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We Have Collected List of Questions Related to En Bloc Sale and You May Find the Answers All Below
2 Types of Failure: Fail to Launch and Fail to Find Buyer.
Fail to Launch. Collective Sale Committee needs to obtain minimum 80% consent from the owners before the launch of the tender. If the target number is not reach within the time period, then the whole en bloc process ends or fail.
Fail to Find Buyer. As per the regulations of the Strata Title Board, a buyer needs to be found within 12 months after obtaining the 80% consent. If a tender fails to attract bids the CSC can launch the property again through a fresh tender offering more incentive to the developers.
The CSC also has the option to enter into a private treaty with developers if they don’t find any bidders. These options have to be exercised within the 12-month period.
After the expiry of the 12-month period the whole process of gathering consent has to be repeated in case the owners want to test the waters again.
For More Information See En Bloc Process
There are series of steps in an en bloc sale that include calling an EOGM, hiring a professional team, discussing the agreement & fixing reserve price, obtaining consent, launching the tender and legally handing over the property.
It can take anywhere between 18 to 36 months for the entire process to materialize provided there is no Stop Order obtained from the Strata Titles Board or the objection reaches the doors of the High Court.
For More Information See En Bloc Process
There are several reasons when en bloc sales end up in the High Court. The most common reason being when individual property or a certain group objects to the collective sale over disagreement with respect to reserve price or method of apportionment.
Dissenting owners usually approach Strata Titles Board with their objections and in most cases STB initiates mediation to solve the disputes. If all efforts at mediation fail, a Stop Order is issued and the case reaches the High Court.
The Selective En bloc Redevelopment Scheme or HDB en bloc (Popular Known) is a scheme that has been initiated by the Housing and Development Board in Singapore wherein they select older flats in specific locations which undergo demolition and redevelopment. Under the SERS package flat owners receive rehousing benefits as well as compensation.
The En Bloc market is volatile and there are times of extreme enthusiasm whereas at other times the market is cold.
In en bloc parlance ‘Lucky Star’ refers to those properties that find successful bidder in even when the market is cold.
Such sales have the potential to override the negative sentiments in the market. They facilitate new sales and create a domino effect and hence they are termed as “Lucky Star”.
Singapore being one of the financial centres in the world has seen constant economic boom. It is also one of the favoured transit points in Asia, a great tourist destination, educational hub and a shopper’s paradise.
All this has created a huge need of hotels, restaurants, cafes, financial services etc. As space is scarce in Singapore old commercial structures give their way to new ones.
Old commercial properties are sold collectively to developers to allow them use the space far more efficiently and build taller and roomier structure and maximize the use of plot ratio.
This allows sellers to earn huge premium on their properties compared to selling them individually and investing in their business.
Commercial En Bloc sales are more incentivised for the developers as compared to residential properties.
Commercial en bloc sales allow foreign individual and companies to acquire properties which increase the scale of the market. The hospitality market in Singapore is booming and hence developers have the option of converting commercial sites into hotels (subject to URA approval).
But the biggest incentive for the developers is the relief from ABSD (Additional Buyers Stamp Duty) which is payable only in residential en bloc acquisition.
En bloc is a French term that literally translates into “collectively” or “all together”. En bloc sales in real estate refer to sale of the entire property by the individual unit holders collectively.
If 1 Owner Who Owns the Entire Property and sold it to another Buyer, then it is not consider en bloc sale.
Collective Sales or En Bloc Sale refers to all the unit holders in the property selling their units collectively to a buyer. This allows them to get a higher price than in the normal realty market.
There must be a consensus among the majority owners for the sale of the property collectively as mandated by the regulations. They also need to agree on the valuation of the property and methods use for the division of the sales proceeds.
The process has to undergo different stages and meet regulatory guidelines.
En bloc in Singapore is the process where property owners sell their properties collectively instead of selling them individually in the market.
En bloc sales are far more popular in Singapore than elsewhere in the world. In a city like Singapore where land is scarce en bloc sales have become the most popular means for developers to acquire land bank.
En bloc sales also offer sellers good return on their investments. Originally, it started in prime districts 9,10,11 and now has spread to city fringe and all parts of Singapore.
A residential en bloc sale is one where majority of the home owners (80% as required by regulations) collectively launch their property for sale via a tendering process.
The owners set the reserve price for the property and also define the method of apportionment of the receivables. In such sales the owners earn from the sale proceeds based on the size of their units or the share value in the property.
The residential En Bloc sale market in Singapore is in near frozen state for more than a year. The en bloc market which was booming till the second quarter of 2018 received a jolt when the government announced new cooling measures in July 2018.
