Jan 31, 2006
Collective home sales set for another bumper year
Seven sites already launched, as market rides on positive economic outlook
By Joyce Teo
Property Correspondent
IT IS no surprise that optimism is flowing in the property market: The year has barely begun, but already seven collective sale sites have been launched.
And that is coming off a record year in 2005 when 37 collective sales of residential sites worth $2.09 billion were completed - more than double the deals and value achieved in 2004.
Ms Soon Su Lin, executive director of property consultancy CB Richard Ellis, said such sales will continue at the same pace as last year thanks to a good economic outlook.
Supply and demand tells the story: Sites sold en bloc last year generated a potential supply of 3,860 new homes, while overall, 8,955 new homes were sold last year.
'So potential supply from the sites being sold en bloc is expected to meet good demand when they are ready for launch,' said Ms Soon.
Home owners in collective sales typically get at least 30 to 50 per cent more than what they would have reaped from an individual sale. But the risk, said consultants, is that owners may have unrealistically high price expectations.
Typically, potential collective sale developments are more than 10 years old with rising maintenance costs.
Selling these sites require the consent of at least 80 per cent of the owners; those less than 10 years old need 90 per cent acceptance.
Because people looking to rent tend to migrate to new projects, owners of older projects find it harder to find tenants. And with maintenance costs rising, they may be keener on a collective sale, said DTZ Debenham Tie Leung director Tang Wei Leng.
But that does not mean everyone can cash in.
Prime sites in districts 9, 10 and 11 clearly have the best chances. The Cairnhill area appears to have the most potential sites, though projects in posh Ardmore, Draycott, Nassim, Leonie Hill and St Thomas Walk are also very popular, said Credo Real Estate executive director Tan Hong Boon.
'Sites in Cairnhill are very sought-after and the success rate will be good if they are not over-priced,' he said.
In general, most owners ask for about $800-$850 per square foot per plot ratio, though some want as much as $1,000 psf ppr, he said.
Still, the highest residential collective sale land price last year was only at $876 psf ppr - made by Wheelock Properties in September for The Habitat II in Ardmore Park.
Areas in Tanjong Katong Road, Meyer Road, Amber Road, East Cost Road and the Telok Kurau area also have good chances, said the head of investments at Jones Lang LaSalle, Mr Lui Seng Fatt.
The best candidates are developments of six storeys or less, with a small number of units or a large plot of land, said DTZ's Ms Tang.
'Those with facilities would have good rental value so the owners won't be very motivated to sell,' she said.
Credo Real Estate's executive director, Mr Karamjit Singh, said: 'The poorer the physical conditions, the better the chances.'
Surroundings also play a part. For instance, a low-rise development in an area with mostly high-rise projects could be a strong target, he said.
It could be tricky for mixed developments as shop owners may not want to sell. 'The revenue they derive from the shops may be much better than the property's value,' said Ms Tang. 'If they move out, they will lose the goodwill they have established over the years.'
Consultants said many former HUDC estates like Pine Grove, Gillman Heights and Farrer Court have expressed interest in selling collectively.
So have some owners of ageing private properties such as Grand Tower in Moulmein Rise, Eng Tai Mansions at St Thomas Walk, Peck Hay Mansion in Cairnhill and The Ardmore at Ardmore Park.
But getting enough owners to agree to a collective sale could take years. 'It's a waiting game,' said Ms Tang.
A home owner Gerald sold his Parry Gardens home near Yio Chu Kang in 1993, even though a neighbour said there may be plans to sell en bloc.
'I missed out on making money but the deal was only concluded in 2005! I would have had to wait for more than a decade,' he said.