Amidst negativity that has gripped the realty market in Singapore ever since new cooling measures were announced, Pandan Valley condo has set a new record in terms of the asking price.
As the property gears up for a fresh attempt at collective sale, the owners have settled on a record reserve price of S$2.6 billion.
Market watchers in Singapore suggest that the whopping price tag set during a EOGM on 8th September shall be a new benchmark as far as the asking price for large en bloc sale goes.
If the en bloc sale materializes, the owners would see their bank accounts swell by S$4.2 million each for the site that encompasses an area of 865,000 sq ft.
More than 300 residents of Pandan Valley holding over 40% of the property’s share value attended EOGM.
Among the attendees more than 66% had voted for S$ 2.6 billion reserve price while 11% of the attendees wanted the price to be S$2.86 billion.
8% of the owners were who were filled in with enthusiasm wanted the asking price to be fixed at S$3 billion.
In the same meeting 84% of the attendees gave their consent to terms and conditions that were set for collective sale.
It must be mentioned that clauses on apportion and distribution of the sale proceeds are yet to be finalized by the owners.
A third EOGM has been slated for the month of November where the Collective Sale Committee of Pandan Valley shall put forward the proposal on apportion before the process of collecting signatures begin.
Learn More about En Bloc Sale Process
Mandarin Gardens held the previous record in terms of reserve price which was S$2.48 billion.
The 1,006 apartment-unit development located along the East Coast is in the process of acquiring the minimum 80% consent required for collective sale.
The only other property that clocked the S$2 billion price mark was Braddell View, the ex-HUDC estate which has an asking price of S$2 billion which houses 918 apartment units with an area of 1.124 million sq ft.
Apart from these other properties that have breached the billion-dollar mark include Holland-Bukit Timah’s Pine Grove which is in the close vicinity of Pandan Valley and has been listed for sale at a reserve price of S$1.72 billion.
While Hillview Area’s The Dairy Farm is trying to lure developers for S$1.68 billion.
CapitaLand-led consortium has acquired Farrer Court on 2007 which holds the record for the biggest successful en bloc sale and bagged S$1.34 billion. The site was redeveloped into d’Leedon condominium which has 1,715 apartment units.
Mr Colin Tan from Suntec Real Estate Consultants feels that since majority of the owners have agreed to the S$2.6 billion reserve price they are well aware of the demand for collective sales in the market since the new cooling measures were announced two months back.
He added that this breaks the myth that the market for en bloc sales was dead and he feels the owners have been reasonable in their demand and they understand the current situation in the market.
Savills Singapore’s Head of Research Mr Alan Cheong is of different opinion and feels that CSC has been little more enthusiastic about the asking price which was to convince the owners to sell their property and in this collective sale market it may be difficult to attract developers.
While there is difference of opinion between the analysts about the asking price for a freehold site of this size what they agree upon is that the price tag is little too high given the new cooling measures that have dented the market.
Chris International’s Director Mr Chris Koh said that developers are measuring their steps in the market and most would play a patient game.
According to him, owners of Pandan Valley should be ready to compromise on their reserve price if they are looking for a buyer in this market and have to be flexible with the closing date of their tender even if they are able to successfully obtain 80% consent required for the sale of property.
He concluded that developers have become selective and they would compare the pros and cons of different sites before putting in their money.
Nicholas Mak, Executive Director at ZACD Group believes that the S$1,430 psf ppr price as estimated by ERA the marketing agent for the sale is attractive but the property’s size makes it a hard sell in this market.
The first challenge for the developer is to pump in that much cash while acquiring the site and then there is always the challenge of being able to sell all the units for new launch property within the strict five-year timeframe.
It must be mentioned that as per the new cooling measures developers have to bear steeper 25% ABSD rate which is forfeited if the developers aren’t able to sell all their units within 5 years and also have to pay 5% non-remissible ABSD.
Mr. Mak said that Pandan Valley is in the club of other big developments which face the same challenge.
He added that at the asking price of S$2.6 billion, there isn’t a developer that would be willing to take such a huge risk in the market and if there are developers interested in this site they may prefer forming a consortium in order to share the risks.