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En bloc millionaires to drive market

If just two-thirds buy homes, they may spend $6b: Savills

(SINGAPORE) Around 5,700 homes were sold through collective sales in the first half of this year and the home owners who will have to look for replacement homes are expected to drive the property market.

A report by Savills Singapore estimates that if just two-thirds of those displaced by collective sales – about 3,900 of them – choose to buy replacement homes, their collective kitty could total $6 billion, representing the total payout to these en bloc millionaires.

Savills director (marketing and business development) Ku Swee Yong does not expect all $6 billion to be spent though. ‘About $4 billion could be channelled into new property acquisitions,’ he reckons.

And developments in the fringe and suburban areas such as Bukit Timah, Upper Bukit Timah, Clementi, Novena/ Thomson, and Upper East Coast will be their targets.

Savills projects that only two-thirds of the en bloc millionaires will be in the market for a new home because it believes many already own second homes, if not more.

Savills’ analysis reveals that of the 2,795 home owners affected by the collective sales in Q2 2007, up to 2,159 owned homes in the prime districts of District 9, 10 and 11.

And Mr Ku reckons that half of these home owners already own at least one other home.

Interestingly, Mr Ku believes that only 20 per cent of the displaced home owners from homes outside the prime districts have second homes. But the number of en bloc millionaires could taper off if collective sales continue to fall. In Q3 2007, only 13 en bloc deals worth about $1.1 billion were done, down from $6.4 billion for 45 sites in the previous quarter.

Yet, en bloc millionaires are also expected to support the already buoyant residential market.

Savills says that assuming that 30 per cent of owners (or their tenants) affected by collective sales require rental accommodation, 974 units would have been needed to meet the demand over the last nine months. Savills added that the situation is expected to worsen in 2008, with some 800 units needed per quarter to accommodate displaced owners (or their tenants).

Savills does expect most demand for rental units to come from an increase in the number of foreigners working here.

Its report highlighted that foreigners working here grew by 14.9 per cent, from 875,500 last year to just over one million thus far, representing the highest year-on-year growth in the last 10 years. ‘With a low unemployment rate and high job creation rate, the number of foreigners working in Singapore is expected to grow sharply,’ it added.

Its analysis of data reveals that average rents of all non-landed residential properties in the prime districts rose by 13 per cent to $3.70 per square foot (psf) a month between Q2 and Q3 in 2007, while high-end residential rents climbed even higher to $6 psf a month.

Savills also noted that rents in Districts 8 and 12, on the fringe of the city, have risen by 35 and 23 per cent respectively to about $1.90 psf a month.


Source: Business Times 21 Nov 07


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