.
So when can we expect discounts from developers?
“… they forgot the fact that developers were selling at the highest possible price to early buyers at that moment. After they made their money, they could lower prices at any time, especially when it is time to clear unsold units approaching the 5-year ABSD deadline or a financial crisis.”
The CEO who dares to tell the truth
Jamie Dimon, long-term head of the US largest bank JPMorgan Chase, told The Wall Street Journal that he is less optimistic about a soft landing than Wall Street. Factors that keep inflation higher for longer include the green economy, the remilitarization of the world, fiscal deficits and geopolitics.
“I’m a little more worried it may not be so soft and inflation may not quite go away as people expect. I’m not talking about this year – I’m talking about 2025 or 2026 … It looks a little bit like the 70s to me. Things looked pretty rosy in 1972. They were not rosy in 1973. Don’t get lulled into a false sense of security.”
He also said this in January’s CNBC interview, “I think it’s a mistake to assume that everything’s hunky-dory. When stock markets are up, it’s kind of like this little drug we all feel like it’s just great. But remember, we’ve had so much fiscal monetary stimulation, so I’m a little more on the cautious side.”
What’s next?
For now, the economy is shielded by the US election. But no matter who wins in November, the new government still has to face up to the large fiscal deficit.
Whether there will be runaway inflation or economic recession in 2025 and 2026 nobody knows. But market signals are pointing to a defensive strategy. I try to recall what saved me from falling flat in the previous financial crises. For the next few years, liquidation will definitely be the key.
“We always hope for the best but prepare for the worst. Just like inflation and stagflation, there is nothing much we can do with a recession except to be prepared for it.
A financial crisis impacts every single one of us indiscriminately. However, every economic downturn or recession tends to punish much more heavily those who are financially weak or ill-prepared for the unexpected.
– “Be prepared for post-Covid recession“, PropertySoul.com
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Great and detail information as always.
Thank you for reading my blog post!
“ new home sales volume (1,889 units) is the lowest in 20 years.” – if US enters into recession early 2025, would price come down..??
No one can predict when or what will happen in the future. But we can study past cycles and monitor the trends to minimise our loss in the next crisis.