The high number and value of collective sale deals done this year has expectedly become the talk of the town. Such sales offer a useful way to optimise the use of land, allow older developments to make way for fresh designs that appeal to today's buyers, and perhaps even offer "green" features. From a national point of view, there is much to be said for freeing up scarce land in Singapore. Indeed, collective sales reflect the current value of a piece of land, one that takes into account the effects of economic growth and the benefits of infrastructure and amenities which have sprung up since the erection of the original building.
En-bloc redevelopment could enhance the tone of some areas, especially when new buildings blend in with existing structures, and help people to live closer to MRT stations, parks, malls and other facilities. As a higher density of housing could put pressure on transport links, sufficient attention must be paid to all aspects of urban mobility.
Sellers taking advantage of the upswing to cash in will be able to re-enter the property market to find a home that befits their current circumstances. Some might need more room for a growing family and others would want to downgrade to the HDB market after the required waiting period. An active property market allows people to reorganise their finances for a variety of purposes, like business expansion, diversified investments and retirement. Both public and private housing can get a fillip from an upbeat mood on the collective sale market.
The collective sale deals done this year have a total transaction value nearing $5.8 billion, according to one account. To put that in perspective, the deals in 2006 were valued at $7.8 billion by some and the figure for 2007 was $11.5 billion. However, a greater number of larger deals has been concluded this year compared with previous cycles.
So long as developers make the right call by giving weight to the sustainability of present trends, these sales are a rational indication of the importance of property in the economic life of the city. Bidding should not become over-exuberant as the success of en-bloc sales depends on several factors, not least of which is the possibility of oversupply fanned by large-scale developments. There is a danger of successful collective sales creating a momentum that loses touch with market fundamentals. The rate and price levels of the recent land acquisitions must also take into account the possible effects of slower economic and population growth. Of course, the market will strike an equilibrium between demand and supply eventually. In the meanwhile, if artificial buoyancy is created, that could provoke a contraction of the collective sale segment which would affect other parts of the property market as well.