Thursday, July 15, 2010

More collective sales ahead, but boom unlikely

THE number of collective sales is tipped to rise in the coming months as developers replenish land banks - but it is too early to talk of another boom.

Two key factors - large-scale government land sales on the boil and a prime segment stuck in the doldrums - will keep a cap on the sort of 'en bloc' mania seen in 2007.

But property experts say the market for such sales has certainly improved this year, especially among smaller developers, and that is energising more owners keen to sell.

Credo Real Estate says there have been 16 collective sales worth $786million completed this year, compared with one last year and eight in 2008.

Consultants expect more launches over the coming months as many estates which initiated the long sales process around last year or early this year will be ready to go to market.

Last week, Villa D'Este in Dalvey Road was launched for sale at a guide price of $115million, or about $2,343 per sq ft per plot ratio (psf ppr).

And Melrose Court, off Balestier Road, was put up for sale yesterday with a guide price of $48million, or about $688 psf ppr, inclusive of a $2.38million development charge.

Consultants said they have been fielding a steady stream of inquiries from potential collective sellers over the past six to nine months.

As in the past, such inquiries pick up whenever news of a successful collective sale hits the headlines.

'More launches and sales will come but a lot also depends on owners' expectations. It's whether they think they can get a similar replacement property with the en bloc premium,' said Colliers International's executive director of investment sales, Mr Ho Eng Joo.

Experts noted that there is a price mismatch in the prime sector, with owners' expectations higher than what the major developers, who are still cautious, are willing to pay.

As for buyers, they are keen to buy freehold land in collective sales because it is not available from the Government, they said.

The Government's land sales programme comprises large 99-year leasehold sites targeted at the mass market. Unlike a collective sale, a government land purchase is straightforward and fast.

Experts say small- and mid-sized private developers still need to replenish their land banks and they cannot afford the big government sites coming up for sale.

Indeed, the collective sale deals completed this year were all done by boutique developers. Apart from the recently concluded $137million sale of Meng Garden Apartments off Killiney Road, the other deals were all priced below $100million.

The recent successful collective sales are in mostly attractive city-fringe areas such as Balestier, or areas where no government sites will be offered for sale, said Mr Ho.

Credo Real Estate managing director Karamjit Singh expects to see more medium-sized sites of around $100million sold in the collective-sale market this year rather than large sites.

'Between now and December, there may be another 20 or so successful deals but these are likely to be small sites meant for small-sized units of several hundred square feet,' said Mr Jeffrey Goh, head of investment sales at HSR International.

'Smaller sites priced below $100million have a higher chance of success than prime ones priced above that amount.'

The flats on these sites are usually quite old, with owners who are thus more realistic about price, he said. That makes it easier to obtain the 80per cent approval for the sale to proceed.

New mass market launches may be going for benchmark prices but sellers in collective-sale deals can find better value in the resale market for replacing their homes, said Mr Singh. Also, a lower- priced site would attract a bigger pool of buyers than a higher-priced one, said Mr Ho. 'The risks are manageable.'

Source: Straits Times, 15 Jul 2010

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