When we talk about gaining substantial wealth and switching into a luxurious life instantly, most of you may associate that with striking the lottery or jackpot.
But these ways are entirely reliant on the element of luck, which is not the topic for today.
Fortunately, there are some proven ways to make a lot of money in Singapore – primarily through the sale of a property.
If you live in Singapore, you might have heard of people becoming overnight millionaires from an ‘en bloc’ sales.
However, is it truly that easy to become an “en bloc millionaire”? After all, if it were that simple, most of us would be millionaires.
So, what does en bloc entail for you?
How does it work?
What is the process like?
Could you potentially become the overnight millionaire that most Singaporeans desire to be?
Let’s find out in the sections below where we discuss the things you need to know about en bloc in Singapore!
What Does ‘En Bloc’ Mean?
To provide some background, ‘en bloc’ is a French term that means “all together” or “collectively.”
But, in Singapore, ‘en bloc’ is often referred to as a collective sale of extensive housing development to a buyer.
En bloc happens when most of the homeowners in the same development are interested in selling their property to a buyer at the same time.
The buyer may be a property developer or the government.
How Do En Bloc Sales Differ From Normal Resale Property?
For starters, en bloc sales are different in terms of who is buying and selling, and the amount of money you’re getting compared to the typical sale of a property.
There are a few simple differences;
In the case of a typical resale, we are talking about selling or buying only one unit.
However, in the case of an en bloc sales, it’s about selling an entire development.
The typical resale transaction involves two parties; the owner of the unit and another individual.
But, for an en bloc sales, it involves a large number of transactions between the group of development owners and a property developer or the government.
A typical resale of a property takes little time to process. The deal can be completed as soon as both buyer and seller agree to a specific price.
On the other hand, an en bloc sales take a longer time (usually up to two years) to attain closure.
This is because it’s not easy to get everybody to compromise as some of the owners may not feel like selling.
Last but not least, for a typical resale, the owner may or may not be profiting as his property is subjected to prevailing market value – and is highly depending on the time of entry.
But, in the case of an en bloc sales, these development owners are almost guaranteed to make a profit as these properties are often sold at a much higher price compared to normal market value. (Reasons will be discussed below)
How Does The En Bloc Sales Process Work?
As mentioned, the closure of an en bloc sales usually takes around two years – due to the complex processes behind such collective sale.
Here are the few essential steps that one needs to follow when applying for en bloc:
Step 1: Establishing A Collective Sale Committee
Owners who are interested in selling the property will come together to form a Collective Sale Committee (CSC).
This committee is responsible for proposing the reserve price of the property, and collecting signatures from owners who agree to the en bloc sales.
To form the CSC, a General Meeting must be held – which can be done by collectively getting approval from at least 25% of the owners in the development OR getting owners with a combined share value of 20% to agree.
During the formation of the CSC, the elected candidates shall be transparent with their potential conflicts of interest as this may affect the en bloc sales in the future.
Step 2: Getting External Help
Once the CSC is formed, they will start consulting property agents and lawyers to get an independent valuation report, to determine the proceeds of the sale, and get a clear idea on what kind of process they need to follow ahead.
Step 3: Getting Votes
The CSC will have to get owners to sign on the Collective Sale Agreement (CSA).
If the development is ten years and older, at least 80% of share value and strata area are required to be in favour of the sale.
However, if the development is less than ten years old, the committee needs to get consent from at least 90% share value and strata area. En bloc can only proceed after reaching such requirements.
According to the Land Titles (Strata) Act :
· Developments < 10 years old – require at least 90% by share value and strata area
· Developments > 10 years old– require at least 80% by share value and strata area
*i.e. 80% of share value refers to 80% of what the entire development is valued at while 80% of strata area refers to 80% of the total area of the development.
Step 4: Finding A Buyer
If the development does not have a current buyer, it will be placed on the market for interested developers to bid for it.
Homeowners may advertise the en bloc of the development following the guidelines here.
Step 5: Informing Strata Titles Board
After getting the owners to sign on the CSA, the CSC must apply to the Strata Titles Board.
In the event where there are objections, the Strata Titles Board will decide if it is possible to proceed with the en bloc sales.
The board helps to evaluate whether this sale will be profitable(or not) for all unit owners.
With the report provided by the Strata Title Board, the CSC can take a better course of action regarding the sale of the development.
(The en bloc application form can be found here)
Step 6: Handing Over The Property
After a successful en bloc, the existing owners are given a grace period to move out of their property or make necessary arrangements with their tenants.
Can Your Property Be Put Up for En Bloc Against Your Consent?
While it’s true that owners of private properties have a certain degree of say in making the decision of putting their properties up for en bloc, this power will not hold in the face of greater authorities.
In short, under specific conditions, the property developers or government can interrupt and force owners to sell their property.
If you’re wondering, such scenarios are quite common in Singapore.
Sometimes they may happen forcibly, but usually, property owners are more than happy to sell them due to the enticing monetary incentives that come along with such sales.
How To Identify Which Property Has En Bloc Potential?
Well, there are a few simple indicators that you need to check for when deciding whether your property qualifies for an en bloc sales or not.
We have highlighted a few such signs below to ease your en bloc sales process:
Rising real estate values in your area:
The biggest factor that contributes to en bloc sales in Singapore is the rising value of land as compared to the development.
