En bloc, a term derived from the French word “en bloc”, meaning “all together”, refers to the process of selling a group of properties as a single unit, rather than selling them individually. In Singapore, en bloc (or also know as collective sales) has become an increasingly popular way for property owners to sell their aged homes and for developers to acquire land for development.
The government of Singapore allows en bloc sales as a way to promote the rejuvenation of older housing stock, increase the overall value of an area, and address the issue of aging housing stock. Additionally, en bloc sales can also help to control the development pace and land use of the city-state.
En bloc sales can provide substantial profits for property owners, but it’s important to consider all the factors and risks before deciding to participate in an en bloc sale. In this article, we will delve into the en bloc process in Singapore, the factors to consider when choosing a potential en bloc development, the risks involved, and the impact of en bloc on Singapore’s housing market. This article will serve as a comprehensive guide to help you understand the intricacies of the en bloc process in Singapore and make an informed decision about whether it’s the right move for you.
The En Bloc Process in Singapore
The en bloc process in Singapore can be a complex and time-consuming process, involving a number of steps and approvals. It typically starts with the formation of a collective sale committee, which is composed of the majority of property owners in the development. The committee will then engage a property agent to market the development to potential buyers.
The percentage of property owners that must consent to an en bloc sale is typically at least 90% by share value and strata area for developments that are less than 10 years old, and 80% by share value and strata area for developments that are more than 10 years old.
The next step is the sales process, where the development will be put up for sale, and interested buyers will submit their offers. Once a buyer is found, the development will be put under contract, and the sale will need to be approved by the Strata Titles Board.
The Strata Titles Board is a government body responsible for overseeing the sale of strata-titled properties in Singapore. The Board will review the sale to ensure that the terms and conditions of the sale are fair and reasonable for all parties involved.
After the Strata Titles Board’s approval, the development needs to be approved by the relevant government authorities such as the Urban Redevelopment Authority (URA) and Building and Construction Authority (BCA). These authorities will review the development proposal to ensure that it meets all the necessary zoning, planning, and safety regulations.
Once the sale is approved by all the relevant authorities, the proceeds from the sale will be distributed among the property owners. It’s important to note that the en bloc process can take a significant amount of time, and there is no guarantee that the sale will be approved by the Strata Titles Board or government authorities.
It’s crucial for property owners to be aware of the legal requirements, the potential costs and risks associated with the en bloc process, as well as the various steps involved in the process before deciding to participate in an en bloc sale.
Factors to Consider when Choosing a Potential En Bloc Development
When choosing a potential en bloc development, there are several factors to consider in order to maximize the potential for profit and minimize the risks associated with the en bloc process.
- Location: Look for developments that are located in desirable areas, such as those near MRT stations, shopping centers, and other amenities. These developments will be more attractive to potential buyers, and the location will enhance the value of the development.
- Age of the development: Developments that are over 30 years old are more likely to be sold en bloc, as they may be in need of repairs or upgrading. Additionally, these buildings are more likely to be eligible for en bloc sales as per the government’s regulations.
- Ownership structure: Look for developments where the majority of the units are owned by a single entity, as this makes it easier to gather the necessary signatures for the en bloc process. This increases the chances of getting the required percentage of consent from the owners.
- Potential redevelopment: Look for developments with a high plot ratio and a large land area that can be potentially redeveloped into a larger and more valuable project. Such developments are more attractive to developers as they can see the potential for profitability.
- Market conditions: The market conditions such as property prices in the area and economic situation can impact the success of an en bloc sale. It is advisable to research the market conditions in the area and consult with experts to understand the potential of the sale.
- Legal and administrative costs: Research about the legal and administrative costs associated with the en bloc process, as these costs can be substantial and will need to be factored into any decision to purchase a property in an en bloc development.
- Maintenance and repair costs: Check if the development has a high maintenance and repair costs, as this may indicate that the development is in need of upgrading, making it more likely to be sold en bloc. Additionally, these costs will be taken into account by the buyers when making an offer, and it’s important to understand how it can impact the sale price.
- Potential buyers: Look for developments that have a large pool of potential buyers, such as developers with a track record of successful en bloc sales. This increases the chances of a successful sale and also opens up the possibility of better offers.
- Vacancy rate: Look for developments with a high vacancy rate, as this may indicate that the development is not in high demand and may be more likely to be sold en bloc. This could also indicate that the development could be facing financial difficulties, which could impact the sale price.
- Zoning and planning regulations: Check if the development is located in an area with favourable zoning and planning regulations, as this may make it more attractive to potential buyers. The development must comply with the regulations and rules set by the government authorities, which could impact the potential redevelopment of the property.
- Government policies: Keep an eye on the government policies, such as the cooling measure, as it may have an impact on the en bloc process and the success of the sale. It’s important to be aware of any changes in regulations that could impact the sale and the market conditions.
By considering these factors, property owners and investors can make an informed decision on whether or not to participate in an en bloc sale and increase their chances of success. It’s important to consult with property experts and do your research to make an informed decision.
There are several risks involved when investing for en bloc profits:
- Risk of failure: There is always a risk that the en bloc sale will not be successful. This could be due to a lack of interest from buyers, difficulties in getting the necessary percentage of consent from property owners, or difficulties in obtaining the necessary approvals from government authorities.
- Legal and administrative costs: The legal and administrative costs associated with the en bloc process can be substantial and will need to be factored into any decision to invest in an en bloc development.
- Timing risk: The en bloc process can take a significant amount of time and there is no guarantee when the sale will be approved by the Strata Titles Board or government authorities. The market conditions and the economy also play a role in the success of the sale and also impact the timing of the sale.
- Market risk: The market conditions such as property prices in the area, the economy, and other factors can impact the success of an en bloc sale. If the market conditions are not favorable, it may be difficult to find a buyer or achieve the desired sale price.
- Displacement risk: En bloc sales may lead to the displacement of residents, who may have to find new homes and adjust to new neighborhoods. This can be a difficult and stressful process for residents and may also affect the local community.
- Zoning and planning regulations risk: The development must comply with the regulations and rules set by the government authorities, which could impact the potential redevelopment of the property. If the development is located in an area with unfavourable zoning and planning regulations, it may be difficult to find a buyer or achieve the desired sale price.
En bloc sales in Singapore provide property owners with the opportunity to sell their properties at a higher price than they would be able to achieve by selling them individually. However, the en bloc process can be a complex and time-consuming process, involving a number of steps and approvals. It’s essential for property owners to be aware of the legal requirements, the potential costs and risks associated with the en bloc process, as well as the various steps involved in the process before deciding to participate in an en bloc sale.
By carefully considering the factors such as location, age of the development, ownership structure, potential redevelopment, market conditions, legal and administrative costs, and government policies, property owners can increase their chances of success in an en bloc sale. However, it’s important to consult with experts and do your research to make an informed decision.
At Lushhome, we have a team of experts that can guide you through the en bloc process and help you make an informed decision. We have a thorough understanding of the en bloc process and its implications on the Singapore’s housing market. We can provide you with the necessary information, advice and support to ensure that you make the best decision for your property. Contact us today to schedule a consultation, and let us help you navigate the en bloc process.
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