This was done to check the oversupply of properties in the market. The cooling measures announced increased the remissible ABSD Rate for the developers which effectively took it to 25% from the previous 15% (if they cannot sell out in 5 years) and there is non-remittable 5% ABSD which is payable immediately once they bought the site.
This was a big blow for the developers who instead started looking for investment opportunities in the commercial segment. Furthermore, Urban Redevelopment Authorities’ restriction on the maximum number of units that a developer could build added a further blow.
The current regulations stipulate the GFA to be divided by 100 square meters (certain areas are affected) to determine the number of units that can be built. This regulation came into effect in January 2019 and has further driven away developers from residential en bloc sales.
Collective Sales in Singapore is driven by several factors. Owners of old buildings often tend to opt for Collective Sales to avoid increased maintenance cost and the cost of renewing the leases as the balance starts to shrink.
Also, Collective Sales is profitable for owners in prime locations where the demand for land is high.
There are some owners who look at Collective Sales as a way to early retirement when the proceeds from such sales is huge.
En Bloc sale offers developers an opportunity to redevelop the space and add more units thus opening up the opportunity for increased profitability.
Hence the developers are willing to pay substantially higher price for the property compared to the selling price of the individual units in the regular market.
Property owners can make 50% premium or even more in collective sales than selling their property individually.
There are several contributing factors that help in certain properties earning the En Bloc potential tag. The three most dominant factors are the price of land in the district, the pattern of ownership and the plot ratio.
If the site has a favourable plot ratio, lower development charges and higher land prices than surrounding areas it earns an En Bloc potential tag. Freehold properties are more favourable in the market as compared to those under lease.
High lease balance is also an incentive for any property. Other factors include size of the plot, shape of the plot, access to major roads, proximity to MRT Stations, zoning as per Master Plan etc.
Commercial En Bloc Sales Continue to Shine in 2020
More Will Be Expected to Launch in Coming Months
Market Analysis and Report of 2018, 2019 & 2020
Sophia View – Lucky Star of 2019, One of the 2 Residential Collective Sites SOLD in 2019
Selegie Centre Became the First Commercial Site that SOLD En Bloc in Early 2019
Collective sales of commercial properties saw a considerably rise in the past year as compared to sale of en bloc residential sales following cooling measures that were taken in 2018. This trend is likely to continue in 2020 as well.
According to market analysis data released, as of December 2019, around 40 sites have been launched for collective sale.
The report revealed that a total of 6 sites were sold for a cumulative price of S$490 million and 2 of these 6 sites was completely a residential site.
Another block of shophouses and apartments on 2–24 Phoenix Road was bought for S$42.6m in July by Qingjian Realty (South Pacific) Group’s subsidiary holding.
As for the remaining 3 sites that were collectively sold, one was the Min Yuan Apartment which is reportedly being fashioned as a hotel to be run by the Fragrance Group. Additionally, another two commercial sites went under sale in 2019.
It is worth noting that commercial or non-residential sites as well as small sites found more takers and were increasingly in demand by investors and developers alike.
This was mainly due to the huge rise in ABSD or Additional Buyer’s Stamp Duty that is in place since July 2018.
In the first half of 2019, 3 sites were purchased by developers and investors. Two big commercial sites, namely Selegie Centre and Realty Centre together accounted for majority of the sale bringing in nearly S$268 million.
Out of the 40 odd sites that went for sale in 2019, Riverside Piazza located near Clarke Quay whose last date of tender submission was December 19, 2019 has now entering a private treaty negotiation.
Katong Plaza on the other hand whose tender closed on the same date has got an EOI from an undisclosed buyer.
En Bloc 2018 – 2nd Highest Record Sales
In the reports on collective sales, it needs to mention that collective sale cycle reached its sales peak in 2018 with a total transaction value reaching S$10.836 billion.
However, majority of the sale (nearing about S$10.396 billion) took place before July 2018 – the time when the cooling measures were implemented.
Once the cooling measures came to force, developers almost lost their interest in residential re-development projects which thus slowed the collective sales of residential properties.
Only 3 sites worth S$440 million were sold in the remaining months of 2018.
The third site and the Only residential site sold in the latter half of 2018 was Phoenix Heights which was bought for S$33.1 million.
This trend of interest and en bloc commercial sales continued in 2019 as well.
En Bloc Record Sale Singapore 2018 & History
Commercial En Bloc Sales Interest Remain High
It is True that Developers are Interested in Commercial En Bloc Sites that Can Convert to Hotel Use.
It is Also True that Developers Are Avoiding En Bloc Sites that has Ridiculous or High Asking Price
Price Attractively and Correctly
It Will Do the Wonder…
According to market report, developers gained increased interest in commercial properties in 2019 while residential redevelopment projects took a back seat due to the cooling measures.
