We read about it, we heard about it. We even know our auntie’s friend’s son whose house went through it. And at the end of of it all, we keep hearing this one thing which make us pay just a little more attention – “Wah, they earned alot from it!“
If the conversation or story had not ended by then, we may then hear of how these people who profited from their en bloc sale are now flushed full of cash. We then understood they are now having a “tough” time buying a big luxurious home or maybe buying 2 properties for investment instead.
We perhaps then grew just kind of envious of these people and started thinking to ourselves – Can my house go through en bloc too?
I will be talking about en bloc sales regarding private properties in this article. It is good to note HDB does have such en bloc sales as well, which they named as Selective En bloc Redevelopment Scheme (SERS). This will however, be a story for another day.
Right, let’s move on!
What is En Bloc?
Let’s first define what is “En Bloc”. En bloc means “all together”, and in real estate – to do an en bloc sale means to do a collective sale whereby two or more property units are sold to a single purchaser. So as you may commonly know in Singapore, we usually read en bloc sales as the owners of a particular developer banding together to sell their homes to a single purchaser – i.e the developer.
We may also see at a smaller scale – owners of say, 2 or 3 plots of landed property coming together to sell to another owner. This is seen as an en bloc sale too.
En Bloc Sales in Singapore
The private en bloc market is an active market here in Singapore. Developers will at times need to replenish their land bank to offer new units for sale as well as to ride on opportunities brought about by new developments in the area or rising home prices over time.
In 2006, the sales translated to $7.839b. For 2007 – $12.307b, 2017 – $7.31b and 2018 – $10.5b. We can see here that back then in 2006 and 2007, there is definitely a higher amount of sales being made compared to 2017 and 2018.
However, do you remember keep seeing record en bloc sales on the news, happening almost transaction after transaction in 2017 & 2018?
Compared overall, the total sales are lesser in 2017 and 2018 but if we take a look at the number of sales: 2006 – 84 sales 2007 – 166 sales 2017 – 34 sales 2018 – 45 sales
We can see that the number of transactions in 2017 and 2018 are far lesser than 2006 and 2007, but are actually going at much higher prices. This reflects the understandable rising land prices over time in Singapore.
What Are The Terms to En Bloc?
For en bloc to go through – 80% of the owners have to be agreeable to the sale for developments older than 10 years, and 90% of the owners have to be agreeable if the development is < 10 years old.
The above percentage of owners is determined by share value owned by the owner – which larger unit owners will have larger share value.
Asides, this is also simplifying the process – for these owners to be agreeable in the first place, there is also the lengthy process of first triggering the Extra-ordinary General Meeting to start the en bloc process. If successful, then there is the negotiating of prices, searching for a developer who is willing to purchase (not to mention the process the developer will need to undertake to justify this business decision) and etc. A typical process from end to end can take about 1.5 to 2 years.
Still Negotiating
Guide To Assess If My Development Can En Bloc Or Not
Now, does your development have a chance for en bloc? After all, for en bloc to happen – developers have to find that your development is even worth buying over for them to build a newer development over. It has to offer good business value to them to even consider proceeding.
What are the points that you can look out for?
1. Land Value
This may be the most straight-forward reason a developer may consider buying your development. As land values in Singapore increase over time, you may very well see newer properties around your development selling at prices previously unheard when you first made your purchase.
This increase in land values around can happen for many reasons. It could be the Government has announced new plans in the area in its Master Plan, or these actions have already started taking shape. For example, a new MRT or a new mega shopping mall coming up, or maybe just more upcoming developments in a previously less developed area will encourage greater price growth.
When your older development sits through these developments – chances are that your land have significantly appreciated and it would make sense for developers to buy your homes at a price higher than what you paid for; redevelop the land and sell at profit making price.
2. Plot Ratio
Older developments tend to have low-lying blocks, or the Government has stated that the land your development is on can actually be rebuilt to a higher floor. What this means to the developer is that there is that potential to build more units to a higher level than what your development is currently offering. As such, it may make excellent business sense to buy over from you and build a more dense residential plot to drive greater revenue.
