En Bloc Sales Have Peaked, Says CapitaLand

Source : The Business Times, August 2, 2007

Property owners must be realistic about what is marketable: CEO

(SINGAPORE) CapitaLand Ltd, the biggest buyer of enbloc projects in Singapore in the past year, said that such property sales have 'peaked', as owners ask for record prices for their homes.

The market for existing buildings has hit a high 'in terms of pricing', said Liew Mun Leong, chief executive officer of CapitaLand. The developer, South-east Asia's largest, had 18.3 per cent share of the $13.49 billion of such collective sales from July 2006 to June 2007, according to data from real estate consultant Knight Frank.

A frenzy of redevelopment of prime condos around the main Orchard Road shopping district and the neighbouring prime residential area of Holland Road prompted the government to raise the development charge, which must be paid for enhancing a site's use.

'The problem now is that en bloc owners' expectations are raising the hurdles,' Mr Liew, 61, said in an interview on Tuesday. 'Going forward, en bloc owners must be realistic about what is marketable.'

Developers were buying older homes in the city's prime areas to redevelop and resell at prices that were more than four times higher as demand for luxury apartments pushed some residential units to record prices.

A record of 70 older apartment developments were sold last year for $8.1 billion, according to data from Knight Frank. In the first half of this year, there were 48 transactions amounting to $9.48 billion.

'En bloc sales are about derived demand,' said Nicholas Mak, Knight Frank's research director. 'As long as high-end property demand continues, the en bloc sales would continue.' CapitaLand in June said that it's buying Farrer Court, an existing apartment complex in the Holland Road area, which is a five-minute drive from the shopping district, for a record $1.3 billion.

SC Global Developments, a builder of luxury homes, said earlier in June that it had agreed to buy apartments next to the shopping district for $262 million, or $2,338 a square foot, the highest price for an existing complex.

'There will come a time when the market cannot bear' the prices, CapitaLand's Mr Liew Mun Leong said.

SC Global, which paid $1,064 a square foot for a downtown apartment complex last year, sold new homes on the same site in June for as much as $5,100 a square foot, a record.

CapitaLand's shares fell 15 cents, or 2 per cent, to $7.35 yesterday. The stock has risen 19 per cent this year, compared with the 15 per cent gain in the ST Index.

Some apartment developments in the city's downtown districts are having a harder time with en bloc sales. Pacific Mansions, a 10-minute walk from the shopping district, had an asking price of $1.18 billion, or $2,400 a square foot, its marketing agent Savills Singapore said in June.

The Straits Times reported on Tuesday that the owners didn't get bids that met their asking price and are negotiating with possible buyers to achieve their reserve or minimum price, which is 10 to 20 per cent lower than the asking price.

'We are seeing vendors adapting to be more accommodating,' said Donald Han, managing director of Cushman & Wakefield.

'Instead of expecting record price after record price, there is some price stabilisation, which will be good for the market.' - Bloomberg