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En Bloc: A Millionaire Dream

pearl bank apartment en bloc

Understand En Bloc: A Quick Rundown

En bloc or collective sales is a term that has frequently appeared in the Singapore real estate news from the second half of 2016 until now. It also caused many residents to make several million Singapore dollars overnight. Have you ever wondered such a good thing?  Since last year there have been a plethora of customer inquiries on where to buy property with en bloc potential, how much can I earn from en bloc, etc.

Well, today I will touch on some pertinent issues of collective sales.

The Process of Collective Sale

The collective sale that most people are familiar with means that the entire apartment is sold to developers for redevelopment. From the start of the collective sale process to the successful sale of the project, it can be roughly divided into three stages: preparation for sale, the launch of sales, and signing of an agreement.

If you look at media or newspapers reports, it may seem like the transactions between the property sellers and the developer are smooth and hassle-free. In truth, it is a very tedious and lengthy process to move from the initial planning stage to the final relocation stage.

First and foremost, if homeowners wish to sell the apartments they live in, they must first look for like-minded owners and set up a collective sales committee. The work of this committee includes communicating with more owners, mobilizing them to join in the collective sales, and finding suitable sales and legal advisers to promote the collective sales process.

The primary task of the committee is usually to allow all owners to sign a collective sale agreement. This is often the most difficult process of preparation. Many en bloc projects have failed because they could not obtain the consent of enough owners for the sale to proceed.

According to en bloc regulations, property developments more than 10 years must obtain at least 80% approval from the owners. For properties less than 10 years,  minimum 90% of the owners must agree to the sale. If it fails to obtain the minimum level of consent from the owners, this round of collective sales will come to an end. Existing regulations also state a 2-year waiting fulfilment period before a new round of collective sales can commerce. This is to prevent non-agreeable homeowners from any further harassment.

While seeking the consent of most of the owners, the committee also has to contact real estate brokerage companies and legal advisers. Real estate brokerage companies provide collective sales consulting services for homeowners. That includes asking the independent appraisers to value the project, assisting the collective sales committee in handling the relevant procedures, and planning how to sell the project to developers. The legal adviser is responsible for the preparation of relevant legal documents, including the collective sale agreement to be signed eventually by the buyer and the seller.

After obtaining the consent of most owners and setting up a sales plan, this project can finally be launched officially in the market to find suitable buyers. The real estate agent will advertise and invite interested developers to bid.

After negotiations on the terms with the highest bidder,  the owners can sign a collective sale agreement. In the event, if the transaction is not approved by all the owners, it is then necessary to submit a group sale application to the Strata Titles Boards. Collective sales transactions are only officially completed when they are approved by the authorities.

The duration for a successful en bloc sale is at least one to two years. When there are other variables to consider by the owners, the entire process will even be longer. Therefore, concluding an en bloc sale is akin to a war campaign with a protracted period of time.

Owners Opposed to Collective Sales by Legal Means

One case worth noting is the Horizon Towers collective sales lawsuit.  The verdict for the final appeal was in the favour of the four minority owners, and the collective sale transaction fell through.

The sale of Horizon Towers, which was initially tabled for $500 million to Hotel Properties Ltd (HPL) in January 2007, has been among the most dramatic and long-drawn-out collective battles in history. The whole issue spanned more than two years and went back and forth between the High Court and Strata Titles Board (STB) twice before finally being decided in the Court of Appeal.

The landmark horse-shoe shaped Pearl Bank Apartments near Outram Park MRT station will be torn down for redevelopment after it was sold to CapitaLand in an S$728 million collective sale. This is the fourth time Pearl Bank Apartments put up for collective sales. The whole process was around 10 years before this final one was successful.

What are the variables for collective sales?

Since there are many parties involved in the collective sale process, there are still many uncertain factors contributing to the failure of a collective sales deal. This happens even when there is a unanimous decision to go ahead with all the homeowners.

An example is when the brokerage company responsible for the sale handles the collective sale with inappropriate behaviour, the transaction may be terminated.

Thomson Garden was originally sold for $590 million dollars in 2013. HSR, the brokerage company responsible for sales, was found to have paid the money to four homeowners in exchange for agreeing to sell the house. The transaction was ultimately nullified by the court. The HSR was fined $70,000 afterwards and was not allowed to engage in collective sales activities for a year.

If the buyer runs into cash flow problems, it is also possible to end the transaction. This kind of incident actually happened several times.

