25-35% Failure Rate for En-blocs - Business Times

It's ironic that while the Straits Times have embarked on an exercise of fantasy when they wrote articles that perpetuated en-bloc millionaire aspirations, the Business Times came up with an article that gave pause for thought, and a reality check. Selected excerpts follow.

Given that our areas of Holland and Newton have been escalating in terms of reserve prices, with Elmira Heights at Newton now going for $1070 psf and Holland Tower at Queensway going for $1000 psf, the prices of new developments will rapidly exceed $2000 in these areas in the near future. There is absolutely no way any resident can afford to buy a new unit here without pumping in substantial amounts or taking out a hefty loan again. Equally importantly, these prices are rapidly driving up rentals in the areas to the extent that mid-level to upper-level expats on their various forums are making conscious decisions not to work in Singapore any longer or move further from town in order to afford decent sized (and priced) rentals.

Failure rate hits 24-35% for en bloc deals
Business Times 22 Feb 2007
By Arthur Sim (BT)

Asking prices may be going up, but not all collective sales are going through. About 25-35 per cent of more than 100 last year either fell through or are still on the market after failing to achieve reserve prices, property consultants say.

No green light: Grangeford Apartment has yet to achieve the required 80 per cent mandate from owners to sell and the rising price of replacement property could be the reason.

Sy Wan, who is on the collective sales committee for Grangeford Apartment in Grange Road, says some residents fear they will not be able to afford a similar new apartment in the neighbourhood if they sell. Mr Wan himself is looking at a Housing and Development Board flat.

Last year the official price index for uncompleted non-landed properties in the Core Central Region, which includes Districts 9, 10, 11, rose 6 per cent in Q4 and 25.4 per cent for the whole year.

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Prices of prime collective sale properties have been rising lately. In October 2006, Ardmore Point sold for $1,369 psf per plot ratio. By December, The Parisian nearby sold for $1,734 psf per plot ratio, or 25 per cent more.

CB Richard Ellis executive director (investment sales) Jeremy Lake expects fewer transactions this year. 'It's extremely difficult to get 80 per cent because the market is almost too good and some owners are not prepared to commit to the minimum,' he says. Also, sellers' concerns about increasing replacement costs 'have become more evident' in the past three to six months.

Colliers International estimates over 30 of 110-130 collective sale sites launched last year remain unsold.

Director (investment sales) Ho Eng Joo estimates that 70 per cent of collective sales in 2006 were in Districts 9, 10, 11 - the traditional enclave of the well-to-do. Yet many could be looking at downgrading. 'En bloc sellers are becoming increasingly concerned about the replacement price for new homes because they have gone up substantially,' Mr Ho says.

Savills Singapore estimates that of 120 residential developments put on the market in 2006, 43 have not been sold or are still on the market.

Director (marketing and business development) Ku Swee Yong reckons most sellers are looking at 10-15 per cent upward adjustment. But he cautions owners not to ask too much, as developers also have to factor in rising charges and, more recently, higher construction costs. 'Property prices have been rising over the past 12 months, but associated development costs have also risen significantly,' Mr Ku points out.

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