Why collective sales slowly losing shine

Demand for collective sale sites in Singapore has nearly dried up, with only two deals done since the beginning of last year – a far cry from the 16 transactions closed in 2013, according to data from real estate consultancy JLL.

A range of factors – weak home-buying sentiment, property cooling measures, ample supply of government land sites and the complexity of selling en bloc – have suppressed developers’ appetite for such deals, analysts said.

In the last two years, about 10 attempts to sell en bloc were scuppered, including Spring Grove condominium in Grange Road with an asking price of $1.39 billion. And in July this year, the $743.9 million collective sale tender for Amber Park in Katong closed with no bids.

The only sale that went en bloc last year was Katong Omega Apartment and, so far, the only one this year was Thong Sia Building in the Orchard shopping belt.

Chesterton Singapore managing director Donald Han told The Straits Times it would be an “uphill task” to find buyers for projects costing a large total sum. He said: “Developers want to minimise risk. So, unless the price of the en bloc property is going below market rate, even cheaper than government land sale sites, they may not find it a compelling proposition.”

Developers are likely to baulk at the $840 million collective sale of the 488-unit Normanton Park, near Kent Ridge Park, which will be launched on Thursday next week.

JLL said the “sweet spot” for selling en bloc could be between $50 million and $300 million. “Beyond $300 million or $500 million, the number of developers which are prepared to, and capable of investing, goes down dramatically,” said JLL international director Karamjit Singh.

Analysts said the sheer size of some developments, such as Normanton Park or Laguna Park, both at over 660,000 sq ft, piles on significant risk for developers in a market blighted by slow sales.

“The Additional Buyer’s Stamp Duty is a big challenge for large sites because the developer has to complete the project and fully sell it within five years, or face a penalty of 15 per cent of the land price,” said Knight Frank Singapore head of research Alice Tan.

However, smaller deals, under $100 million, like Riviera Point in District 9, and Derby Court in District 11, have no takers either.

Mr Han said one reason the attempts to sell en bloc were unsuccessful was that they are in prime areas where “demand is lacking”.

Meanwhile, consultancy CBRE said the extent to which a prospective developer could intensify a site’s use is also a deciding factor in the acquisition of smaller plots.

Analysts said one deal going en bloc that bears watching is Shunfu Ville, near Marymount MRT station, which has an asking price in excess of $688 million.

“If the sale goes through, it might just trigger other sales committees to start forming again,” said CBRE research head for Singapore and South-east Asia Desmond Sim.

JLL is marketing Shunfu Ville, and the tender closes on Oct 27.