THE EFFECTS OF ANCHOR POINTS ON THE SUCCESS OF EN BLOC SALES

Abstract

Despite the enticing prospects of profits and amendments to the Land Titles (Strata) Act to facilitate en bloc sales, many projects are still unsuccessful in selling en bloc. Previous literature has established that both the intrinsic characteristics of a project, like site area and tenure, and the exogenous conditions, like market conditions and number of GLS sites, affect its en bloc outcome. Few existing literatures, however, cover the effects of anchor points on the success of en bloc sales. As a form of heuristic, individuals may use an “anchor point” of an event or a value that they know as a reference point to make a decision. To decide whether to be in favor of an en bloc sale of his property, the anchor points used by an owner could be (a) purchase price of property, (b) market value of property and (c) owner’s tenure, or his length of stay in the property. This paper therefore seeks to provide an in-depth analysis on the effects of anchor points on the success of en bloc sales. It is hypothesized that the higher the reserve price as compared to the purchase price and market value of property respectively, the smaller the probability for successful en bloc sales because unrealistically high reserve price deters interested developers. Using the owner’s tenure as a proxy for sentimental attachment, it is hypothesized that the longer the owner’s tenure, the greater his sentimental attachment to the property and hence the lower the likelihood for successful en bloc sales. Using the Logit model, analysis was conducted on an individual unit level and the end-results supported the hypotheses, which proved that the anchor points do have significant impact on an en bloc outcome. However, owner’s tenure was found to be insignificant. Furthermore, it was found that the intrinsic characteristics of a project, namely location and number of units, are the most important determinants of its en bloc sale. Nonetheless, the anchor points are still very critical as compared to most of the other intrinsic characteristics of a project and exogenous conditions in determining its en bloc outcome.