(C) Collective Sale Activities

(C.1) Reality check signals beginning of sliding price trend for all

The collective sale market has been so quiet in the first quarter that one could hear a pin drop. Only one en bloc sale project was sold and it was an obscured mixed development comprising nine apartments and nine shops off Holland Road. A jog in the memory would bring us back to the same period last year where the en bloc sale market was frantic with 25 transactions and prices were moving with the vertigo sensation of the maiden test flight of Airbus A380.

However, when it comes to the delivery of the final product, the en bloc market also resembled the Airbus episode – not all the A380 planes were delivered on time and the scheduled handing-over was repeatedly frustrated for one reason or another.

Coincidentally, a number of en bloc sale projects were either rejected by the authorities or repudiated by the buyer in the end. In fact, the Strata Titles Board (STB) cancelled the en bloc sale of Finland Garden in Siglap area and then Regent Gardens in West Coast in quick succession in January 2008. In late March 2008, the Supreme Court upheld the STB’s early rejection of the en bloc sale of Airview Towers in River Valley area.

It would not be too far-fetched to surmise that the authorities had been keeping a close watch on the details of collective sale applications and was ready to scrutinise every application and, if need be, give the decisive chop in anticipation of a possible ‘next wave’ of en bloc sale projects more desperate to meet deadlines (and therefore more vulnerable to hasty decisions) before their respective Collective Sale Agreement (CSA) lapses under the new collective sale law.

(C.2) Aspiring developer showed sign of financial stress after buying spree last year

Besides the above, there is another appalling dimension to the en bloc sale scene – the foreign funds promised to the buyers may not materialise after all. In the context of foreign funds’ perception of the high-end residential market in Singapore, the island city’s upside potential dwarfs in comparison with Shanghai, Mumbai and even Ho Chi Min city as the former are all starting from a very low base and are relatively young markets with very different demography. This perspective is not unrelated to the Kuwaiti episode mentioned earlier.

At least one aspiring developer, Bravo Building Construction, which went on a buying spree in the en bloc sale market last year armed with promises of foreign money, had on 1 April 2008 rescinded a $162.8 million collective sale of Makeway View in the Newton area, and eight days later, rescinded the en bloc purchase of District 10 Tulip Garden, losing $25 million in deposit. However, the fledgling developer claimed that it would honour the en bloc deal of Pender Court, off Pasir Panjang Road which it purchased at $80million.

(C.3) Implications on funding – the ‘runaway bride’ starring Kuwait (instead of Juliet Roberts)

In the same context of the ‘runaway bride’, the frustrations seen in the en bloc scene cannot be disassociated with the recent lapsing of Option by a Kuwaiti fund company to purchase 97 units of freehold Goodwood Residence in Singapore. In both cases, the promised marriage did not materialise despite the dowries being paid.

The implications of the ‘no-show’ by the cash-rich Middle Eastern fund may be far reaching. First of all, it may open the floodgate for more such ‘walk outs’; and secondly it serves as a cold blanket for all home sellers who are still fantasising about an IR boom – a perceived wisdom that may turn out to be like an overcooked steak – hard to swallow but still get everybody saying ‘well done’ before the bad dish (or bad deed) is served. 

It’s now time for property sellers to align their asking prices to the market equilibrium, because as far as foreign investors are concerned, property prices may have reached an altitude that requires breathing apparatus and a huge courage or stupidity to venture further.

With 8,400 new condo units expected to receive their TOP this year and the increasing number of unsold new home units (statistics from page 5 to 7), a supply glut will soon become apparent.  What investors should look out for is fundamental value of the real estate and not the supposed attractiveness of historic low interest rates.

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