You finally found your dream house, you made it your home, life is good – and then someone bulldozes it and decides to build a proverbial highway right through it. While the power of private property is substantial, it is not absolute – and under certain circumstances, the government or property developers can barge in, force you to sell and take over your home. In Singapore, the oft-cited way that such takeovers go down is through a collective sale, colloquially known as the – sometimes loved, sometimes dreaded – en bloc sales.
So, what’s this collective en bloc sale all about?
A collective sale, also known as en bloc, is a sale of two or more property units to a single common purchaser. Whilst smaller collective sales often take place, the best-known example is the iconic grand-scale, full-development sales that you may often come across in newspaper headlines.
Generally speaking, an en bloc sale means that owners, in exchange for collectively parting with their property are each offered a golden handshake, so to speak. The contentiousness arises from the fact that not everybody has to consent to the deal, and as a result, for some, the golden handshake – no matter how golden – is also kind of a slap in the face.
How can your property be sold against your will?
When a development is older than 10 years, at least 80 percent (90 percent when it’s less than 10 years old) of its residents* must agree to part with their home for the deal to go through. Consequently, in the event that a vast majority – to the tune of 80 percent of the residents – decide to sell a collective sum of units (including those that are not theirs), then the whole development can be sold, much to the misfortune of the remaining 20% of residents.
Important*: the government has been flip-flopping considerably on the laws regarding en bloc sales, altering them every few years, most recently in 2007 and 2010. As of today, it is not precisely 80 percent of residents that have to concur with the sale for a deal to be viable. Instead, it is required that the owners holding a minimum of 80% of the share value and 80 percent of the total strata area concur with the sale. Whilst this may merely look like some legal jibber-jabber, it is important to understand; it simply means that votes are assigned based on the share value rather than number of units owned. Evidently then, in the event that a large number of units, or the better valued, more luxurious units, are owned by a relatively small number of individuals, then less than 80% of the residents, and perhaps even a minority may decide the future of the whole block.
For more information on how votes are precisely allocated see this guide by the Building and Construction Authority (BCA).
The Rationale of en bloc
The logic of en bloc sales is such that in land scarce nations, or otherwise densely populated cities, the tides of time will lead different areas and neighbourhoods to develop at different speeds. As time moves on then, the old will sometimes have to make way for the new. Yet, how about those still living in the old?
Imagine a scenario where there would be no laws regarding collective sales, and there would be no way to strong arm anyone to sell their property against their will. If anything, many cases would probably arise where a small minority, or even a single individual would refuse to sell, thereby holding back the entire neighbourhood from developing.
To mitigate against such events the government has brought into life laws regarding collective sales. The idea then is to make it difficult yet possible for en blocs to occur, and so the 80% threshold was called into action to find a reasonably fair midway point between respecting private property laws and holding the common good of neighbourhoods in mind. This way, when a sufficiently large crowd wished to sell a development, then the a minority will have to make way. In practise, it is really not too easy to get 80% of a development to agree to a collective sale, and the financial compensations tend, as such, to be rather high.
How does an en bloc sale occur?
There are generally three ways that an en bloc can go down.
Firstly, and most amicably, there may be an opportunity for a greatly lucrative sale, with the owners coming together and putting the whole bloc up for sale so as to get a better price collectively, than they would get individually.
Secondly, an outside buyer may approach a group of owners and negotiate with them to get enough people to vote and sell the whole development. Often, a battle of sorts would ensue with the owners being divided into stay and sell camps. No jokes, these things can get heated!
Thirdly, a company may approach the owners so as to buy the development, subsequently sell it to a third party and make a quick profit as the middleman.
Before the Global Financial Crisis reached the shores of Singapore (and hence before seven rounds of cooling measures were introduced), expected profits were high and the second and third way occurred most often. Indeed, buyers were widespread, and prices would often go through the roof. Today, developers are far less willing to make the jump, and quite a few developments have been going en bloc repeatedly, only to be disappointed by the lack of response from potential buyers.
The Largest en bloc Sales of Singapore
The largest en bloc sales all went down back in 2007. Most extraordinarily, 618 apartments of Farrer Court were collectively bought for $1.339 billion. Discounting all overhead costs, it amounted to a handover of $2.122 to $2.238 million per apartment. These sums are especially extraordinary seeing as though these same units changed hands for around $500,000 to $600,000 before the collective sales negotiations started. Whilst the previous owners made a hefty profit, the site has been revamped into D’leedon, a behemoth of an apartment complex with more than 1,715 high-end, luxurious, residential units.
The sale and subsequent development of D’Leedon is interesting for more than its astronomical price tag. Indeed, it follows the familiar en bloc narrative; a relatively uninspiring or not-too-amazing bunch of apartments is bought by courting its owners with attractive compensation. Next, the entirety of the complex is wholly revamped into a more expensive condominium complex, built high into the sky.
Apart from the monster sale of Farrer Court, there were more noteworthy en bloc sales all of which occurred before 2007:
- Leedon Heights (Today known as Leedon Residence) was sold for $835 million
- Grangeford Apartments (today known as the Twin Peaks) was sold for $625 million
- Gillman Heights (today known as the Interlace) was sold for $548 million
- Anderson 18 (today known as the Nouvel 18) was sold for $478 million
Most recently on 1 June 2017, HUDC estate Eunosville was sold for $765 million to to MCL Land, the second-highest price ever registered for such a plot.
That silver lining 🙂 …
At the end of the day, en bloc sales can either be a blessing or a curse; depending on how you view it, it can be a welcome financial windfall, or a violation of your private property rights. Whilst it is always unsettling to find oneself within a dissenting minority, forced against one’s will to part with one’s property, there may be a silver lining in that we are in Singapore, where there is enough prime real estate to go around – and as for that golden handshake, it may very well come in handy once you decide to take another look at the real estate market.
If you found this article helpful, 99.co recommends What happens after the en bloc craze dies down and En bloc Potential: 7 Reasons why a Collective Sales Tender Fails.
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