En Bloc Fever Collective Sales News Singapore2022-08-12T09:50:57+08:00
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Is Collective Sales Still Doable in 2022 After the New Cooling Measures?

Is Collective Sales Still Doable in 2022 After the New Cooling Measures?

On the late night of 15 Dec 2021, most were shocked by the new cooling measures that government had just suddenly imposed in the residential market.

Many viewed these cooling measures negatively as penalty for developers increased from 25% to 35% with interest payable to IRAS if they are unable to complete selling within 5 years from date of purchase or date of strata title board sale order whichever is applicable.

Those who wanted to buy a second and third properties are tremendously discouraged with hefty Additional Buyer’s Stamp Duties (ABSD) which government raised at least a 5% percentage point to 10% percentage point for 2nd and 3rd properties for Singaporeans, bringing ABSD to 17% for 2nd residential property and 25% for 3rd residential property.

For the first residential property, it remains unchanged at 0%.

ABSD for Permanent Residents (PR) was raised to 25% for the 2nd residential property and 30% for the 3rd residential property. For the first residential property, it remains unchanged at 5%.

ABSD for foreigners has increased from 20% to 30% for 1st and subsequent residential property.

Total Debt Servicing Ratio (TDSR) was reduced from 60% to 55%.

So How Does It Impact the Collective Sales and The Residential Market?

Cooling Measure Will Not Have A Lasting Effect In The Residential Market

Due to Continuous High Demand in the Residential Market, Property Prices Will Still Go Up and Will Only Go Up

According to flash estimate, the residential market increases 10.6% for year 2021, with the last quarter registering the highest increase of 5%.

This 10.6% increase is the highest increase in Singapore for the last decade. Hence, the government has to act to cool the residential market as massive increase of 5% per quarter is definitely not healthy for Singaporeans and PR in the long term.

There is a genuine demand from the HDB upgraders supporting the sales and a robust year of more than 13,000 new units at new launches were snapped up and more than 19,000 units of resale residential were transacted.

Not all are upset with the new cooling measures. The happiest buyers are those who genuinely want to upgrade from HDB to a private residential resale or new launch project; they will have less competition, hence, giving them more chance to upgrade to their dream homes.

Tracy Goh of PropNex believes that this year 2022 will see a continued rise in residential prices and do not foresee that the cooling measures will have much impact in the market.

Just like the car COE, COE price basically more than doubled from 2020 to 2021 as the demand for cars are unexpectedly high due to a lower supply of COEs and driven by a group of buyers who did very well in the pandemic and electric car providers.

The increase in 2021 was a real genuine demand from Singaporeans and PRs who wanted to upgrade and foreigners who choose to migrate to Singapore.

As long as this demand is genuine and not speculative, then any cooling measure will not have a lasting effect in the residential market. It will probably slow the residential market down only for a few months.

2022 opens with a very low unsold inventory of around 14,000 units as at 1 Jan 2022. Imagine 13000 units were sold in 2021 and the market is now left with 14,000 units of new launches, the residential market is obviously sorely in need of new lands to build.

With such a tight supply, the residential market is poised for another increase this year 2022.

What about the 35% remissable ABSD penalty cost to the developers?

Naturally, developers will assess their risk more cautiously. The 35% penalty is meant to awake the developers to assess the lands more prudently and to price their products attractively to the consumers to achieve a sell out within 5 years from the date of purchase.

No developer would want to be hit by such a cost as that could drown the company. A $500m land means at least $175m ABSD plus interest penalty and a $1 billion land will mean at least $350m ABSD plus interest penalty.

This increase of penalty will definitely shift the focus of land acquisition from Central Core Region (CCR) to Rest of Central (RCR) and Outside Central Region (OCR) where land prices could be less than half the price of CCR.  

So what is the future of collective sales?

Even before the cooling measures in 2021, there were only 10 collective sales that were sold and 21 collective sales that did not find a buyer in tender closing.

This year 2022, we could see less than 10 collective sales sold, not that developers do not want to buy lands from collective sales projects but because developers are now even more price sensitive to ensure a complete sell out within 5 years.

What Are the Challenges?

  • Collective sales are now getting more and more challenging to get 80% signatures as resale prices have increased last year and owners are facing difficulty to find replacement properties for those collective sales projects where profit is less than 35%.

