Singapore's Guide To Understanding The En Bloc Process
 
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Singapore's Guide To Understanding The En Bloc Process

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Singapore’s Guide To Understanding The En Bloc Process

With news about homeowners becoming overnight millionaires with successful en blocs, many are curious as to what an en bloc means, why do people en bloc, and more importantly, kay poh a bit about recent en bloc transactions.

The current en bloc cycle is in its third year – starting with the successful sale of Shunfu Ville in 2016. However, it has petered down following the tweaks to the cooling measures in July 2018. Owners of older projects, seeing the millions earned by those who had their properties successfully sold, often think about putting their own properties up for collective sale and the chance to earn a hefty return as well. However, the process is onerous and not as simple as it sounds. There are various conditions that the development and residents need to satisfy before the en bloc sale can take effect.

This guide helps you to understand


What Is An En Bloc Sale

A simple way of defining an en bloc is the sale of two or more property units to a single common purchaser.

It is equivalent to a collective agreement for the majority of the owners to give up their apartments in exchange for payment. Ideally, that payout is higher than what the individual apartments were purchased for. Thus, in many instances, a successful en bloc sale means a significant profit earned for the owners.

Pacific Mansion in River Valley was sold for close to S$1 billion to a consortium led by GuocoLand.

However, an en bloc sale might still encounter potential roadblocks, especially if the development is more than 10 years old. This is when approval for the owners need to be solicited, and at least 80 per cent of those residents (90 per cent if the development is less than 10 years old) must agree.

Even when approved, complications can still arise as the remaining 20 per cent might resist the sale, such as the en bloc sales exercise of Shunfu Ville. Although successfully awarded to Qingjian Realty, some owners objected to the sale during the court case and filed an appeal to the High Court. One objection queried if the transaction was done in good faith, considering the sale price.

However, lawyers representing the collective sale committee argued that in 2015, the committee launched two public tenders, both at a reserve price of S$688 million. However, the tenders did not attract any formal bids until Qingjian Realty approached with an offer price of S$638 million.

When delivering the final judgement, the Court of Appeal noted that while the “committee was in somewhat of a rush, there was nothing to suggest an absence of good faith or impropriety in the transaction”.

Advantages And Disadvantages Of An En Bloc Sale

Homeowners, especially those who have weighed the costs and benefits of seeking the collective sale route, have taken into consideration the high upkeep costs for an old development.

For example, the lifts may often break down. Other maintenance issues like the ageing pump and sewage systems, which cause persistent chokes, contribute to overall inconvenience where time and money must be spent to fix the problems.

Others might be motivated by the premium offer. These owners are more than happy to collectively sell their units to the developer and in the process, accrue significant profit compared to what they have invested earlier.

There are also some homeowners who want to move to a smaller apartment since their children now live on their own. These homeowners are mainly retirees who find living in a big apartment too costly.

As they might not be able to apply for home loans due to age, if the offer amount is deemed sufficient to foot the payment of the next, smaller apartment, it presents a tempting venture.

However, beneath the stories of overnight millionaires, the process to a successful en bloc is often long and tedious with plenty of legal costs, disappointments, loss of sleep, and sometimes fiery tussles among neighbours opposing the sale for personal reasons.

The regulations are such that if one of the owners chooses not to accept the proposal, there is a possibility that the 80 or 90 per cent threshold is not met, thus throwing success of the sale in doubt.

Pros And Cons Of Selling En Bloc

ProsCons
Able to monetise one’s investment immediately.No amount of cash can replace memories and nostalgia of living in one’s family home.
Money can be used to finance the next apartment.Want to keep the home as a legacy to pass down to future generations.
Can finance for retirement overseas.Families reluctant to move as they want to enlist their children in nearby schools.
Tired of costly maintenance upkeep; money can be deployed to higher yielding investments.New homeowners do not wish to bear the costs of additional stamp duties for selling their units prematurely.
Money will come in handy when there are urgent medical needs or other emergencies.Homes that have existing tenancies might need to bear additional costs for changing the tenancy terms.
Proceeds from the en bloc sale can be put into the new development on the existing site.If the home is held in an estate or will, additional legal costs might be needed if original estate owner/will writer stipulated that the property cannot be sold under any circumstances.

