Just as everyone thought the en bloc phenomenon was dying, there was a revival in en bloc sales in the second half of 2021. Alas, the government stepped in with their new raft of property cooling measures in December 2021, which was akin to pouring cold water on prospecting developers’ heads, dampening the en bloc market once again.
So, what does the en bloc market have in store for us in 2023? And could your property be one of the top condos with en bloc potential in 2023? Let’s find out.
En Bloc in Singapore: What Is It?
But first, what exactly is “en bloc”, and why can it be so lucrative for those lucky enough to be involved?
The term en bloc (also known as a collective sale) is French in origin and means “in a lump, or block”, “as a whole”, or “all together”. En bloc sales differ from regular property transactions in terms of scale. In a regular transaction, you only sell one property to another individual at market value. In an en bloc in Singapore, the entire private development is sold when a large majority of the owners agree to the sale, selling their homes simultaneously to a particular buyer.
Usually, this buyer is a property developer buying a private development, which is the collective sale type that this article will cover.
Many homeowners in Singapore hope and pray that their property will have en bloc potential and be selected for a collective sale, and for good reason. Prices for en bloc sales are usually well above market rate as developers tend to be willing to pay top dollar for a choice en bloc site. So, unsurprisingly, a successful en bloc in Singapore can be like winning the property lottery.
Why Do En Bloc Sales in Singapore Command so Much Money?
Since developers believe they can earn a tidy profit from redeveloping an en bloc site, they are not averse to paying astronomical sums of money. As older developments typically do not use space as effectively as newer ones, the Gross Floor Area (GFA) and plot ratio of older developments can be maximised by developers to extract maximum value from an en bloc site.
For example, if you’re living in an old gated property with low-rise blocks spaced far apart, developers can buy up the land, demolish all those blocks and build 30-storey towers in their place. They can then sell each unit in those towers for more money than it would cost them to acquire that land.
Since a collective sale requires most of the residents to agree to sell their homes, the developers have to convince them that it’s worth giving up their property and moving elsewhere. They do this by offering large amounts of money, hoping the residents will take up the offer.
How Does En Bloc in Singapore Work?
Who is making the en bloc purchase?
Either a property developer or the government
Can take up to two years
What is sold in the en bloc?
Every unit in the condo and the land
How much can you sell for?
The en bloc committee will typically set a reserve price that is set at a premium above the current market price.
The buyer (i.e. property developer or government) will try to match the reserve price or negotiate with the committee.
When is an en bloc in Singapore confirmed?
When the committee gets a consensus to sell from the owners. For condos < 10 years since TOP, you need ≥ 90% of all owners to agree to sell.
For condos ≥ 10 years since TOP, you need ≥ 80% of all owners to agree to sell.
The sale process can also take rather long, often up to two years for the sale to be finalised and for you to receive the sales proceeds.
Developers tend to purchase these properties at a premium, so if you bought your property some time ago when it cost less, you’re likely to walk away with a big profit.
It then hardly becomes surprising that potential en bloc sites are a hot topic among Singaporeans. The question on most peoples’ minds is likely about which properties are next in line and if their property is one of the top condos with en bloc potential in 2023.
2023 Housing Market: Where Is the En Bloc Market Heading towards?
According to Property Guru’s Singapore Property Market Index Q4 2021, the Singapore government has been calibrating the land supply in the past few years. This has made developers turn to the alternative option, namely en bloc in Singapore, to replenish their depleted land banks. And as the cost is high for larger en bloc sites, developers favoured smaller- to medium-sized en bloc launches in 2022 instead.
ABSD Rates for Entities Buying Any Residential Property
8 Dec 2011 to 11 Jan 2013
12 Jan 2013 to 5 Jul 2018
6 Jul 2018 to 15 Dec 2021
25%, plus an additional 5% for housing developers
On or after 16 Dec 2021
35%, plus an additional 5% for housing developers
Still, the number of successful en bloc in Singapore sales has been slowing down ever since the government started implementing property cooling measures like increasing Additional Buyer’s Stamp Duty (ABSD) rates, which can amount to a huge sum given that en bloc in Singapore transactions can go over a billion dollars.
With economic uncertainty and the threat of recession looming over our heads, it’s no surprise that the en bloc market might slow down in 2023.
According to Dr. Tan Tee Khoon, Country Manager – Singapore, PropertyGuru, the relatively higher ABSD rates (caused by the December 2021 property cooling measures), rising interest rates and construction costs, and increased land betterment charge rates are likely to be factors affecting en bloc sales. Mortgage loan rates impacting borrowing and affordability also impact local buying demand.
Still, some developers might be tempted to try sites on the failed en bloc list in 2023. Last year, 24 en bloc sites made it onto the failed en bloc list; only 12 en bloc sites were sold out of 36 placed on the market in 2022. In their second and subsequent attempts at collective sales, several failed en bloc sale sites may have their asking prices reduced, making it even more enticing for developers.
How to Identify Top Condos with En Bloc Potential 2023
1. Rising Land Value
If your neighbourhood is undergoing lots of development, such as a new MRT station or a major transformation, the land value in the area could be rapidly rising, which is a sign of good investment potential from the developers’ point of view.
2. Inefficient Use of Land
Old blocks or condo estates that don’t fully utilise their land area have higher chances of being one of Singapore’s top condos with en bloc potential, as they can be demolished and turned into denser residential developments. If you’re living in a block of flats with only eight floors where there could be multiple 30-storey condo towers, it’s an attractive investment for a property developer.
3. Old Property
Developers gravitate towards older properties because the value per square metre of land is lower, and residents who live in older properties tend to be a bit more agreeable to collective sales. Furthermore, developers only need to obtain at least 80% of the owners’ agreement for properties 10 years and older versus 90% for properties below 10 years old.
4. Robust Property Market
En bloc sales in Singapore involve a lot of money, so they are more likely to happen if developers think they can profit from buying and redeveloping the land. The performance of the market will play a part in how often developers bid for new en bloc sites and how much they’ll offer.
Disclaimer: The information is provided for general information only. PropertyGuru Pte Ltd makes no representations or warranties in relation to the information, including but not limited to any representation or warranty as to the fitness for any particular purpose of the information to the fullest extent permitted by law. While every effort has been made to ensure that the information provided in this article is accurate, reliable, and complete as of the time of writing, the information provided in this article should not be relied upon to make any financial, investment, real estate or legal decisions. Additionally, the information should not substitute advice from a trained professional who can take into account your personal facts and circumstances, and we accept no liability if you use the information to form decisions.
More FAQs About Top Condos with En Bloc Potential in 2023
En bloc is a collective sale of two or more properties. In Singapore, the term is used for property sales where residents of an older development agree to sell their homes at the same time to a particular buyer.
For private residential properties, an en bloc in Singapore happens when a vast majority of the residents are agreeable to the sale. For properties that are 10 years and older, at least 80% of the owners have to agree, and for properties below 10 years, at least 90% have to be agreeable.
The Collective Sale Committee (CSC) may choose to enter into a private treaty contract with a potential buyer, or relaunch the property for sale again within 12 months.
The HDB equivalent is known as the HDB Selective En Bloc Redevelopment Scheme (SERS), which do not give homeowners a choice to stay or sell their property.