SINGAPORE – Amidst the current en bloc fever in Singapore where private home owners may get compensated as much as twice what their homes are worth in the resale market, many condo owners must be asking themselves if their condo development is a candidate for en bloc (or collective sale).
The math of en bloc is simple.
If a developer can buy the entire development, top up the lease (if needed), pay development charges, tear down the place, and pay the marketing agency and other admin charges, at a cost lower than buying a similar plot of empty land directly from the government – then it may make sense to do it.
So given this, what are the signs that a condo development is prime for en bloc?
1. Lack of government land sales around the area
Given the costs and effort that go into negotiating an en bloc, developers would rather buy directly from the government if they had a choice. But if there is a lack of new land being released around the area, that increases the chances of an en bloc (if other conditions are right).
2. Low density of housing units in the development
Older developments generally have lower density of housing units within the site area. Such developments are generally a sign of en bloc potential.
3. Inefficient use of space in the development
This is related to the earlier point. If your development is not using the space efficiently, e.g. having too much open carpark space, too many green spaces, etc., it may increase the chances of en bloc as well.
4. Rising land and property values in the area
If the property values are rising in your area, the land your condo is sitting on becomes more valuable. So it might be cheaper for a developer to buy the entire development and redevelop it, than to buy from the government auction, which is likely to see intense competition from other developers.
5. Your development is old
Newer developments are generally more efficient in terms of space, whereas older developments tend to be more inefficient. Also older developments are generally much cheaper, and hence it makes more financial sense for the developer.
6. Recent resale transactions are scarce
Recent buyers are more unlikely to agree to an en bloc, as they may have to pay Seller’s Stamp Duty (SSD), and they may not want to move again. More importantly, they may not make much from the sale, that they are incentivised enough to want to sell. 80% of residents need to agree to an en bloc sale before it can pass.
Share this with your friends if you think their condo might be a candidate for en bloc!