In 2018, many Singaporeans became millionaires overnight when the en bloc fever hit the real estate market. In that year, there were more than 36 developments that were sold en bloc, making many owners millionaires overnight. That begs the question – how do you spot properties with en bloc potential?
But first, what is en bloc? The term en bloc, also known as a collective sale, is a French term that means “in a mass” or “as a whole.” In real estate terms, an en bloc happens when residents of a development agree to sell their homes at the same time to one buyer (usually a developer) and for prices much higher than the resale market value of individual units.
Plot Ratio: Inefficient Use Of Land
Many developments built in the 1970s & 1980s do not fully utilise their land area. You see plenty of open-air car parks and greenery, unlike the newly launched developments of today, all with multi-storey car parks. A prime example is the former Farrer Court (now known as D’Leedon), which had plenty of green open space and open-air car park lots.
Developers who purchase these developments en bloc would most likely build another residential block in place of the open-air carpark lots. This is a good indication of how space can be used more efficiently. For developers, this makes more financial sense, since they can sell more units and therefore earn more dollars per square foot. Older condo estates with inefficient use of land are likely attractive targets for en bloc sales.
Increase in Value of Land and Property
If the prices of the surrounding developments in your location has been going up steadily, it is also an indication of the potential for en bloc. One clear indication is if your area is undergoing a major transformation i.e. building of MRT station, integrated transport hub, and major malls etc. Once the transformation is completed, the land value will go up and that is what developers are most interested in.
Location also plays an important role as areas that are more central and well-connected via public transport, are more likely to attract developers’ attention. It is no surprise that developments in districts 9, 10 and 15 have the most en bloc projects from 2016 to 2019.
Size of Development
Smaller developments have a higher chance of en bloc success than large developments. This is due to the fact it is easier to garner the necessary required percentage of owners’ approval for sale as compared with larger developments, which requires more owners’ consent. Also, small developments requires less financial commitment and therefore, lower risks.
Age of the Development
If your development is less than 10 years, it is unlikely to be an en bloc target. Most of the recent en bloc developments are usually between 20 to 40 years old. That’s because the value per square foot of the land of older developments is cheaper and the value has then increased.
Also, residents who live in older properties tend to be a bit more agreeable to en bloc sale as the units they are staying in might not be in the best condition or they might be thinking of right-sizing.
State of the Property Market
If the property market is in doldrums, it is unlikely any en bloc will happen. The en bloc fever of 2018/2019 was due to developers’ sentiments that the property market has bottomed-out and they expected the market to rebound sharply. Developers will only look for potential en bloc developments when there is a demand for new projects. It takes a lot of money to complete an en bloc sale and developers will only proceed if the risks are lower and the profits higher.
The Legend at Bukit Timah
Our team recently visited a property that we believe has a high en bloc potential: a very high floor 2-bedroom maisonette at The Legend. The project was completed in 1996 - and based on our observations, it meets the criteria mentioned above.
Read our in-depth review of the property HERE.