En Bloc Projects in Singapore: Date, Price and Projects

DateProjectReserve Price (S$)BidsFinal Price (S$)Winner
May 19, 2016Shunfu Ville688,000,0000638,000,000Qingjian Realty
August 31, 2016Harbour View Gardens34,000,000133,250,000Roxy-Pacific Holdings
October 06, 2016Raintree Gardens315,000,0003334,200,000UVD (Projects)
November 17, 2016Cuscaden MansionsN/AN/A103,800,000Not Disclosed (UK Wealth Management Company)
December 20, 2016Perpetual ApartmentsN/AN/A10,200,000Not Disclosed
May 05, 2017One Tree Hill Gardens72,800,000N/A65,000,000Lum Chang
May 24, 2017Rio Casa450,000,000N/A575,000,000Oxley, KSH, and Heeton Holdings
May 25, 2017Goh & Goh Building120,000,000N/A101,500,000BBR Holdings
May 31, 2017Eunosville648,000,0007765,781,819MCL Land
July 11, 2017Lotus at Pasir PanjangN/AN/A121,000,000Oxley Holdings
July 20, 2017The Albracca63,500,0001269,119,000Sustained Land
July 26, 2017Serangoon Ville415,000,000N/A499,000,000Oxley Holdings
August 22, 2017Tampines Court952,000,0001970,000,000Sim Lian
August 30, 2017Toho GreenN/AN /A8,400,000Oxley Holdings
September 21, 2017Sun Rosier235,000,0004271,000,000SingHaiyi
September 26, 2017Jervois Gardens68,000,000872,000,000Subsidiary of SC Global
September 28, 2017Nanak Mansions200,000,000N/A201,080,000UOL Group and Kheng Leong
October 07, 2017The Opus768,000,000N/A906,700,000City Developments Limited and Hong Realty
October 10, 2017Sembawang Hills EstateN/AN/A25,740,000Tee Land
October 17, 2017Changi Garden196,000,0008248,800,000Chip Eng Seng
October 20, 2017Florence Regency629,000,0003629,000,000Logan Property
October 23, 2017Dunearn Court38,800,000N/A36,300,000Roxy-Pacific Holdings unit RH Central
October 27, 2017Lodge 77N/AN/A29,000,000KTC Group
November 07, 2017Casa ContendereN/AN/A72,000,000Tee Land
November 16, 2017Tai Wah BuildingN/AN/A84,890,000Lucrum Capital
November 17, 2017Mayfair Gardens265,000,000N/A311,000,000Oxley Holdings
November 28, 2017How Sun Park78,000,000N/A81,089,980Subsidiary of SingHaiyi Group Ltd
November 29, 2017Crystal Tower138,000,00012180,650,000Allgreen Properties
December 01, 2017Royalville368,000,0009477,940,000Allgreen Properties
December 06, 2017Jervois Green48,000,000652,916,768Investors led by Mike Ho
December 11, 2017Apartment 8N/AN/A21,529,998Oxley Holdings
December 13, 2017Derby Court62,000,000773,880,000Roxy-Pacific Holdings
December 13, 2017Parkway Mansions138,000,000N/A146,990,000Sustained Land
December 15, 2017Vista Park350,000,0005418,000,000Oxley Holdings
January 12, 2018Parkwest Condo818,000,000N/A840,890,000SingHaiyi Land and Haiyi Wealth Pte Ltd
January 26, 2018The Wilshire98,070,000N/A98,800,000Roxy-Pacific Holdings and Tong Eng Group family vehicle
February 07, 2018City Towers355,000,0007401,933,798Japura Development (a unit of Cheung Kong)
February 14, 2018Peark Bank ApartmentsN/AN/A728,000,000CapitaLand Group
February 14, 2018Cairnhill Mansions362,000,000N/A362,000,000Low Keng Huat
February 14, 2018Riviera Point75,000,000N/A72,000,000Macly Group
February 19, 2018Brookvale Park530,000,000N/A530,000,000Hoi Hup Realty and Sunway Developments
March 02, 2018Hollandia163,150,000N/A183,380,000Far East Consortium International, Hong Kong
March 08, 2018Toho Mansions163,200,000N/A120,428,000Koh Brothers
March 09, 2018Eunos Mansion218,000,000N/A220,000,000Fragrance Group
March 09, 2018Goodluck Garden550,000,000N/A610,000,000Qingjian Realty
March 14, 2018Lotus at JervoisN/AN/A46,300,000Fragrance Group
March 15, 2018Katong Park Towers288,000,00010345,000,000Bukit Sembawang
March 17, 2018Pacific Mansion938,000,000N/A980,000,000GuocoLand, Hong Leong, Hong Realty
March 21, 2018Makeway View168,000,000N/A168,000,000Bukit Sembawang
March 27, 2018Ampas Apartments105,000,000N/A95,000,000Oxley Holdings
March 29, 2018Cairnhill Heights80,000,000N/A72,588,888Ocean Sky International, Tiong Seng
April 04, 2018The Estoril220,000,000N/A222,938,000Far East Consortium International, Hong Kong
April 05, 2018Pomex Court37,000,000N/A37,600,000K16 Development
April 13, 2018Tulip Garden753,000,000N/A906,900,000Yanlord Land Group and MCL Land
April 16, 2018Asia Gardens338,000,000N/A343,000,000Sustained Land, Ho Lee and other partners
April 19, 2018Dunearn Gardens488,800,000N/A468,000,000EL Development
April 23, 2018Olina Lodge220,000,000N/A230,900,000Peak Opal (a unit of Kheng Leong)
May 04, 2018Balmoral Gardens92,000,000N/A82,899,995Aurum Land
May 09, 2018Peak Court Condominium106,000,000N/A118,880,001Tuan Sing Holdings and Rich Capital
May 17, 2018Chancery CourtN/AN/A401,780,000Not disclosed
May 18, 2018Chinatown PlazaN/AN/A260,000,000Royal Golden Eagle (RGE)
May 23, 2018Landmark Tower285,000,000N/A286,000,000JV Company (One of them public-listed, not disclosed)
June 12, 2018Kismis View and 19 Lorong Kismis102,000,000N/A108,450,000Roxy Pacific Holdings and Tong Eng Group family vehicle
June 14, 2018Park House308,000,000N/A375,500,000Shun Tak Cuscaden Residential (wholly-owned subsidiary of Shun Tak Holdings)
June 19, 2018Kemanan Point143,800,000N/A143,880,000Soilbuild Group

