Despite the standstill in Singapore’s en bloc market, collective sales are still a relevant option for property developers to replenish their development pipeline and for owners to exit from their ageing assets, according to a media report quoting Colliers International.
However, Colliers noted in a white paper issued this month that an expectation gap continues to impede en bloc deals.
Sellers who are looking to get rich overnight through a collective sale do not seem to have accepted the new market reality. On the other hand, developers are hoping for a higher risk discount in order to mitigate the headwinds in property development considering the softening market.
“It is inconceivable that buyers (developers and landlords) are going to pay anywhere close to outrageous sums for development land, unless it makes economic sense,” noted Chia Siew Chuin, Research Head at Colliers International.
In the past, developers were willing to spend “what seemed like astronomical sums” due to the intensification of development potential as well as the change in land use zoning for many sites. But this is no longer the case now.
In fact, no successful en bloc deal has ever been recorded year-to-date, said Colliers. The various rounds of cooling measures implemented by the government have not only taken the froth out of the property market, it has also taken the steam out of en bloc sale activities.
As a result, the success rate of en bloc sale attempts has dropped from 41 percent in 2012 to 33 percent in 2013. This implies that only three out of every 10 collective sale attempts were successful last year.
Last month, Spring Grove condominium in the Grange Road area was launched for sale by tender with an asking price of more than $1.39 billion, a price that’s considered as “ambitious” by many consultants compared to Farrer Court’s record $1.34 billion en bloc sale in 2007.
Chia believes that owners of older residential properties are likely to achieve better prices and profit if they sell en bloc rather than selling their units individually.
Similarly, owners in a strata-titled single-use or mixed-use development can also consider the en bloc route to upgrade to a better business environment and dispose of older assets, said Chia.
Romesh Navaratnarajah, Singapore Editor of PropertyGuru Group, edited this story. To contact him about this or other stories email romesh@propertyguru.com.sg