There has been an increased investment in the hotel sector mainly due to the rise in visitor arrivals and there being a tightening of supply pipeline.
Thus, some commercial en bloc sites have been sold and converted to hotel development.
However, though there seems to be an increased interest in commercial collective sale, this does not necessarily mean that there is a rise in the sales of collective commercial properties.
There hasn’t been a lot of success in the collective sale of commercial properties and the main buying activity has been limited to office spaces and mixed-use buildings and shophouses.
It is noted that the current challenge is to get all the owners of collective commercial properties to mutually agree on a reasonable pricing band as well as a standardized apportionment method that would distribute the gross sale proceeds properly among the multiple property uses.
Developers Interest in Residential En Bloc Sales Still Remain Low
Residential Collective Sales Still in “Winter Seasons” Developers and Owners Keep Praying Cooling Measures Lifted
This Can Only Happen in their Dream But Don’t Dream Too Much…
Market analysts are predicting that in 2020 the interest in residential collective sales would continue to remain muted mainly because developers would be cautious.
They said that in 2020 the general sales value is likely to be significantly low, especially when compared to the heights in sales that was seen in 2017-18. Thus, collective residential en bloc sales would be lesser when compared to sale of commercial properties.
Market analysts estimates, there may be a few takers for smaller collective residential sites that costing less than S$200 million as there remains a steady interest in the sale of residential units.
There are always small and medium-sized developers who are still continue looking for lands to redevelop.
However, the demand for larger residential sites will be subdued considering the high risks that come along the sale the lengthy sale process and the additional restraint of 5-year ABSD remission period.
It is noted that though more commercial and non-residential will put up tender notices for sales in 2020, a sale would only be potentially successful when developers could be convinced that the asking price of properties as listed by sale owners are actually economically viable propositions.
Collective sales of residential properties would draw lesser interest, at least till the middle of the year as developers would be busy selling all their pre-existing inventory.
Developers could possibly turn their attention to GLS or government land sales which would mean they could easily shore up a sizeable landbank.
CBD En Bloc Sales
Developers All Eyes at District 1 Office Sector
The Arcade Offer Ambitious Developer to Build a Modern Magnificent Skyscraper in Singapore CBD
Collective sales of commercial properties are likely to increase according, especially in the city’s office sector due to the increasing number of real estate investments across the border as there is a growing confidence in the fundamentals of the matter.
Developers will continue to invest in the office sector because of the incentives attached to redeveloping old CDB building which includes higher plot ratio, tighter vacancies, rise in rents and a lighter supply pipeline.
One of the En Bloc Sites that is launch in CBD area will be “The Arcade”. The Arcade Singapore @ 11 Collyer Quay covers a land area of 21,909 square feet and has a gross plot ratio of 15.
This means that the new developer can build a magnificent 50 storey high skyscraper in the Singapore most prestigious location.
What will attract the buyer the most will be the 999-yr leasehold tenure. It is very rare to find one in Central Business District.
Will Singapore En Bloc Sales Continue in 2020?
Developers Still Need to Monitoring the Market Before Turn on the Buying Mode Again. They are Only Interested Buying New Lands for Redevelopment Once the Market Goes North, Cooling Measures Tweaked or Lifted.
According to market analysis, developers could be more interested in buying more lands if their sales maintain current momentum and if the GLS supply remains low.
It is predicted that if unsold inventory of residential units would come down to about 24000- 26000 by the end of the current year then it would make developers hasten their interest in land banking the following year.
Many has Pointed out that the sale of commercial sites which are closer to MRT stations, have a considerably good plot ratio, with a possibility of adding more storeys and availability of necessary amenities would be attracting more buyers.
There are a number of commercial en bloc sites that are in progress; getting the 80% signatures such as:
- Fook Hai Building
- High Street Centre
- High Street Plaza
- International Plaza
- Textile Centre
- Peace Centre
It remains to be seen whether these sites can be launched for tender in year 2020.
There is a continual demand of commercial en bloc sites as long as the property meets all the requisite requirements of the buyer.
According to estimations, investors who are looking to preserve their wealth will be looking for prime sites while those looking for higher ROE , would look for sites that have high redevelopment potential and are located in areas that will see future development and regeneration.
Other factors would also play a deciding role such as whether the site can only be used in its limited ways as currently existing or there are several broader development choices available. Government’s plan for the particular area would also be a deciding factor.
Furthermore, if the authorities do not allow lease top up for certain commercial properties, it can also become a deciding factor for strata sale developers.
Other than developers, end-users who may be looking to develop flagship building may also be interested in commercial buildings.