More collective sale sites end up unsold after cooling measures

Developers may be reassessing strategy before next move

Grace Leong

Even as mega sites Pandan Valley and Laguna Park bedazzled with their multibillion-dollar collective sale attempts last week, two other billion-dollar candidates, Horizon Towers and Faber Garden, closed their tenders without a buyer.

Horizon Towers and Faber Garden are among 50 collective saleprojects whose tenders closed without a sale this year up to last Wednesday, according to Colliers International’s data.

The list of unsold sites is growing after the July 6 cooling measures, and currently number 22 collective sale tenders valued at $5.39 billion, said Colliers’ head of research for Singapore Tricia Song.

The slower activity reflects developers taking a breather to evaluate potential risks and monitor the take-up rate of upcoming launches and their price levels.

Also, many of them have replenished their landbanks in the past year and may be more selective now.

This points to an increasingly uncertain outlook for sites that are nearing their deadline to get the 80 per cent mandate to launch, or whose tenders are closing soon.

Ms Tang Wei Leng, Colliers managing director, said: “We think it could be a case of one too many collective sale sites. Even before the measures, the feedback on the ground was: ‘There’s no hurry with so many sites available’; ‘deal fatigue’; and ‘unless it is cheap, or else we’ll wait’.

“Developers were already proposing put and call options in which they sought to enter deals at lower prices. The market was in the process of finding its equilibrium, months before the measures came out,” she added.

The market is now grappling with uncertainty on several fronts.

With the cooling measures, land acquisition costs soared overnight as developers have to pay 30 per cent additional buyer’s stamp duty on land – of which 25 per cent is remissible if the developer can build and sell all units in the project within five years of buying the site.

This means that even if giant sites such as Ivory Heights and Pine Grove can secure the mandate to launch, there is no guarantee developers will bite at this stage.

With the measures, developers have to consider if they can, within the five-year deadline, sell the thousands of units these mega sites can potentially yield.

Their hefty multimillion-dollar asking prices are another consideration.

Many observers say it is not certain if the 654-unit Ivory Heights and 660-unit Pine Grove can get the mandate to launch by their Sept 30 and Oct 28 deadlines respectively. If they cannot, the attempt to sell en bloc is deemed to have failed.

Pine Grove’s journey to get the mandate has been particularly fractious, culminating in Mrs Kogi Murthi resigning as chairman of the collective sale committee late last month. While 78 per cent have signed, the last 2 per cent or 20 units are holding out to get a higher reserve price even though market conditions have changed, said Huttons Asia’s head of investment sales Terence Lian, who is marketing it.

“Huttons is adamant on keeping the $1.72 billion reserve price even though some asked for $1.73 billion to $1.86 billion. It’s already very challenging to get developers’ interest at $1.72 billion.

“Even if we get the mandate, we will likely launch early next year and hope the market would have settled by then,” Mr Lian said.

The consent level has crossed 74 per cent at Ivory Heights but analysts say it may be challenging for the former Housing and Urban Development Company project to get the mandate to launch at $1.68 billion, with just two weeks left to the deadline.

Meanwhile, Windy Heights in Kembangan is taking another stab at a sale, after its $806.2 million tender closed without a buyer in April.

Marketing agent Knight Frank Singapore said the owners are “going through a re-signing process to revise the reserve price to $750 million”.
Lakeside Apartments and Lakeside Towers in the Jurong Lake District area and Park View Mansions in Yuan Ching Road are among those that closed without a sale.

A source close to the deal said Park View has started getting signatures for a reserve price that is about 20 per cent lower than the original $320 million. But it still gives sellers a decent premium, he said.

Lakeside Towers is evaluating whether to lower its reserve price, while Lakeside Apartments is in private treaty period.

“Sellers are getting more realistic in their expectations. The next cycle may be in five to 10 years’ time. By then, the remaining lease will be even shorter, and more of the upgrading premium will go to the Government, which may mean less in proceeds to sellers,” Mr Lian said.

But Ms Tang believes the collective sale cycle has not come to an end. “It’s more likely that developers are reassessing their strategy and monitoring market dynamics before making their next move. We believe well-located sites with good attributes, in areas with less competition, and which are realistically priced will still interest them,” she said.

This article first appeared in The Sunday Times on 16 Sep 2018.