Good to note as well – in Singapore many buildings are limited in height due to clearance required from planes flying over the area. Paya Lebar Airbase is such an example, and it has imposed height limits in many areas such as Punggol, Sengkang, Hougang, Geylang and Eunos. It is now slated to clear in 2030. With this, we can expect a revision of plot ratio in all these surrounding areas and that may spark off a possible en bloc frenzy.
3. Land Use Intensity
Similar to the plot ratio point, if your development sees a lot of open spaces within the development and it just.. does not feel as packed as other developments you see; There is a chance that it is not used as intensely as it could, meaning there is a chance for developers to actually put in more units into the site.
While this may mean staying there is not as crammed as it can be, it can also mean developers may find it worthwhile to buy over your site and redevelop it to something newer.
4. Land Size
How about the size of the whole development? In 2017, 2018 – many huge sites were sold to developers and that resulted in mega developments offering more than 1,000 units.
However, large land sizes may also have a drawback. It can simply be too expensive to buy! Even if a developer finds the site to be attractive – if it is too large and out of their budget, they are unable to buy too. This may very well affect your chances of en bloc or to secure a good price.
In 2017 & 2018, it may make sense to buy such large plots as the land values make sense and developers were running out of land bank as well. However, in this period of time (especially during COVID19) – large plots of land are not as attractive to developers.
5. Competitive Supply
Now, even if the stars all align above with regards to your development – A developer may not feel inclined to buy if there is too much competitive supply around.
Imagine, if you were a developer and there is this chance to purchase this piece of land. However, you see that all around this land are other new condominiums. Would you buy if there is such tough competition around you? Probably not, unless you can find a way to confidently enter the market with better pricing or product value compared to surrounding competition.
On the other hand, if this piece of land has less competitive supply or maybe much older properties around it – it may then make sense to enter.
6. Property Market
Of course, developers will look at how the property market is performing before making any decision. If the property market is doing well, and there is strong demand, it will make sense to take advantage of current trends.
However, if the market is bad and people are more concerned about their jobs than buying a new property, maybe they should hold back on their purchase as there is a time limit to buy, develop and sell before penalties are imposed on them by the government.
Alternatively, a bad market may also present opportunities to developers to purchase cheap. However, this may be very rare in terms of en bloc sales. At the end of it, developers will become more selective in such markets. Today’s market during the COVID-19 pandemic is probably a good example of such a bad market. As of Oct 2020, there has only been ONE en bloc sale of a very small site.
What Happens After An En Bloc?
After an en bloc sale is concluded, this group of sellers are now suddenly removed of their homes but are compensated with a large amount of money. The natural reaction these sellers is to now enter the buyers’ market of course, as they now have no place to stay.
Armed with this new money – they can possibly buy more than 1 property even and at higher prices. What will happen then is that it is possible you will see an inflation of home prices, which may not be the best thing if you are a buyer yourself who DID NOT just have an en bloc sale.
And if we just do a comparison to the hot en bloc periods of 2006-2007 and 2017-2018 to the Private Property Index – we can see that there is a corresponding rise in private property prices as well.
Of course, this is understandably less pronounced in 2017-2018 due to greater cooling measures and regulations which help to prevent sharp fluctuations in the market.
So Will En Bloc Or Not?
Well, so will your development en bloc or not. Yes & no, really. This depends on the timeframe you are looking at.
Chances are if your development is relatively new, you may find it difficult to en bloc. In the current COVID-19 market, developers are in no mood to do en bloc sales as well, especially in the flurry back then in 2017 and 2018. Many are still selling their existing stock.
If you are willing to wait however, as land prices rise and your development ages during this time, there is a chance developers will take a look as their existing stock starts to run out. If we exit the pandemic situation, developers may also find it attractive to buy land.
At the end of the day, Singapore is a land-scarce nation and as time and land value progresses, your development may very well be in the plans of developers or even the Government for redevelopment.
Want to learn more? Reach out to us here!
Comments