  • The en bloc profit of 35% or less may not be enough to incentivise them to agree to a collective sale. But as the years pass, the owners will find it more and more difficult to en bloc as resale transactions are expected to increase further with passing years. Hence, this will drive the expectations of owners wanting a higher reserve price.

  • En Bloc profits are also reduced as government increased development charges (in most sectors, govt has increase more than 50% for the past 5 years.

  • For 99 years leasehold projects, the top up premium (TUP) also increases yearly and the TUP just keeps ballooning in the years ahead. This will ultimately erode all profits from the collective sale. In short, if the collective sale has no en bloc potential now, it is unlikely to have en bloc potential in the future.

  • Before a collective sale can go into a tender launch, it is necessary to get 80% signatures based on 80% strata area and 80% share value; and the practice of most collective sale committee is just to raise the reserve price (RP) so that 80% signatures can be achieved. However, such practice ultimately destroys the collective sale projects as the RP becomes unattractive to the developers. It is for this reason; more than 90 collective sale projects could not find a buyer in year 2018 to year 2020. And this mistake kept repeating itself in every collective sale initiative.

  • On the other hand, government releases government land sales (GLS) programme and it is expected to increase much more this year 2022 to cater to developers’ demand. The fact that developers prefer to bid for GLS is obvious. Under the GLS, government can afford to sell at 85% less than the market land value as their intention is to stabilise the market. However, collective sale projects can never sell below RP unless another 80% signatures are achieved to lower the RP which is an uphill task when resale market is strong.

  • In addition, GLS need not go through Strata Title Board (STB) as it is an outright purchase and developers are in full control of the timeline. In collective sale, minorities who oppose the collective sales can cause timeline to be derailed at STB and some even go to High Court to fight the collective sales. This is a time management risk that developers will have to undertake when they look at collective sales to replenish their land banks.

  • In conclusion, as much as we expect this year 2022 to be another good year for real estate with prices advancing; the collective sales projects will face challenges listed above and many will not find a buyer when they reach the market as their high expectations will drive developers away to bid for GLS.

Developers Choice: Small, Medium or Big Sites?

En Bloc Sales 2022 Developers Choice: Small, Medium or Big Sites?

Developers are facing huge challenges with the new property curbs, not only that there are other factors such as higher construction costs, supply chain disruptions, border closures and potential construction delays.

Despite these, all these challenges WILL NOT Deter their hunger for land acquisition as there are still demand for luxury homes and profits to be made.

Since all sites that are launch for sale in the collective sale market comes with different sizes and quantum, which one does the developer prefer in 2022?

Small Site. Small site has the least risk though at the same time yield small profits. Some small and medium developers still prefer these sites, even business owners and entities may want to own it. Price range is around S$20 million to S$100 million.

Medium Site. As home hunters’ interests for new luxury homes still remain high even in 2022, developers might go for medium site that can yield around 200 to 500 new units, usually will cost them about S$200 million to S$600 million.

This is most ideal to most developers and any site that meet these criteria will be in their target list.

Big Site. These sites measure more than 600,000 to 800,000 potential gross floor area. Big redevelopment sites usually can build up 600 units to 900 new units.

The price tag will range from $750m to $1 billion to acquire the lands.

Nevertheless, despite all the challenges, potential good en bloc sites that have great locale, reasonable reserve price, high demand of new homes in the area and if developers can see themselves selling completely in 5 years, then collective sales projects will find the buyers.

How about Mega sites that exceeded $1 billion?

Naturally, for year 2022, it is likely that developers will avoid mega sites.

The interest can return if the site proves to be irresistible with great location and great views and reasonable reserve price.

Why Must Sell Your Property En Bloc Now

PropNex En Bloc Services

Collective Sales Hit S$2 billion Mark in 2021

Peace Centre Mansion Finally Sold En Bloc in 2021

Sold at S$650 million, Peace Centre & Peace Mansion was the Highest Collective Sale in 2021

Maxwell House Singapore Sold En Bloc for S$276.8 Million

Maxwell House Made Headlines in May 2021 and is the Only Site That Sold Within CBD

Ji Liang Gardens Sold En Bloc Instagram

Ji Liang Gardens One of the District 15 Hot Sites (RCR) Also Found Its Buyer

At the end of December 31, 2021, a total of 10 sites were reported sold. The total collective sales reached over S$2 billion.