Tulip Garden was successfully sold in the market in 2007.  Bravo Construction agreed to buy it for $516 million. However the company was unable to obtain financing for the purchase the following year, and the request for an extension of payment was rejected by the owners of Tulip Garden. In the end, Bravo Construction lost the 5% deposit.

In 2009, Cairnhill Heights was sold for $44 million, but developers retracted from the sale due to unfavourable market conditions.

In that same year, a company set aside $1.78 billion to bid for Laguna Park in Marine Parade, a price way above the reserve price of $1.2 billion.  The deal did not pull through in the end due to funds transfer issues.

The last variable is the developer’s plan for the development of the new project which has to meet the standards set by the authorities by law.

In 2016, the application to redevelop former HUDC  Shunfu Ville into a high-rise residential project was turned down by the authorities due to the proximity to the nature reserve. The developer Qingjian Real Estate (Nanyang) Group had no choice but to change the development plan in order to continue with the transaction.

Is En Bloc Profitable?

In 2017, more than 7,000 homeowners sold their houses through a collective sale. Are all of them making money?

Let’s take a look at two examples:

Spending $180,000 for decoration

For most of her life, Li Shulian (75 years old) and her husband Chen Zong (74 years old) always desired to live in private housing that offers shopping, medical care, and public transportation nearby. It took them quite a while before they settled for Ivory Heights.

Located in Jurong East, Ivory Heights is a former HUDC residential project housed in a mature estate. The units are spacious and well-lit by daylights. It is also a stone throw away to Yuhua Gardens, where they can enjoy strolls and walks leisurely.

In 2013, they forked out $1.32 million to buy a 1,700 square feet unit. They also spent a lot of time converting it into an elderly friendly home. They changed the stairs in the house into slopes, laid non-slip tiles in the house, and installed handrails in various places. The toilet doors were also modified to facilitate wheelchair access.  It took them nearly a year to complete the $180,000 works.

When interviewed by  “Lianhe Zaobao”, Mdm Li said: “My spine has problems and I cannot stand or walk for a long time. I may have to sit in a wheelchair for a long time in the future. This house is my retirement home. If I have to use a wheelchair in the future, the house must be wheelchair friendly.”

With the sale of Ivory Heights due for completion soon, the two elderly people are left with a big problem. According to their rough estimates, they stand to lose about $240,000 after deducting the stamp duties and other charges if they were to find another unit of comparable size and facilities.

Homeowners worry that they can’t afford an alternative house

There are many homeowners like Li Shulian who do not want to sell their homes, and Wu Lifen (45 years old, housewife) who lives in the Goodluck Garden is one of them.

She did not want to move out of the house of nine years because her three children aged 11 to 15 are still attending nearby schools. If she chooses to live in the same area, she fears the $2.6 million she receives is insufficient to purchase an alternative house.

“If the sale of the collective is successful, we expect to receive the developer’s money in September next year (September 2018). Apartments of the same size in the vicinity are now asking for $2.2 million. By the time we receive the money, it might not be enough given soaring property prices”, she said in an interview with the local media.

En Bloc Not Necessarily Profitable

During the collective sale process, homeowners who don’t know much about the details may assume that they could earn big profits out from it. The truth is homeowners must have a place to stay, on top of the payment of various fees.

Collective Selling Costs

The homeowner pays commissions to real estate consultants and legal advisors at a certain percentage of the collective sale price. Each household pays several thousand dollars. If the plan for the sale of the collective falls, there will be no charge.

There is also an independent appraisal fee, the cost of advertising in mainstream media like newspapers, and a $5,000 fee payable to the Strata Titles Boards for the approval of the sale. All these costs are shared by the homeowners.

If the owner has moved into the apartment for 3 years or less, he is liable to pay Seller’s Stamp Duty (SSD) for the sale (4% to 16% of the transacted price, based on holding period). For example, 49 homeowners at Tampines Court must pay SSD ranging from $60,800 to $277,000.

It should be noted that SSD must be paid within two weeks after the completion of the transaction.  Money receivable from the developer, on the other hand, has to wait for several months before delivery. Therefore some households might run into cash flow problems because of the time lag. In addition, the first payment when buying a replacement house needs to be considered. Older homeowners might also face difficulty in securing bank loans.

Homeowners have to set aside money for Buyer Stamp Duty (about 3%~4% of the price) when they buy a replacement house; if they have more than one house or different nationality status (permanent residents or foreigners), they have to pay extra Additional Buyer Stamp Duty (5% to 15% of house price).

If the existing home loan is not fully paid up, the bank might seek prepayment penalty from the homeowner. This penalty is generally a percentage of the outstanding loan amount, and it differs from bank to bank. If the loan still has 800,000 remaining and the fine for early prepayment is 1.5%, then the fine is $12,000.

