Collective Sales To Trickle Back Into Market, Says Credo

Source : The Business Times, July 17, 2009

PROPERTY consultancy firm Credo Real Estate expects collective sales to resurface this year or next, but not with the same intensity as in the boom years of 2006 and 2007.

Some 5-10 collective sales may happen this year, said Credo's managing director Karamjit Singh. But they will probably involve small to mid-sized sites, as these tend to reach the market faster, he added.

This week, 72-unit Dragon Mansion became the first property launched for collective sale this year. There were more than 100 such transactions in 2007.

The outlook for 2010 is brighter, when some 30-40 estates may be sold en bloc, said Mr Singh. A collective sale is financially feasible when the land value exceeds the total value of individual units in the open market. Right now, this situation has yet to occur for most estates, he explained.

But even when the collective sale market picks up, it is unlikely to rebound to earlier levels. Owners may also have to trim their price expectations 20-25 per cent from peak levels, according to Mr Singh.

Owners may start asking for more if recovery in the property market accelerates, he said. Since February, private home sales have been buoyant, leading to greater optimism in the industry. Developers sold 1,825 new units in June - more than double the number sold a year ago.

As more stock is cleared, developers will want to replenish their land banks and that will drive collective sales, said Mr Singh. According to him, small developers in particular have started looking for smaller sites.

Calmer markets today are less likely to create contention in collective sales, much of which arose because of steep increases in land values, he said.

But new challenges have emerged. For instance, new legislation governing such deals may make it costlier and more time-consuming for estates to reach the market. Also, fewer owners may volunteer to join sale committees now that the law has spelt out their responsibilities clearly.