The spotlight has shifted onto property developers sitting on prime sites acquired during the 2006-2007 en bloc boom, while the market mulls over the impact that rule changes will have on collective sales.
If the proposed changes will make it harder for prime freehold residential sites to make their way to the property market, that will be good news to developers who are already holding such sites acquired earlier.
Based on a compilation made by property consultancy firm CBRE, developers currently have 26 sites in prime districts 9, 10 and 11 acquired through collective sales in 2006 and 2007.
These sites are intended to be redeveloped into nearly 4,300 new homes. Outside the prime districts, developers could build another 4,700 homes on 16 sites acquired through collective sales between 2006 and 2007.
Among the developers who purchased prime district en bloc sale plots earlier are City Developments Ltd (CDL), CapitaLand, GuocoLand, Wing Tai and Overseas Union Enterprise. For instance, CapitaLand and its partners acquired the Farrer Court site and are planning a redevelopment project, comprising of 1,715 units. Hong Leong Group (including CDL) has exposure to six sites designated for development into more than 600 units in locations such as Leonie Hill, Thomson and Anderson roads.
According to several industry observers, developers will be more interested in these sites and projects, and will want to time their launch with more caution if it gets tougher to replenish land bank in this segment through collective sales.
“The proposed amendments are unlikely to facilitate the en bloc process significantly and as such, the number of collective sales coming to the market is likely to remain relatively limited,” said Mr. Jeremy Lake, executive director of CBRE.
“From a developer’s point of view, it will be more difficult to replace landbank in prime areas so those who have such sites may think more carefully about the timing of launch of new projects on these sites as it will not be easy to find replacement land.”
Giving a more positive take, a developer said: “I don’t think anyone would be too far wrong to say that en bloc sales are just about the only source of supply for prime district freehold sites. The proposed amendments to the Land Titles (Strata) Act will put the ‘last nail in the coffin’ for en bloc sales in the near future, and the market will be completely dried up for freehold District 9, 10, 11 land supply.”
This will create upward pressure on prices of lands, he added.
Putting things in perspective, Mr. Shaun Poh, the senior director for investment sales at DTZ, said: “En bloc sales in many developments have already been activated and these are unlikely to be affected by the proposed amendments. The supply from this source should be enough for the market for the time being.”
“However, the future pipeline of en bloc sales will be affected.”
The Ministry of Law recently released the proposed changes that will among other things make it tougher to restart a collective sale within two years of a failed attempt. Any attempts to convene EGMs to appoint a sales committee during this period will require owners to secure higher requisition levels – 50 percent of total number of owners or by share value for the first re-try and 80 percent for any subsequent attempts.
“Already it’s not easy to secure requisitions for EGMs based on existing thresholds of 20 per cent by share value or 25 per cent of number of owners,” said Mr. Poh.
“Now that they’re proposing to raise the threshold for restarting previously failed en bloc attempts, it’s going to be more difficult for those who want to have another shot when, say, the market suddenly turns hot.”
On a more positive note, Mr. Karamjit Singh, managing director of Credo Real Estate, notes that the instances of failed attempts that will be affected by the two-year restriction do not cover cases where owners had secured an 80-percent or 90-percent majority consent, but the Collective Sales Agreement (CSA) expired because a buyer could not be found in time.
“The projects that may be affected are likely to be those that had attempted an en bloc sale when they should not have, either owing to the project not being fundamentally ‘enblocable’ or the market was not on their side to an extent that the majority owners rejected the proposal,” he said.
MinLaw hopes that the proposed amendments will deter repeated attempts at en bloc sales where there is insufficient support from owners.