Launched in January, the combine sites of 2, 4 and 6 Mount Emily Road were the first to be sold, ZACD Group picked up the site for S$18 million.

The second site that enter developer land bank was Surrey Point in district 11, ASK Development made up of Creative Investments, Kay Lim Realty and Santarli Capital Venture purchased the site for S$47.8 million.

After these 2 sites in prime zone sold, developer change their sight at district 15, Malacca Hotel site was acquired around March and the buyer & sale price remain unknown.

The district 1 property Maxwell House launched in April gathered a lot of attentions from investors, the prime site was acquired for S$276.8 million by joint venture of Chip Eng Seng, Chuan Holdings and SingHaiyi.

The second site sold in district 15 was Ji Liang Gardens marketed by PropNex Singapore. Owners just made their first attempt selling through tender and was rewarded with successful result. It was sold at $18.6m and buyer remain anonymous.

Third quarter of the year past, the collective sale market witnesses another multi-million-dollar site sold. Flynn Park located at Yew Siang Road was snatched by joint venture of Sunway Developments and Hoi Hup Realty for S$371 million.

En bloc fever reached a new degree with Watten Estate Condo Sold in October, for a huge amount of S$550.8 million, it became one of the top sales of 2021.

The hotly fought prime site was won by joint venture of UOL Group and Singapore Land Group (SingLand).

After ZACD Group bought Mount Emily Road site in early 2021, they now acquired La Ville, an attractive freehold site in district 15.

The bidding war was won by them and they pay for S$152 million for the Tanjong Rhu plot.

Success found its way to Peace Centre & Peace Mansion owners after 5 long attempts at collective sale. The 1 Sophia Road prime site was acquired during “private treaty negotiation process”.

Joint venture of SingHaiyi, Chip Eng Seng and Ultra Infinity find it hard to let it pass and finally decided to pick up the site and bought for S$650 million.

This will be the highest collective sale in 2021.

The last batch of owners that taste collective success were Bukit Timah and Duke’s Road site owners. Royal Golden Eagle and Hillcrest Investments paid S$53.9 million for the acquired land.

Out of 10 sites sold in 2021, 5 of them are within core central region (CCR), prime zone of Singapore. 3 of them are in district 15 zone, Rest of Central Region (RCR).

We remain optimistic that more sites at Outside Central Region (OCR) and Rest of Central Region (RCR) will be targeted by developers in 2022 as their stocks will be running out soon.

En Bloc Sale Process Singapore Step by Step Guide
En Bloc Process
EnBloc FAQ (Frequently Asked Questions)

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.

In order to re-initiate the collective process again will take some time. (See Example: Ivory HeightsMandarin Gardens)

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 

Once En Bloc is SOLD, they still need approval from STB to issue a Sales Order.  And before a sales order can be granted, the minority is given a chance to object based on grounds of “not in good faith” or other material or valid reasons that can stop a collective sale.

The STB acts a mediator to solve these problems and if the minority insists that they want to take the matter to the high court, then a stop order will be issued.

If the minority decides not to contend further, the STB will issue a sales order. Once granted, they will then proceed the completion of the sale.

If there is 100% owners’ signatures, then STB’s approval is not needed.

It takes between 1.5 years to 3 years for any project to complete the en bloc sale process. Once the property is successfully sold to a developer the proceeds are distributed to the sellers within a period of six months or so.

The owners or their tenants get between 3-6 months to vacate the property from the date of completion. The developer gets the property in vacant possession.

There are mistakes that can result in failure of the initiative. The most common mistake is overpricing the property as this turn off the interest of buyers.

For the recent en bloc fever that lasted only 14 months from May 2017 to June 2018, the developers were hungry and had to replenish their land banks.  Hence, when the collective sale reached $20 billion sales, the government introduced the 6 July 2018 cooling measures to cool down excessive exuberance.

The government has the foresight to be concerned that $20 billion sales is enough to supply new condominiums to Singaporeans who aspire to upgrade from their current properties for the next 5 years.

