How to spot the next en bloc

By Feily Sofian / The Edge Property | May 24, 2017 2:20 PM SGT
The residential collective sale market jolted back to life with the sale of Shunfu Ville, Raintree Gardens and Harbour View Gardens last year with a total value exceeding $1 billion. The prospect for collective sale remains encouraging with the sale of One Tree Hill Gardens for $65 million to a unit of Lum Chang Group this month.
Amid a tight supply of private housing sites on state tenders, developers are setting their sights on the collective sale market for alternative land sources. Nearly 30 private housing sites were launched for sale in 2011, excluding executive condo sites. In comparison, less than 10 private housing sites were launched for sale in 2016.
Homeowners stand to reap attractive sale proceeds from collective sales. This is because for developments that are 10 years old or older, at least 80% of owners must agree in writing to put up the property for sale in the open market. The potential sale proceeds serves as a carrot for homeowners to sign their consent.
On the other hand, a collective sale deal is likely to fall through if the asking price is too high. Developers must reap a reasonable profit margin from the collective sale with a view of redeveloping the property into a new project for sale in the future.
Besides asking price, there are other factors that would determine the success of a collective sale. To identify these factors, The Edge Property constructed a logit model, also known as the logistic regression*.
Based on the model, there are three variables that increase the success of collective sale. They were statistically significant at 5% level:
  • 1. Age (older developments have better success rate);
  • 2. Number of units in the development (smaller developments have better succes rate); and
  • 3. Premium of new sale and sub-sale price over the collective sale/ asking price, within the same year and district.
Interestingly, tenure (freehold versus leasehold) and location (whether the property is located in Central or Non-Central Region) were statistically insignificant.
Former HUDC estate Rio Casa (left) and Eunosville (right), which were put up for collective sale, have a success probability of 79.7% and 62.9% respectively based on the logit model
Photos: Knight Frank, OrangeTee