En bloc sales in Singapore –A Beginner’s Guide
If you have been shopping for private properties in Singapore recently, you might have already noticed many listings advertising a property’s “en bloc potential”. But what is this “en bloc” potential anyway? How could something that might force me to move out be a good thing? If you’ve had some of these questions, that’s what we’re here for! Read on to find out all you need to know about what happens in an en bloc sale in Singapore.
What is an en bloc sale?
To put things plainly, what happens in an en bloc sale in Singapore is that one entity buys the entire property, normally to develop it. The “property” in this case doesn’t quite refer to a single home, apartment, or flat, but to every unit situated on a particular plot of land.
This means your home, and likely your neighbours’ homes as well, will all be sold to the developer as one piece. Here is the funny thing about en bloc sales, though: not every homeowner needs to agree to an en bloc sale before the deal goes through and the building is sold to the developer.
In Singapore, typically only 80% of homeowners in a building need to agree to sell their homes for an en bloc sale, although the minimum is raised to 90% in newer buildings (younger than 10 years).
Why is an en bloc sale a good thing?
So, in Singapore, why is it that having “en bloc potential” is such a great selling point? Let’s look at en bloc sales in Singapore from the buyer’s perspective. You’re looking for a plot of land to develop, and you’ve found one that would be perfect your purpose. But in order to buy that piece of land, you also need to convince 80% of theresidents living on that plot of land to sell their home to you, and no one else. How do you do that? By offering them a price far above the market rate!
Because of this, owners of homes involved in en bloc sales are usually offered a far higher price than their home’s usual resale value, which compels them to agree to sell. This makes “en bloc potential” a selling point of sorts, especially if you think of your home in terms of a long-term investment.
Of course, it is always possible that there will be residents who are unwilling to sell their home regardless of the price, but as long as the number doesn’t exceed 10 or 20 percent of the homeowners, the sale will still go through.
Variations in the offer price per unit
Not all en bloc sales in Singapore are equal. Depending on the property in question, offers for homes can definitely vary in terms of how far above the market value they are. One of the main factors that influence the offer price is the status of the property lease involved in the en bloc sale.
In Singapore, leasehold properties tend to either have 99 or 999 years on their lease when new. When the lease period runs out, the value of all flats in the building becomes $0, so it’s understandable that owners would want to sell their homes more when the end of the lease is drawing near. Because of this, en bloc sales that happen near the end of a building’s lease is likely to fetch a lower offer price per unit, although this will probably still be above the market rate.
On the other hand, let’s talk about homes that are freehold, and homes that still have a substantial number of years remaining on their lease (over 80). Owners of these homes do not have any real urgent need to sell, and so they might require more persuasion to accept an incoming offer. Because of this, en bloc sales involving these types of homes usually involve far higher offer prices per unit.
HDB’s en bloc sales
En bloc sales in Singapore’s Housing Development Board (HDB) work slightly differently compared to en bloc sales of private homes. HDB has the Selective En-Bloc Redevelopment Scheme (SERS) in place to select older HDB sites for redevelopment. Unlike the above cases of private en bloc sales, owners of flats selected under SERS cannot refuse to sell their flat. Instead, after the initial announcement of the en bloc sale, your flat will be valued, and HDB will offer you a compensatory sum of money to aid you in your relocation.
At the end of it all, you’ll get to decide whether you want to move to a flat in a building selected for you (often near your initial home), or receive the compensatory payment.
Should I only look for properties with en bloc potential in Singapore?
Not exactly. For now, let’s assume you are thinking in terms of the investment value of buying your new property in Singapore. True, an en bloc sale can lead to a huge return in your investment, but an important thing to note is that “en bloc potential” doesn’t guarantee that you strike the jackpot in several years. Under HDB’s SERS, less than 100 sites have been selected over almost 3 decades now. So don’t let en bloc potential be the main reason you purchase a home – it’s nice to have, but not an absolute game-changer.
However, if you’re looking for a “forever home” – one that you envision owning and living in for the rest of your life, and perhaps passing on to future generations, then “en bloc potential” might not quite be what you’re looking for.