Rebound in the mid and high end property segment

UOB produced a note with their views on the mid and high end segment of the property market picking up. Main findings from their report reproduced below.


  • Foresee nascent recovery spreading to the mid-range and high-end segments in the next wave
  • Driven by replacement demand from enblocers and a pick-up homebuying interest from foreigners
  • Expect Singapore property prices to rise by 5-10% next year after bottoming out this year.

What’s new?

  • Enbloc fever picking up. Still in the early cycle of recovery.
  • Historically, spikes in enbloc sales have preceded property sector price recovery. This happened in the past cycles in 2007 and 2011.
  • Singapore is becoming more appealing to foreign players after the levelling of taxation costs

Room for more enbloc sales

  • Collective sales still at the one-fifth mark of 2006/07 cycle. Suggests ample room for more enbloc sales.
  • Collective sales value transacted in 8M17 has topped S$3b, exceeding the combined transactional value in the previous four years (2013-16).
  • Surge in enbloc sales could span between six to eight quarters. The collective sales in 2016/17 ytd only 21% of the cumulative sales transacted in 2006/07, suggesting further room for more enbloc sales.

Replacement demand to fuel mid/high end properties

  • Replacement demand from enbloc sales to fuel mid-/high-end segment. The 2006/07 enbloc sales cycle took out around 10,000 units and correspondingly minted a similar number of millionaires seeking replacement properties.
  • In the nascent cycle from 2016-17 ytd, about 2,000 units have been taken out, with another 1,000 units in advanced stages. As the cycle progresses further, collective sales could be fuelled by more replacement demand. The wealth effect would likely see the millionaire enblocers upgrading to the mid/high-end segment, and further feeding the cycle.

Risks of oversupply

  • Risk of oversupply once enbloc fever subsides. While the 2006/07 enbloc sales cycle took out around 10,000 units, it put back twice as many units into the market.
  • According to JLL, the 3,000 units (including the ones launched for tender) could yield 12,000 units in new developments.

Enbloc market a source of supply

  • Enbloc market as a key source of supply for the mid-range/high-end segment. The GLS programme has focused mainly on the mass market segment, with only a few sites in the mid-/high-end segment.
  • In the 2H17 GLS programme, the mid-/high-end segment made up just 24% of the potential 7,810 units. With the governments focusing on the mass market, GLS will rarely have sites in the mid-/high-end segments. Hence, developers looking to develop in the mid-high end will look to the enbloc market as a source of supply. There are about 30-40 residential properties islandwide trying to enbloc at various stages.

Foreign buyers have tax advantage in Singapore

  • Levelling of playing field to bring foreigner buying interest back to Singapore. Foreign purchases have tapered down, especially after the implementation of Additional Buyers Stamp Duties (ABSD) 10% from Dec 11 and 15% from Jan 13.
  • As overseas regimes caught up with harsher property cooling measures to moderate housing prices and limit foreigners’ participation, we expect buying to move up to the mid-high end segment, driven by foreign demand.
  • In Nov 16, Hong Kong doubled its stamp duties on overseas property buyers to 30% eclipsing that of Singapore’s 15%. In Taipei, a punitive divestment gains tax of as high as 45% was unveiled in Jan 16, dwarfing Singapore’s Sellers Stamp Duty (SSD) of 12%. Australia and Canada have also raised the transaction costs for foreigners to own property.

Spike in enbloc sales an indicator for turnaround

  • Inflection point? Traditionally, spikes in enbloc sales are early indicators of a turnaround in the residential property market in Singapore.
  • The two enbloc fevers in 2006/07 and 2010/11 both preceded the rally in the Property Price Index of Residential Properties.
  • Recovery should trickle up to the mid/high-end segment. Expect property prices will bottom out in 2017, followed by a 5-10% increase next year.

This article first appeared on UOB Kay Hian’s research page.