En Bloc: Hitting the Jackpot, or More Trouble Than It’s Worth?

Potential en bloc flat - PropertyGuru Singapore

En bloc sales have been rattling around some Singaporeans’ heads for a while now. Despite the recent implementation of cooling measures by the government, the term “en bloc” still sometimes makes people think of dollar signs. It is considered by some as a form of gambling or a speedy way to get rich. However, the truth is that an en bloc sale is much more complicated than meets the eye.

What is an en bloc sale?

What is the meaning of en bloc anyway - PropertyGuru Singapore

What is the meaning of en bloc anyway?

The phrase “en bloc” is French in origin. It is a term that means, “collectively” or “entirely”. In simple terms, an en bloc and a collective sale are the same. Locally, en bloc sales refer to property sales.

En bloc sales occur when the majority owners of a residential property decide to sell their homes at the same time. Alternatively, en bloc sales could also commence when there is an offer from the buyer’s side to the owners. Usually, buyers involved in an en bloc sale are either the government, or property developers.

What is the en bloc process?

En bloc takes place when homeowners of a property cooperate to put a whole residential structure for sale. Owners form a sales committee, and seek advice from property consultants and lawyers on how to go about the en bloc sale process. Alternatively, an interested buyer can make an offer to the owners of the property.

Either way, a certain level percentage of consent among the owners must be received to initiate the en bloc sale.

How does an en bloc benefit residents?

En bloc is generally a good form of development and progress for the nation. With land being scarce and expensive in Singapore, it is only logical that old developments will be demolished in order to make way for new ones.

For people living in properties that get sold in an en bloc, they benefit from the profits as a result of that sale. Very often, developers offer high prices to persuade residents to sell their units. It is not surprising to hear of some owners earning profits of up to 100%.

How might an en bloc result in eviction?

As mentioned previously, there needs to be a certain level of consent before an en bloc sale can begin. For a residential property that is older than ten years, 80% of the owners must agree to sell their homes. For residential properties that are less than ten years old, a total of 90% must consent.

A resident may be evicted even if they do not agree to sell their unit. Once the 80% or 90% consent range has been reached, those that did not consent cannot reject the sale offer. They will still receive their fair share of the payment, although they will need to find a new home.

The Laguna Park condo incident

One of the most prominent cases involving an en bloc sale in Singapore is Laguna Park condo. Laguna Park is a 99-year leasehold condominium located along Marine Parade Road. It encompasses a total of 516 residential units and 12 retail units on a land area of 669,486 sq ft.

Back in 2007 and 2010, the owners of the property made attempts at an en bloc sale. Both proved to be unsuccessful as a result of unfortunate economic circumstances. In September 2018, a third tender was launched by the property owners, with a reserve price of $1.48 billion.

The en bloc sale attempts by the condo made headlines due to vandalism cases. Residents of Laguna Park that had opposed the en bloc sale were the recipients of vandalism from their neighbour, who wanted the sale to push through. However, the estate finally managed to reach the necessary 80% consent level required to perform an en bloc sale in 2008.

Laguna Park condo was not the only en bloc sale that garnered attention due to residents not seeing eye to eye. Other residential buildings such as Pine Grove condo and Shunfu Ville faced similar social issues.

New laws affecting en bloc sales

The government implemented new laws in 2018 to cool down the property market. These laws were enacted to ensure that prices aligned with the current economy. One of the major laws that affected en bloc sales was increasing the Additional Buyer’s Stamp Duty (ABSD) by 5% for developers.

This increase of the ABSD for developers purchasing collective sale properties decelerated en bloc sales. The main goals for this measure by the government were to deflate the en bloc sale market and reduce the hype surrounding it. Nonetheless, despite the enforcement, there are still projects and estates that wish to cultivate en bloc sales, including Laguna Park mentioned above.

Why are some people still seeking out en bloc residential buildings?

Potential en bloc flat - PropertyGuru Singapore

Potential en bloc flat

Developers purchase these properties with the intent of replacing them with more profitable homes. They replace these older buildings with residences that are taller, have more units and better facilities in order to sell them for higher prices.

As for the general public, the idea that one could be a millionaire overnight drives people to invest in, or buy potential en bloc homes. These people tend to seek residential units with various factors that make them potential en bloc material:

  • A smaller number of units per block
  • Properties that are older
  • High plot value
  • Strategic location (eg near an MRT station or bus interchange)

Even if a piece of property meets all the criteria for en bloc, it is still a gamble to purchase one for profit. With the deflating market, there is no guarantee that it will undergo the process in the near future. So, there is a chance that your investment might get stuck, and not result in the instant profit you hoped for.

As things stand now, the cooling measures enacted by the government have played their part quite well in tampering en bloc demands. The government has intended for more affordable homes in line with the economy. Despite the new laws putting down millionaire hopefuls and property developers, it is still highly probable that en bloc sale will pick up in the future.

 

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