Hence, the recent government land sales (GLS) had seen some land prices dropping more than 20% in the same location.  Putting an enbloc project up now will mean lower prices for the owners and that will make it even more difficult to convince the owners to sell as prices are lower than expectations.  Hence, it is better for owners to wait for better market sentiments to launch their en bloc projects.

For some owners who thought that their en blocs will sure go through, they  bought their new home too fast before the completion of the sale.

There are some cases the objectors won in high court or in rare cases, developers even aborted the sale. These can cause failure in en bloc sale.

If there are no sale proceeds, the owners end up in financial crises, thus buying a new home too fast before completion is never a good idea.

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.

Pre-Application Feasibility Study (PAFS) on traffic impact is required for certain properties before they hit the en-bloc market. This is mandated by the URA (Urban Redevelopment Authority) and the LTA (Land Transport Authority).

This Study is done to understand the impact on the traffic once the old development is razed and a new property comes up adding significant number of dwellings.

The Outline Application and the Development Application under this detail traffic impact and traffic management measures and/or feasible transport improvement plans that shall be implemented in the new development.

At present the PAFS is applicable for properties that are Zoned Residential, Residential cum 1st Storey Commercial and Commercial & Residential properties as per the 2014 Master Plan.

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 

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”.

See Casa Sophia and Sophia View

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.

GLS or Government Land Sales is a simple process compared to en bloc sales. And developers prefer them over en bloc projects due to fast completion as they need not give the owners 3 to 6 months’ time to move out of the properties.

Also, there is no need to demolish any old buildings which will save a lot of money.  However, all GLS land sales for residential properties is on 99 years lease tenure.

In the en bloc market, developers can acquire lands that are freehold in tenure.

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.

An anti-en blocker is a person or a group in a property who oppose the en bloc sale being initiated by the Collective Sale Committee.

There are many debates to a collective sale.   Often an old building poses some real maintenance issues that can run up to hundreds of thousands of dollars and pro en blocker will prefer to sell and make a profit instead of spending so much money maintaining their estate.  And for many, is good retirement money.

However, the anti-blockers has many sweet memories with an old place; for some, it could be their first marital home, for others, they grew up there and for many who just bought and move in, the convenience of schools for children and the space that comes with it is becoming hard to find and very precious.

For these reasons, they become the “victims of en bloc sale”. Having found their dream home, and being forced to sell their properties through collective sale and even have to pay the seller’s stamp duty are simply too much to bear.

Many anti-en blockers found themselves helpless when 80% owners consented the sale living in the same project and they have to endure much stress and distress during the whole process.

If a buyer is found and sold en bloc, they have to relocate even without their consent.

So the debate continues…..

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.

Once an En bloc tender fails to attract any bids above the reserve price, it automatically goes into a 10 week private treaty where they must find a buyer who will pay the valuation or the reserve price whichever is higher, failing which the collective sale committee will have to reconsider launching another tender if there is still time.  (For a collective sale process, it is necessary to sell the project within 1 year of getting the 80% signatures)

Properties that do not go through the collective sale process and can get 100% consensus to sell are usually small projects, or a stretch of landed properties that come together to sell collectively.

Hence, they will use this private treaty method to sell collectively. This private treaty process is thus not tied to any time frame of getting a buyer.

And if they agree to launch a tender, they are also not tied to any time frame as they did not start the collective sale committee.

Once they have started the collective sale process, it is necessary under the Land Title Strata Act (LTSA) that they have to launch a tender or an auction.

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.        

There are various reasons why some owners refuse to sign up for collective sale. Their objection may be due to the lower than expected reserve price being set by the Sale Committee; the payout is not sufficient to compensate their relocation.

For many, they cannot accept the method of apportionment which they find not in their favour.

For some who just moved in less than 3 years, paying the extra seller’s stamp duty (SSD) is really upsetting.

For some, more money does not attract them because they value their homes much more than the payout.

Seller’s Stamp Duty is payable on properties sold within a short term from the purchase. Since the last cooling measures were announced in July 2018 sellers have to pay between 4% and 12% of the selling price for SSD for properties sold within 1-3 years from the date of acquisition.

New property owners are obviously unwilling to pay such high taxes.

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.

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.

See PropNex En Bloc Services

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.

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