SINGAPORE (EDGEPROP) - Collective sales of condominiums are seen as a windfall for many owners and some property investors are interested in finding properties with collective sale potential. In this article, we will examine the factors that influence the collective sale market. We will also look at the likelihood of successfully sold collective sale flats and possible residential projects for collective sale.

Investors looking to reap the rewards of a collective sale will need to be patient as the process can take up to two years and there is no guarantee that it will be successful. In addition, current market sentiment has been hit by the weak economic outlook and changes in government regulations.

If private home owners sell their properties, they will have to wait 15 months before they can purchase a non-subsidised HDB flat for resale. Only owners aged 55 and above who are buying a four-bedroom HDB flat or smaller are exempt from this requirement.

As a result of the requirement implemented last September as part of the cooling measures, owner-occupiers under the age of 55 who need immediate housing will be forced to purchase another condominium unit as a replacement home. The high replacement cost of condominium units, coupled with rising mortgage rates, may deter some younger owner-occupiers from selling their condominium units en masse.

Owner-occupiers who choose to buy resale HDB flats will have to rent temporary housing to wait for the 15-month period. In recent years, limited supply and strong demand have pushed up housing rents. The average housing rent for flats in Singapore has soared from S$4.04 per square foot per month in 2021 to the current S$4.83 per square foot per month. The high rents will discourage some owner-occupiers from agreeing to sell en masse. Investors may also be reluctant to give up their strong source of rental income.

The deductible portion of the Additional Buyer's Stamp Duty (ABSD) for developers was increased from 25% to 35% in December 2021. ABSD will only be reduced if the developer is able to complete and sell all the units in their project within five years. As a result, development risks have increased, leading developers to become more selective in their site selection.

Tenders for the collective sale of Bagnall Court on Upper East Coast Road closed last year. In January this year, the 43-unit project was sold by private agreement to a consortium led by Roxy-Pacific Holdings for S$115.28 million (S$1106 per square foot). A five-storey condominium with 113 units is planned to be built on the freehold site.

The 60-unit Meyer Park along Meyer Road was sold to UOL and Singland in February for S$392.18 million (S$1,668 per sq ft per plot ratio). The freehold site will be redeveloped into luxury condominiums with 230 to 250 units.

The 19-unit freehold Holland Tower, located along Holland Heights, was sold to a wholly-owned subsidiary of Wing Tai Holdings in March for S$76.3 million (S$1,746 per square foot per plot).

According to Low Choon Sin, Managing Partner of SRI Capital Markets, "Reasonable and realistic land pricing will be one of the key factors in determining the success of a collective sale project. There are plenty of options in the private collective sale market and on government GLS land, so developers are unlikely to rush to acquire overpriced land."

As well as price, the freehold and small scale of Bagnall Court, Meyer Park and Holland Tower have contributed to their success. In addition, Bagnall Court is located in the Bayshore area, which the government plans to regenerate, while Meyer Park is in an established residential area nearby. Holland House's prime location in District 10 has certainly contributed to its successful sale.

Chia Mein Mein, Head of Land and Collective Sales at Knight Frank Singapore, said: "A potential collective sale site must have attractive property attributes such as being in a popular neighbourhood, close to an MRT station and unobstructed views. If it is located within an existing residential area, then the new project could appeal to upwardly mobile people living in the area. The size of the site and the absolute cost of the existing residential development are further considerations."

At the time of writing, there are five condominiums whose collective sale is due to close later this year. Of these five, only Horizon Tower is located in the prime area, but Lakeside Tower is in the up-and-coming Jurong Lake District. In addition, three of the developments are freehold, but all five are over 20 years old.

Lakeside Tower has a high chance of being successfully sold en masse as it is located in the Jurong Lake District, which is set to become Singapore's second CBD, and the Jurong Region Line, which will greatly improve access to the western part of the city when it is fully completed in 2029.

The downside of Lakeside Tower is its 99-year lease, but the successful collective sale of two non-freehold neighbours - Lakeside Apartments and Park View Mansions - suggests that the lease may not be a barrier to property in the area. The main drawback of Lakeside Tower is the potential competition from two new developments that will arrive within 500 metres.

In May last year, the nearby Lakeside Apartments was sold collectively for S$273.88 million (S$1,250 to S$1,260 per square foot) to Wing Tai Holdings, which plans to build a 300-plus-unit residential development.

Park View Mansions is another nearby project that was sold through a block sale in August last year. A joint venture comprising CEL Development, Sing-Haiyi Pearl and TK 189 Development snapped up the site for S$260 million (S$1,023 per square foot) and plans to build a residential development of up to 440 units.

Current list of projects in collective sale and their likelihood of success

Park View Mansions was sold as a group for S$260 million last year. (Photo: Albert Chua/EdgeProp Singapore)

Freehold Hong Heng Mansions is another project that is expected to attract developer interest due to its proximity to Springleaf MRT station (TEL). In addition, interest in the neighbourhood is growing following the sale of several plots around the nearby Lentor MRT station (TEL) under the Government Land Sales (GLS) scheme. In addition, Lentor Modern, which is located on one of the sold GLS sites, sold 80% of its units during the sale period.