Is Your Condo Next? Here's Everything You Need to Know About Residential En Bloc Sales (2024)
Singapore's skyline is constantly evolving. New and modern developments emerge every now and then to replace older structures. This ongoing transformation involves a collective sale process we know as en bloc. For homeowners, this phenomenon can be a lucrative financial opportunity but also complicate your living arrangements. Understanding the en bloc process can help you make informed decisions that could benefit your future. So if you want to learn more about en bloc and how it affects you as a homeowner, keep reading.
In this article:
What is an en bloc sale?
Why do we need en bloc?
What developments are affected by en bloc
Does en bloc affect freehold properties?
Benefits of en bloc for homeowners
En bloc considerations
Prime candidates for en bloc
En bloc timeline
Final thoughts
What is an en bloc sale?
Directly translating to "as a whole" or "in a block", en bloc typically refers to the collective sale of an entire development. This process involves most residents agreeing to sell their units simultaneously to a single buyer, usually a property developer. This often occurs with older structures that could benefit from being redeveloped into something new and better.
En bloc sale is just one source of land supply in Singapore. There are other sources such as the Government Land Sale Programme (by URA) and private land sales.
Why do we need en bloc?
Due to the limited land situation, Singapore has to make extra efforts to utilise its land in the most effective way. This means taking down old developments to make new ones. En bloc projects can revitalise the neighbourhood, paving way for a modern development with improved amenities and infrastructure. This is valuable not only to future residents but also the surrounding community.
What developments are affected by en bloc?
En bloc affects both public (HDB) and private residential developments. However, HDB has its own system known as Selective En bloc Redevelopment Scheme (SERS). While en bloc is a market-driven process for private properties, SERS is a government initiative for HDB flats. They both aim at urban renewal, but have different approaches and resident involvement.
With private housing, en bloc can be initiated by residents or developers. They require consensus to sell from a high percentage of homeowners: at least 80% for condos older than 10 years and at least 90% for condos less than 10 years old. With public housing, SERS is initiated by HDB. Residents don't have a choice but to give up their properties. However, they are offered compensation and rehousing options based on market valuation. You can get a more detailed explanation on the differences between the two over here.
Additionally, en bloc affects commercial and industrial developments, though the process can be a bit different. In this article, we'll focus on en bloc on private residential properties.
Does en bloc affect freehold properties?
Yes, en bloc sales can affect both leasehold and freehold properties. Even though freehold implies perpetual ownership, en bloc involves the collective sale of the entire development. So, if the majority of residents agree to the sale, even freehold owners are obligated to sell their unit and relocate. That said, recent trends suggest that developers might favour leasehold properties. Click here to learn more about lease tenures in Singapore.
Benefits of en bloc for homeowners
En bloc sales often result in significant high payouts for homeowners compared to individual sales. This is because residents hold greater bargaining power when they act collectively. Homeowners can negotiate a more favourable selling price because developers are willing to pay a premium for the entire land plot so they can redevelop it into a new project. This is most beneficial for those who bought their property at a lower price.
En bloc considerations
While en bloc sales offer the alluring possibility of significant financial gains, it should be weighed against the challenges it poses. After all, replacing your current home might not be as straightforward as expected.
Firstly, the en bloc process can be lengthy and arduous, taking months or even years. This means residents need to be patient as they consistently participate in negotiations and meetings. Just look at projects like Pandan Valley, Pine Grove, Mandarin Gardens, Laguna Park and Braddell Heights. They were marked for redevelopment ages ago yet nothing has happened to this day. It's definitely a waiting game.
Residents will also face the challenge of finding alternative accommodation within a strict timeline, which can be especially difficult in a competitive housing market like Singapore's. Rising prices and tax implications could add financial burdens, and there's bound to be additional costs that come with moving. Not to mention there's no guarantee that the sum received from the en bloc sale is even enough to get a unit in the same location that is similar or better in quality.
There are also some concerns about the fairness of the en bloc process. The average homeowners who know very little (if anything at all!) about en bloc are at a disadvantage since they don't have a clear understanding of the process and don't know what to expect. Even if they attend the meetings, they might not know what to ask. Moreover, homeowners who oppose an en bloc sale may find difficulties obtaining legal representation to fight their case.
Beyond all that, en bloc sales can also draw emotional impact. Many residents who have lived in the development for years have gotten comfortable with the environment and become close to neighbours. Saying goodbye to familiar surroundings and friendly faces can be difficult, and not everyone can easily let go of their emotional attachments.
Prime candidates for en bloc
Not all developments are equally likely to be targeted for a collective sale. Certain characteristics make a property more susceptible to an en bloc proposal. Some of the main factors are age and condition. Older developments with outdated facilities and infrastructure are likely to be targeted. Developers see an opportunity to demolish and rebuild a more profitable project.
Land size and plot ratio also play a role. A property with a large land area and a low plot ratio (meaning the land has a lot of unused space) is particularly attractive to developers. This means there is potential to build a denser development with more units on the same plot of land. Maximising the use of land like this can translate to higher potential profit.
Location is also a crucial aspect. Properties in prime areas, especially those with good access to amenities, are more desirable for developers. They indicate that the land value could rise rapidly, which would be great to invest in. So, homeowners living in neighbourhoods that have been undergoing urban renewal projects, such as the construction of new MRT stations, should stay informed about the potential for an en bloc.
The makeup of residents themselves can also influence the likelihood of an en bloc sale. Developments with a high proportion of owner-occupiers, particularly those nearing retirement age, might be more receptive to en bloc proposals. In such cases, it might be easier for developers to convince the residents to sell their units and relocate.
En bloc timeline
The entire en bloc process can take anywhere from 18 to 24 months on average. This timeframe can vary depending on market conditions, resident agreement and complexity of the sale. Typically the process goes like this:
Final thoughts
While the prospect of financial gain is enticing, remember that en bloc has its drawbacks. So before you consent to giving away your home sweet home, make sure to weigh the potential benefits against the time commitment and complexities of en bloc. And should you need any help with that, we are ready to provide our support and expertise.
Views expressed in this article belong to the writer(s) and do not reflect PropNex's position.
25 July 2024
https://www.propnex.com/picks-details/843/is-your-condo-next-here-s-everything-you-need-to-know-about-residential-en-bloc-sales-2024
