With about 5.6 million people living and working on an island measuring just 700 square kilometers, Singapore has a real estate problem. There just is not enough real estate to support new developments – unless considering redevelopment. That is where en bloc real estate sales have become big tools for sellers and buyers alike.
An en bloc sale occurs when 80 percent of property owners in a particular development, such as an existing condominium building, agree to collectively sell their properties to a developer. Once that 80 percent sales agreement is reached among property owners, the redevelopment sale can go through – even over objections of property owners who do not want to sell.
En Bloc Sales Reach New Highs
Last year, Singapore real estate deals included 27 en bloc deals valued at more than $8.13 billion. That was the most since a record $11.6 billion in en bloc sales occurred in 2007, Colliers International reported.
The pace this year is even greater than last year, with 17 en bloc sales of residential properties totaling $5.83 billion. If that rate continues, a new record for en bloc sales might be set in 2018. That means lots of money transferring from developers to residential homeowners. Yet, not all homeowners are happy about the trend.
Advantages of En Bloc Sales
En bloc sales are particularly useful for owners of residential properties who want to sell and maximize the potential sales prices on their individual homes. En bloc sales also help developers to target particular high-rise communities for deals that can lead to big developments and more profits over the long run.
For private owners of the properties sold via en bloc transactions, they get more money. A property owner generally gets about double the sale price for an individual condominium or other property when sold through an en bloc real estate sale, rather than selling the property individually as a single owner, Reuters reports.
For developers, paying double the price for condominium properties sold via en bloc transactions accelerates their ability to get their projects completed. The time savings more than makes up for paying double the cost for residential properties.
Problems with En Bloc Sales
While en bloc sales have become important redevelopment tools in Singapore, recent actions likely will slow the transactions. The federal government recently enacted a law requiring traffic-impact and similar studies to be done before an en bloc sale occurs. The government also increased the tax on en bloc sales.
Developers also have gained an upper hand in recent years, with more en bloc sales units now on the market. The more en bloc sales units that are available, the more developers can take their time to pick and choose the best one for their potential development plans.
With a relative glut of en bloc sales opportunities, developers have shown a recent preference for buying properties in core central regions, rather than in Singapore’s suburban markets. Developers want to be where business gets done in Singapore, and the core central regions are dominating recent sale trends.
Yet, there remains many excellent en bloc sales and development opportunities in Singapore’s real estate market. Whether buying or selling, it pays to do market research