Collective sales set to take off again

As many as 50 collective sales may be launched this year, though less than half of these could translate into actual deals before year-end, say property agents polled by BT.

A study by property consultant Credo Real Estate has listed a total of 34 possible properties that could be tendered for collective sale in 2010.

Eighteen of the 34 developments are either in District 10 or 15. ‘These are among the larger high-density private residential districts that enjoy healthy demand for new homes and hence land for residential development,’ says Credo’s managing director Karamjit Singh.

Collective sales committees have been appointed for all the 34 developments in the list. Most have also appointed property consultants and lawyers. Some have begun signing a Collective Sale Agreement (CSA); however, a tender launch could well flow into next year, especially for larger estates.

Two of the 34 sites – Goodwill Mansion in Balestier and Holland Hill Lodge – have already been launched this year. Meanwhile, nearly half the developments on the list comprise fewer than 50 existing units each.

Agents say larger estates will take more time to be launch-ready as it takes longer to secure the minimum 80 per cent consent level from owners. It also requires several (usually three or four) extraordinary general meetings (EOGMs) before a site can be launched for sale under revised en bloc rules that kicked in from October 2007.

Mr Singh points out that even for an estate of say just 30 units, it could take about six months between the time owners requisition for their first EOGM and inking the sale to a developer. This used to take just three to four months before rules were amended.

Jones Lang LaSalle’s head of investment sales Stella Hoh says: ‘Small and mid-sized sites will form the bulk of new launches and actual deals up to, say, the third quarter of this year. Next year onwards, if the private residential market continues to be stable and sales volume picks up further, that will create more confidence for bigger en bloc sale sites to be launched.’

Colliers International executive director (investment sales) Ho Eng Joo reckons that projects in city fringe locations like Balestier, as well as East Coast and Changi areas, are more likely to succeed in en bloc sale efforts than those in the prime districts. ‘Prices of end units (homes) in prime districts have not recovered to their 2007 peak, so it’s harder for developers to cough up 2007 land prices that many owners expect.’ In fringe locations, the price gap compared to 2007 has been much less.

Mr Singh suggests that it may be tough selling 99-year leasehold en bloc sites this year as developers can buy comparable plots under the Government Land Sales Programme. ‘Likewise, prime sites very close to Orchard Road may also see a slow start as developers still have prime sites in their books, many of which were bought in 2006/2007.

‘Where we expect to see greater levels of success would be (sites) in mass market and mid-prime locations which are realistically priced and offering unique selling points like being near to Sentosa, MRT stations, shopping centres and good schools,’ he added.

Credo reckons about 30-50 sites could be launched this year, of which around 20 could be sold by end-2010. Knight Frank executive director Nicholas Wong forecasts 40-50 launches and 15-20 sales this year. JLL’s Ms Hoh predicts that only 15-20 sites could be launched, of which 10 may be sold.

During the peak year of 2007, a total of 87 collective sale deals were sealed at a total of $11.6 billion. This fell to eight deals for a total $346.5 million in 2008 and just one deal at $100.8 million last year.

Owners looking to match or exceed 2007 prices could stand in the way of en bloc sales.

Savills Singapore’s director of investment sales and prestige homes Steven Ming says that owners may expect higher premiums before they sign the CSA as prices could rise while they wait to collect their sales proceeds. ‘It can easily take one and a half years from the point of obtaining the first signature to the time when owners receive full sales proceeds,’ he said.

‘Sellers, when they consider signing the CSA, look at how much premium they will get for their unit in an en bloc sale than if they were to sell it on an individual basis in the current market; as well as the future replacement cost for the property. Sellers seek a higher premium for fear of being priced out later if prices rise steeply.’

However, developers in their bids would be more mindful of changes in property cycles while they wait for Strata Title Board and possibly other court approvals before they can take possession of the site. ‘The sudden market correction in late 2008 is still fresh on developers’ minds,’ Mr Ming notes.