Relocation Period

The homeowner can choose to vacant the house once the transaction is completed, or leave within the deadline after the transaction is completed. Generally, the deadline is six months. If the homeowner chooses the latter, the buyer’s or seller’s legal adviser will deduct approximately 5% from the homeowner’s sale proceeds. The balance will be released after the owner clears the house.

Owners who continue to live in the house will be subjected to pay rental to the developer, while still paying management fees and property taxes.

Strata Titles Boards Approval

If all homeowners agree to sell the house and sign a collective sale agreement, the committee can directly deal with the developer with the winning bid. If a small proportion of homeowners objects, the apartment must be approved by the Strata Titles Boards (STB) before it can find a buyer through a tender.

If the homeowner finds that the sale proceeds are less than the amount of money paid for the purchase of the house after deducting all costs of the collective sale, resulting in a loss, they may apply to the STB for a termination of the collective sales. It should be noted that this does not include the cost of buying an alternative house, decoration and moving house.

In addition, if the owner mortgages the house to the bank and the sale proceeds are not enough to pay off the loan, he can also apply.

After the sub-divisional review has been verified, it will order the termination of the collective sales plan and then hand it to the High Court for adjudication.

Experiences of Successful En Bloc Homeowners

The general purpose of buying a house is to live in it. For houses to have en bloc potential, they have to be of substantial age. This is usually where the dilemma comes in. Are you willing to sacrifice comfort to stay in a development with en bloc potential?  Let’s hear out some of the owners of Pearl Bank Apartments.

Pearl Bank Apartments was built in 1976. It has a history of 42 years, with 50 years of land lease remaining. It covers an area of 82,376 square feet. It is a 37-storey building with 280 residential units and eight commercial units.

According to the residents, the facilities inside are old and require frequent maintenance. Lin Ting (38), who lived in the apartment since the age of 5,  said that the maintenance and decoration costs are already more than $10,000 for the last couple of years for each household.

Ms Seet, chairman of Pearl Bank Apartments Management Corporation Strata Title (MCST) committee, adds that $2.5 million new maintenance and maintenance costs are spent on major facilities every 2 years. In 2017, there were 84 incidents of leaking water pipes, as well as more than $20,000 maintenance and repair fees for elevators. Many disputes were caused by leaking water pipes. A resident said that in recent years, the annual maintenance fee for the property hovers about $7,000 to $8,000. This is hard for the owners because the most of them are retired elderly with no income.  This is one of the key reasons why the majority of owners are agreeable to the sale.

Mrs Phang, a retired doctor, bought a unit there 10 years ago. The monthly rental has dropped drastically from a high of $6000 to the present $2000. Coupled with the high maintenance fees and frequent repair costs, she felt that it’s time for Pearl Bank Apartments to be redeveloped.

Intense Competition from Other En Bloc Projects

2017 was a year filled with robust and active news coverage of collective sales. The competition has become very stiff bu virtue of the high number of collective sales projects. Ms Tang Wei Leng, the managing director of Colliers International, commented many private housing projects started to prepare for collective sales plans in early 2017. It was only towards the end of the year these projects were released to the press.

Mr Tan Hong Boon, Jones Lang LaSalle (JLL) Regional Director, said that according to his knowledge, about 50 private housing projects are currently preparing for collective sales, out of which one-third is 99-year lease projects.


In summary, if you want to enter the market to buy a house with en bloc potential,  you must first understand these things.

  1. The process of collective sale is long and arduous. Psychological preparation is required. According to past data, collective sales fever happens once every 10 years and lasts for about a year or so. Besides obtaining consent from the majority of owners and the speed to launch the project in the market, the biggest challenge is the asking price. It is at times difficult to meet the owners’ expectations and have a reasonable pricing to attract buyers. When Eunosville made its first attempt in 2013, many homeowners were seeking high asking prices. By the time the preparations were finished, the government launched new loan borrowing policy, and this effectively killed the plan.
  2. Not all en bloc cases are profitable. This is hugely dependent on when the property was bought by the last owner.
  3. In general, aged properties with high maintenance and repair costs are more receptive to en bloc.
  4. Not all old property projects will be selected for en bloc by developers. Other factors like plot ratio, Gross Floor Area utilisation and URA’s Master Plan changes have to be carefully studied.

Do you still want to buy a house with en bloc potential? Let’s judge for yourself.

Source: The Straits Times, Lianhe Zaobao

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