Collective-sale fever cools for large residential sites

While such deals remain strong, more sites have been unable to find buyers, analysts say

Grace Leong

Even before new rules to raise the minimum average unit size for condominium and private apartment projects outside the central area were announced last Wednesday, the collective-sale fever was abating for larger sites, as owners at Chuan Park condo know all too well.

The 99-year leasehold estate of 446 units in Lorong Chuan has failed in its second attempt to secure an 80 per cent mandate for a $900 million collective sale.

It was a close thing, however, with 585 owners of 357 units, or 79.78 per cent of total share value and 77.39 per cent of total area, signing the sale agreement by an Oct 13 deadline, according to a notice seen by The Straits Times.

The shortfall came despite the reserve price being raised from an initial $790 million.

The Straits Times understands that freehold Windy Heights in Kembangan is now in a 10-week private treaty period after its tender closed on Oct 10 without a sale.

While the reserve price is unchanged at $806.2 million, owners are going through a re-signing process to lower it to $750 million.

Even smaller sites are trying to lower their reserve price to boost their appeal. La Ville, a 40-unit freehold condo near Katong Park MRT station, has relaunched for sale by tender. More than 70 per cent have signed to lower the reserve price from $152 million to $140.6 million.

There were 28 unsold collective-sale sites, valued at $6.03 billion, as of Oct 15, according to Colliers International, a number that has been steadily increasing since the July 6 property cooling measures which raised Additional Buyer’s Stamp Duty rates and tightened loan-to-value limits.

This excludes two projects that relaunched for sale and whose tenders are still open – Faber Gardens at $1.18 billion and Cairnhill Astoria at $196 million.

Colliers also noted that 54 collective-sale tenders – seven with commercial components – have closed without a sale so far this year.

This compares with 33 deals worth $9.89 billion that have been completed, said Cushman & Wakefield Singapore senior director Christine Li.

Ms Li said 64 sales worth $19.1 billion were completed from the second quarter of 2016, when collective-sale deals started taking off, to Oct 15.

“This (current) wave is certainly very strong. But in terms of number of collective-sale transactions, the 2005-2007 wave is the strongest, with 165 projects sold during that period,” she added.

Colliers International managing director Tang Wei Leng said: “We think the current lull in the collective-sale market probably reflects a ‘crisis in confidence’ among developers who are still reassessing the market conditions after the new measures kicked in.”

At least two collective sales were aborted after developers got cold feet. Singapore-listed Lafe Corp’s unit Gioia Fund backed out of buying freehold Fairhaven in Sophia Road, citing the cooling measures, the escalating trade war between China and the United States, and higher borrowing costs.

In late July, developer Tee Land called off its $60 million purchase of Teck Guan Ville in East Coast.

Slowing collective sales have taken a toll on overall real estate investment sales, which fell 42 per cent to $6.5 billion in the third quarter from $11.2 billion in the second quarter, said Cushman & Wakefield.

Ms Li said commercial collective-sale sites will likely benefit because these are unaffected by July’s cooling measures, and because many developers seem to have had their fill of residential land.

Market watchers are eyeing several other big projects, including Faber Garden, whose $1.18 billion tender closes on Oct 31.

Also of interest is People’s Park Centre, where owners will be voting on Oct 23 on whether to accept a reserve price of $1.3 billion and the method of apportionment for their first collective-sale attempt.

This article first appeared in The Straits Times on Oct 22, 2018.