Another big hint is when some big transformation is planned for your area; in such cases, all the unit owners in the concerned property are relocated to some other places.
Also, if your property is situated in close vicinity to some major transport links in the city, you may also experience en bloc at some point in life.
If the structure is wasting much land:
It’s well observed that the HBD flats and condo units these days are consuming less land space; the developers prefer to add more numbers of floors to the properties. It helps them to earn more per square meter of land while ensuring easier buying and selling opportunities.
As old condos and HDBs are built in an age where technology is not that advanced, they are constructed in a way where land is used inefficiently.
Therefore, such units are more preferred for en bloc. In short, if redevelopment of your property can lead to more profitable land use, it has a higher chance to qualify for en bloc.
Availability of alternative housing:
One crucial factor to consider for en bloc is the availability of alternative housing area for existing residents to be relocated.
Unit owners tend to be more agreeable to en bloc sales when they know they can move to other housing areas without much trouble. Residents should take into account the availability of housing area for relocation.
The real estate market is strong:
It’s observed that en bloc is more likely to happen when it is possible to ensure more value for the land by making some redevelopment.
In short, if the economic viability of the property can be enhanced with redevelopment, it can be a profitable decision to announce the en bloc of a development.
Will En Bloc Sales Make You A Millionaire?
Sorry to break it to you, but en bloc is usually announced for much older buildings, so if you’re hoping to become a millionaire from en bloc, it’s probably not going to happen since most of the real estates in Singapore are relatively new and functional.
However, if you do own a property that fulfills all the criteria mentioned, you might be able to gain huge returns(enough to make you a millionaire) through the sale.
But, considering the fact that you have to purchase a new house, pay stamp duties, and taxes, you’ll probably be losing a substantial amount of capital gains upfront.
Tip: As selling your property through en bloc takes a longer time to finalise, the property prices may fluctuate by a great extent depending on market cycles.
Thus, it’s highly recommended to source for new homes at a reasonable price so that you can keep most of the capital gains!
Case Study: The Largest And Most Valuable En Bloc Sales In Singapore
The en bloc Singapore sales have been a hot topic for discussion for the past several years.
One such transaction was recorded earlier in the year 2007 when 618 apartments were sold for a total of $1.339 billion at Farrer Court.
The developers handed over almost $2.122 to $2.238 million to the individual owners in that property.
The previous owners were able to make hefty profits from this sale, and the developers then turned that property into D’leedon that is now considered a famous apartment complex containing 1,715 luxurious and high-end residential units.
This sale was exciting for many reasons – one of it being its astronomical pricing in that point of time.
To add on, here are some noteworthy En bloc sales that were closed before the year 2007; they include:
- Anderson 18 was sold for $478 million at that time. Known as the famous ‘Nouvel 18’ today.
- Gillman Heights property was sold for $548 million. The land now houses the popular ‘Interlace’.
- Grangeford Apartments were sold for $625 million, and developers turned it into Twin Peaks.
- Leedon Heights was sold for $835 million and soon became popular with the new name Leedon Residence.
How Did The En Bloc Market Perform in 2017 and 2018?
In the year 2017, the number of en bloc deals reached 27, and the total value of sale transactions was S$8.13 billion.
2018 was a stellar success for the en bloc market – with over 35 residential deals collectively valued at over $10 billion, a record-high in more than a decade.
To illustrate the extent of the success, here are the top 5 performers:
- Pacific Mansion (completed in 1976) – sold at $980 million
- Tulip Garden (completed in 1985) – sold at $906.9 million
- Park West (completed in 1986) – sold at $841 million
- Pearl Bank (completed in 1970) – sold at $728 million
- Goodluck (completed in 1984) Garden – sold at $610 million
These figures are a whopping 30% more than the en bloc sales closed before 2007.
If you dig deeper into the statistics, these en bloc developments are either located in the town area or near Jurong Lake District(which was announced by URA to become the 2nd CBD area).
Given that you own a mature estate in these areas, who knows if you’ll become the next “en bloc” millionaire?
En Bloc Market Outlook 2019 and Beyond
As you know, the property in Singapore are not built to serve as an investment vehicle, but instead, they are built with the intention for own stay.
To prevent the real estate market from overheating, the Singapore government has implemented cooling measures in the form of higher Additional Buyer Stamp Duties(ABSD) rates and tighter loan limits in Jul 2018.
As such, en bloc sales volume has fallen significantly in 2019 due to these cooling measures kicking in.
However, there are still optimistic property owners who are actively putting up their development for en bloc.
Pros of en bloc sales:
- It provides the ability to monetise older investments immediately.
- Previous owners get a hefty amount that can work for them as a retirement fund or meet other emergency needs.
- Older buildings demand more repair and maintenance; Putting them up for En bloc can save you from that mess.
- The received money can be used to buy a new apartment.
Cons of en bloc sales:
- Families may need to look for new amenities at a new place such as good schools for their kids.
- If homes have some existing tenants, the terms and conditions will be required to be changed, and it may appear a little costly affair.
To conclude, the pros certainly outweigh the cons given that the cost of living in Singapore continues to rise as we speak.
It’s an excellent exit strategy and opportunity that helps people to “renew” their apartments and keep their capital gains that may come in handy for the future.
If your place has been en bloc and you are thinking of buying a new launch condo, check out our guide first.