4 Sites Relaunched For Collective Sale At Lower Prices

Source : The Straits Times, June 5, 2008

PropNex hopes 30% cut in asking price will attract buyers, as demand is 'still there'

A BOLD property firm is defying market trends with a renewed bid to sell four housing sites en bloc, even though the market appears dead for now.

PropNex Realty admits its move is 'contrarian' but hopes a hefty asking price cut of up to 30 per cent will attract buyers.

Even then, developers may not bite, given market uncertainties, property consultants say.

Some other sites were relaunched for collective sale this year, but none was sold. Any bids that did emerge were below the owners' expectations.

PropNex is relaunching four sites: Cavenagh Gardens in Cavenagh Road, Novena Hill in the Novena area, Seletar Gardens along Yio Chu Kang Road and Hong Thye in Geylang.

'We are trying to take a contrarian view,' said the firm's head of investment sales and commercial department, Mr Charles Chua. 'We believe the demand is still there. Someone has to take the lead and kick-start the market.'

The four estates were first launched for sale around September and October last year. Their owners had since lowered their expectations, but not their reserve prices. This was the minimum sale price fixed when the owners first agreed to a collective sale.

In the case of the 130,000 sq ft Cavenagh Gardens, the asking price is now $450 million to $455 million, well down from $619 million in October.

Mr Chua hopes the prospect of combining the freehold site with an adjoining piece of state land will be an added attraction.

That will lower the price to as little as $1,481 per sq ft per plot ratio (psf ppr). Last year, the price was $2,308 psf ppr, excluding the state land. A developer could then sell the new units at about $2,200 psf, said Mr Chua.

Seletar Gardens is also heavily discounted now. The asking price is $50 million to $55 million from $75 million last year.

The asking price at Novena Hill is now at $42 million to $45 million, down from up to $60 million last year.

And the price tag on the Geylang plot has had about $3 million lopped off and is now going for up to $13 million.

However, even if the sellers have lowered their pricing expectations, there are other issues to consider, observers say.

'It depends on how reasonable the seller's price is. It is quite meaningless to lower just the asking prices and not the reserve,' said a market observer. 'If developers were interested in buying below the asking prices, they would already have asked for it.'

Most developers already have some projects on their books, so they may not be keen, said Mr Colin Tan, Chesterton International's head of research and consultancy.

'The issue is the construction bottleneck,' he said. 'For new sites, they have to consider rising construction costs, in addition to the risk of a declining market.'

Mr Karamjit Singh, the managing director of Credo Real Estate, which has handled a significant amount of collective sales, said developers would need a greater profit margin in the event selling prices soften even further.