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More potential sellers are entering market and raising prices to unattractive levels

LAST year was a collective sale bonanza for lots of home owners but prospects of a repeat performance this year are not looking so hot.

It is the old story of supply and demand. The 37 collective sale deals last year were more than double 2004’s number, but quite a few developers have now replenished their land banks and do not need more until they sell their projects.

On the other hand, some owners have raised their asking prices to unattractive levels, said property consultancy Knight Frank. More potential sellers in the collective sale market mean more choices for developers, who can be more selective about the sites they target, consultants said.

Take Orchard Road, which is hotter than ever, thanks to the Government’s rejuvenation efforts and the strong bid for the prime Orchard Turn site.

‘The good price achieved for the Turn site and a similarly good price expected for the Somerset site will raise price expectations for properties in the vicinity,’ said Knight Frank executive director Foo Suan Peng.

Orchard Road is seen as a blue-chip strip regionally so sites in the area generally have no trouble luring developers with deep pockets.

The area’s recent developments have been a godsend for owners who have managed to cash in, like those in Emerald Lodge at Emerald Hill Road. Knight Frank said the site was sold last week to a foreign private investment firm for $45.2 million. The owners have reaped more than 50 per cent over what their units would have got individually.

But for those who have yet to sell, unrealistic demands could well backfire. If their asking prices are above what the market can bear, developers will go elsewhere, said Mr Foo.

Owners at the 30-unit The Esquire at Mount Elizabeth know the feeling. They put their block up for collective sale last May for $32 million. There were no takers then, but they relaunched the site on Thursday at the same price, hoping Orchard Road fever might spur developers to open their pockets wider.

Credo Real Estate executive director Tan Hong Boon, said the relaunch is timely after Orchard Turn sold for a higher than expected $1.38 billion. He said there were 10 projects in the Cairnhill area looking to sell collectively, including Horizon View and The Vermont, but their success will depend a lot on their expectations.

Knight Frank’s Mr Foo has already seen some owners raising their expectations. Chesterton International research head Colin Tan said Orchard Road is the ‘playground’ for investors and prices would have raced ahead of fundamentals.

Last year’s total investment sales rose to about $13.5 billion, up an impressive 59.4 per cent over 2004, said Knight Frank. ‘Residential collective sales blossomed to a height of activities that was not witnessed since the boom of 1999,’ it added, citing the $2.09 billion of deals done last year.

Its research director, Mr Nicholas Mak, said the strong momentum in collective sales could continue this year amid economic growth and a positive property market outlook. But to a large extent, rising asking prices could reduce the number of deals done, he said.

Source : Sunday Times - 8 Jan 2006