As the fervour surrounding the collective sale market subsides, larger sites hoping to secure a high bid in en bloc tenders may have tougher hurdles to cross as developers weigh their finances and the growth potential of their acquisitions more prudently.
Developers may have had their fill of residential land
Almost 2 years of collective sale fever may have satisfied the appetites of developers for residential land.
As of Oct 15, there are 28 unsold collective-sale sites valued at $6.03 billion. While larger sites may have stirred up excitement last year or in the earlier part of the year, the cooling measures from the third quarter could have turned some developers away.
Since the July 6 implementation of the new property cooling measures which raised Additional Buyers’ Stamp Duty rates and tightened loan-to-value limits, the number of en bloc sites unable to successfully close deals has been on the rise.
Commercial sites may, however, capture the spillover interest as they are unaffected by July’s property curbs. A commercial project to watch is People’s Park Centre which will be holding a vote on Oct 23 on whether to accept the reserve price of $1.3 billion.
For the many collective sale committees of properties finding their way into the market, the balance between holding on to their original asking or reserve prices and securing the 80% mandate for a collective sale becomes increasingly delicate.
At the 447-unit Chuan Park condominium for example, which fell just slightly short of the 80% mandate with a 79.78% (of the total share value) agreement, raising the asking price from $790 million to $900 million was not sufficient in pushing more than 585 owners of 357 units to sign on the dotted line.
Smaller en bloc sites lowering prices to appeal to developers
While some developers may be looking at smaller en bloc sites with more affordable total quantum, the competition heating up on all fronts. Some of these smaller sites are even considering lowering their asking prices to appeal to developers.
Take La Ville, a condominium development with only 40 units near Katong Park MRT station for example. It originally had an asking price of $152 million. However, 70% of the owners have since signed to lower the reserve price to $140.6 million.
The overall real estate investment figures have fallen 42% from $11.2 billion in Q2 to $6.5 billion in Q3, possibly a sign of a cooling collective sale market.
While nothing is yet certain, industry players are likely to keep an eye on how the market reacts to some big projects which are still open for tender, such as Faber Garden which is asking for $1.18 billion.