THE property market may be hot for new launches, but the fervour has not spilled over to collective sales.
BT understands that two residential sites put up for sale in December last year are unlikely to find new owners soon. The tender for Mayfair Gardens at Rifle Range Road closed in January, but no winner emerged and the collective sale agreement (CSA) has lapsed. Nearby, Green Lodge at Toh Tuck Road has also failed to find a buyer and the CSA is close to expiring.
The CSA is a crucial document in the collective sale process. From the time that the minimum 80 per cent consent level is secured for a CSA, agents have up to 12 months to find a buyer and submit an application to the Strata Titles Board for an order for the sale. If the CSA expires before an application, home owners have to convene extraordinary general meetings again to restart the sale process.
An industry source told BT that there were several bidders for Mayfair Gardens but their offers were below the asking price. The owners had hoped for at least $210 million. On top of this, a developer would have to pay $40 million to restore the lease to 99 years, from the current 72. This means that the cost would have come up to $857 per square foot per plot ratio (psf ppr).
The CSA for Mayfair Gardens was signed in March last year and has expired, the source said. The deal did not go through because of the ‘price gap’.
The story is similar for freehold Green Lodge. BT understands that several bids were received during the tender but they failed to meet the reserve price. The owners were looking for $135 million. Add a state charge of about $9.5 million and the price would be $683 psf ppr.
A majority of the owners agreed to sell the property in April last year. Another market insider said that the CSA is close to expiring, and agents are unlikely to have enough time to find a buyer and submit an application to the authorities.
Apart from Mayfair Gardens and Green Lodge, Laguna Park at Marine Parade failed to find a buyer last year. Laguna Park’s sales committee called off the collective sale in November after lower-than-expected bids came in.
These cases reflect the challenges in selling en bloc in today’s market, where there is a gap in price expectations between buyers and sellers.
According to HSR investment sales assistant executive director Jeffrey Goh, many home owners are not keen to reduce asking prices and are in no hurry to sell. They have seen how well new property launches have done and this has ‘given them a lot of excitement’, he said.
But Credo Real Estate managing director Karamjit Singh believes that Mayfair Gardens and Green Lodge are ‘not necessarily representative of the fate of en blocs to come’.
For properties where sufficient consent from owners was obtained some time back, asking prices may not be in line with market conditions, he said.
‘But we are about to see a new wave of en bloc launches by tender in the months ahead, and these will be projects that would have got started end of last year or early this year.’
Source: Business Times, 27 Mar 2010