If you like a gamble, you don’t have to wait for the casinos to open. Just roll the dice for a collective sale instead.

If you like a gamble, you don’t have to wait for the casinos to open. Just roll the dice for a collective sale instead.

The game plan is simple: Pick a condominium block that looks ripe for a collective sale and buy in before the big payday.

Prices of such blocks are showing rapid price rises as hopeful buyers rush in with an eye on the possible windfall.

Their desire to get a slice of the potential action is driving them to meet inflated asking prices from sellers willing to cash out.

But they are taking a huge bet buying in at inflated levels, if they are merely out to make a quick buck rather than buying a home to live in.

The heightened demand could drive values to an artificial high, said Credo Real Estate’s managing director, Mr Karamjit Singh, with the obvious risk that the anticipated collective sale gets derailed.

‘If the sale does not proceed, the prices could fall from the perceived value.’

Investors should be wary of suburban 99-year leasehold properties selling at prices that include a large premium for a possible sale en bloc, said market watchers.

This is because the chances of a successful sale in such estates are slimmer than the chances of one in estates that are freehold.

Savills Singapore’s director of marketing and business development, Mr Ku Swee Yong, said a freehold site can cost around 20 per cent more than a 99-year leasehold one located next door.

Sale prices have surged at the 280-unit Pearl Bank Apartments near Outram Park MRT Station, thanks to attempts at the 99-year leasehold estate to get a collective sale off the ground.

An agent said that last month he sold two 1,755 sq ft units on high floors: one for $1.01 million and one for $1.09 million. The buyers were a local banker and an Indian permanent resident.

But they might not benefit much if such a sale occurs, as the minimum collective sale price of their units is about $1.19 million, although there is talk this could increase if a higher plot ratio for the site is approved.

The sellers were happy to cash out quickly and buy another property before prices went even higher, the agent said. They also do not have to wait out the collective sale, which might not happen.

Caveats lodged showed that three 1,755 sq ft Pearl Bank apartments were sold last month for $857,000 to $905,000 - compared with just slightly over $600,000 for deals done involving units of the same size last June and July.

At Farrer Court, coming up for an en bloc sale by tender, a 1,453 sq ft unit was sold for $900,000 in March. That beats the $870,000 fetched by one unit in February and the $660,000 fetched for another last September.

The price of the land on which a development sits tends to move faster than the price of individual units, said Mr Singh.

‘It would be unwise to buy into a development that is priced close to the collective sale value,’ he noted.

Nevertheless, not all estates are created equal. The well-located properties will attract more demand than those in less favourable areas.

‘If the collective sale of Pearl Bank doesn’t go through, prices will definitely fall, but maybe by just 10 to 20 per cent, because it is a very central development,’ said a property agent.

The story is different for outlying projects, particularly those with poor rental prospects, said a consultant.

A person buying into such developments - and paying a collective sale premium - would find himself with a bad investment if the collective sale failed, she said.

Still, better rental levels could ease the pain.

At the 99-year leasehold Chiltern Park Condominium in Serangoon, whose residents are working towards a collective sale, a three-bedder sells for $421 per sq ft on average.

If a collective sale goes through, the sum fetched could actually fall below that level once the potential charges that developers have to pay are factored in, according to Savills Singapore.

But investors who recently bought units there could at least get relatively good rents, said Savills, noting that asking rents there now average $2,400 for a three-bedder. This level and the average price give a rental yield of about 5.4 per cent - a very good return in the local market.

If a collective sale fails to come through at a condominium, investors must be able to ride out the market and wait for the next round, which could be years away, said a market watcher.

Anyway, that might not turn out to be such a gamble.

‘At the rate things are going, every old development will find its end and give way to new developments,’ said Mr Singh.

Escalating prices

Pearl Bank Apartments

Last June and July, units of 1,755 sq ft were sold at over $600,000. Last month, three units of that size fetched $857,000 to $905,000; two more, on high floors, went to a local banker and an Indian permanent resident for just over $1 million.

Farrer Court

A 1,453 sq ft unit at this property, which will soon be put up for collective sale, was sold for $900,000 in March. This contrasts with sales done at prices of $870,000 in February and $660,000 last September.