ST: Collective sale market seen slowing on proposed change - 29 Aug 07

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Aug 29, 2007
Collective sale market seen slowing on proposed changes
New rules will address minority concerns over sale price,
transparency By Joyce Teo, Property Correspondent and Nicholas Fang

THE property fever that has gripped Singapore for the past year will
likely cool in the wake of proposed changes to rules on collective
sales.

The new rules - likely to apply in early October - will make
collective sales a lengthier, more complex procedure, say industry
experts.

'The market will eventually adapt, but the process will definitely
be more long-winded and cumbersome, which should diminish the number
of projects which come to market successfully,' said Mr Jeremy Lake
of consultancy CB Richard Ellis.

Lawyer S.K. Phang said Singapore's rules on collective sales are
already one of the most comprehensive in the world, but 'the latest
amendments - so far the most far-reaching in their effects - tighten
them further'.

Sales have already been tapering off.

Other pressures have come from a recent hike in development charges
that developers pay and a jittery stock market that has unnerved
investors.

The new rules come amid seemingly growing resentment among minority
owners - those who did not vote for a sale - with the sale process.

Many of their issues, apart from the sale price, concern
transparency, with some owners complaining that they are being kept
in the dark.

The changes, including a five-day cooling-off period, will help
address these concerns, but the changes are still pro-sale, said a
lawyer.

Some industry players are not happy with the short transition period
for the proposed changes.

Once the amended Land Titles (Strata) Act takes effect, it will
apply to all projects except those where the 80 per cent or 90 per
cent required majority consent has already been obtained.

Owners are seen rushing to get the 80 per cent approval before the
new rules come into effect or risk having to restart the whole sale
process under the new law.

The last few signatures, however, are often the hardest to nail,
observers say, so those who have not yet signed have even more
reasons to resist.

'The short transitional period may undo some ongoing collective
sales, which are in the process of obtaining the required
percentages of consensus,' said Dr Phang.

Estates that have just formed sales committees or started collecting
signatures will have to start again at a higher cost. A benefit is
that the owners of these estates will be able to monitor the sale
process better.

'The new rules will give owners a chance to be involved,' said a
collective sale seller. 'If not, the sales committees kind of run
the show on their own.'

Mr Nicholas Mak of consultancy Knight Frank said: 'The requirement
to have a vote to set up a sales committee means very committed
people are required to sit on the committee, as they will face
greater responsibility and accountability.'

Some speculators looking to set up a sales committee or just buying
into older properties hoping for a quick gain through the collective
sale process could be deterred.

There will be a higher risk that the sale will not succeed and, even
if it does, the specuators' cash will be tied to the property for a
longer period.

The proposals could also deter those who are not serious about a
collective sale but are just testing the market to see their
property's worth.

'If the new regulations can weed out such people, that would be a
positive effect,' said Mr Mak.

If fewer estates come to the market, their success rate could rise,
said a consultant.