Source: URA, PropertyGuru, RHB Research

From the table above, it’s clear that the ongoing en bloc frenzy is unlikely to slow as developers are actively seeking for sites to build up their land banks.

But in 2018, developers have taken more interest in the potential of seeking en bloc sites in prime districts like 9, 10 and 11. The search for sites in these areas is expected to continue as there is strong demand from a pool of foreigners looking specifically to invest in these districts.

Home buyers looking for Singapore Properties in prime districts 9, 10 and 11 may like to visit Property Guru’s Listings

This year, the highest en bloc transaction was in District 9 where Pacific Mansion in River Valley was sold for close to S$1 billion to a consortium led by GuocoLand. In 2018 alone, there were 20 prime district developments successfully sold through collective sales.

A recent freehold development called Park House located along Orchard Boulevard was sold to a unit of Hong Kong-listed Shun Tak Holdings for S$375.5 million, or S$2,910 psf per plot ratio (psf ppr).

Can we expect another billion-dollar transaction? That depends. The continued escalation of the en bloc craze has prompted the government will step in to regulate the market. In July 2018, the Monetary Authority of Singapore rolled out several property cooling measures to help moderate housing price increases. This included raising ABSD rates by an additional 5.0 per cent for developers purchasing residential properties for housing development. As a result, en bloc plans for many ageing residential developments have been put on hold or had their tender periods extended.


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