Love thy neighbor: apartment owners team up to cash in
The Wall Street Journal (abridged)
03 January 2013
As 2018 gets under way, developers are coming up with new ways to feed
what seems to be an insatiable appetite among the world’s emerging
middle class for apartments both as places to live and investments to
store their wealth.
Consider what has been happening in Singapore.
In 2017, the volume of apartments sales in Singapore hit at least $5.2
billion, the most in one single year since 2007, according to
preliminary data compiled by research firm Real Capital Analytics that
included residential sales $10 million and greater.
The lion’s share of the Singapore sales were by a new breed of investor
who were cashing out in a process that has become known as a
Here is out it works: Dozens of neighbors living in the same apartment
complex band together to package all their units and sell the whole
property to a developer in one big go. Selling this way produces a
bigger payout than selling on their own.
Developers in the land-starved region are willing to pay up because
they want to redevelop the property, often by knocking it down and
building new. Most of the time they want to build more apartments and
start the cycle all over again.
The land shortage “makes developers more aggressive,” said Yong Choon
Fah, national director of investment sales at brokerage firm JLL
Singapore’s apartment market typifies one of the engines that powered
the global real-estate industry in 2017 and is expected to keep
chugging along this year. In a major cultural and economic shift, units
are becoming traded almost like a commodity.
The trend is particularly strong in Asia. China’s housing boom over the
last two years has been fueled by speculative activity and the belief
that property is the best investment for families to build wealth.
Condominium prices in metro Manila have been rising at an average rate
of 10% annually, according to Knight Frank.
In Singapore, a collective sale closes nearly every week, said Tricia
Song, head of research for Singapore at Colliers International. Sales
move forward if 80% of the homeowners agree to sell their complex that
is a decade or older. Those who object can sue if they claim the
process wasn’t carried out in good faith or if they stand to lose money
from the sale.
Sometimes the asking price is too high. “In fact, failure is quite
common,” says Christine Li, a research director at Cushman &
Wakefield, a real estate brokerage firm. “Many of the projects sold [in
2017] were their second or third attempt.”
Still, most are willing to go along. The final payout from the
developer is usually at least 30% higher than the market price,
according to Ms. Li.
In the Royalville project, the homeowners received an average 2,785
Singapore dollars for each square foot, or a 122% premium above the
last apartment in the project that was sold on the open market, Ms. Li
“The people who get the most payout have been holding a really long
time,” said Chew Chang Hui, head of consumer marketing for Singapore at
PropertyGuru, an online platform for real estate listings in Asia.
After the sale, the idea then is to tear down the old apartments with
the hope of squeezing more new units on the same piece of land.
In September, Singapore developer Sim Lian Group bought the Tampines
Court project for 970 million Singapore dollars ($725 million)—the
biggest deal of the year—and plans to turn 560 units into 2,000 units.
Likewise, local developers City Developments Ltd. and Hong Realty
(Private) Ltd. plan to transform the 200-unit Amber Park project into
one with 800 units.
The trend shows no sign of slowing in 2018. In Singapore, about 70 to
80 property developments are in the middle of a collective sale,
according to brokerage firm JLL.
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