En Bloc Impact on Singapore Property Market and Foreign Investors

By Kalyan Kumar

The en bloc or collective sales frenzy continues to engulf Singapore’s property market, with this trend influencing demand patterns and home prices equally.

According to analysts, the en bloc fever is likely to reach its peak by May and taper out by December 2018.

For land-starved developers, en bloc is giving them a new lease of life and they have been bidding aggressively, hoping to reap a bonanza once a price recovery from the sunken property market takes place.

Now that the property market has largely revived, price recovery is becoming apparent in the last three quarters. The bad days are certainly over for real estate operators.

However, one dampener to en bloc sellers in some districts will be potential oversupply from previous en bloc deals and release of many Government Land Sales (GLS) sites. This may force developers to target new en bloc deals in districts that have an undersupply of GLS sites.

Snowball Effect in Property Market

The “snowball effect” of en bloc on the real estate market has been noted by Lee Nai Jia, research head of Edmund Tie and Company.

Thanks to rising en bloc deals, displaced owners have to look for new homes. Lee said those selling their single units via en bloc will be looking to buy two units even though some downsizing is inevitable.

In 2018, top condominiums that might go en bloc include Lakeside Apartments (120 units), Laguna Park (528 units) and Teresa Ville (264 units).

In 2018, 44 condominiums will go en bloc, unlocking at least 9,000 potential house hunters.

In 2017, 27 condominiums let off en bloc tenders that brought 3,200 homeowners to the property market searching for new homes, according to Cushman & Wakefield.

Price Rise in Sight

According to analysts, the en bloc wave is going to push up private home prices by an average of 12 percent in the next three years, and some stability can only be expected by 2021.

One positive aspect of this trend is that such strong growth rates can bring back foreign buyers into the Singapore property market, said Lee.

Biggest En Bloc Sale

The mega en bloc sale of Pacific Mansion made big news in March. Sold for S$980 million, Pacific became the largest en bloc deal in a decade, according to real estate agency CBRE. It was also the largest deal in the current en bloc cycle, outshining Tampines Court’s S$970 million deal and the S$907 million fetched by Amber Park.

Pacific Mansion at River Valley Close has 290 units covering 288 apartments and two commercial units.

Pacific Mansion’s tender was taken up by a joint venture comprising Guocoland Singapore, Hong Realty, and Intrepid Investments.

Developers were charmed by Pacific Mansion for its excellent attributes as a vast freehold site lying at the heart of District Nine close to the Orchard Road shopping belt, Central Business District, and the upcoming Great World City MRT Station.

More Leasehold Coming in En Bloc

One significant differentiator for emerging en bloc sales has been identified by Cushman & Wakefield.

According to the real estate research group, unlike the past, all new en bloc sale cycles will have fewer freehold projects and the numbers will be dominated by 99-year leasehold projects.

Freehold Attraction for Foreign Investors

The diminishing supply of freehold units will be an opportunity for top developers to acquire freehold sites aggressively to target long-term investors and foreign buyers who are willing to pay premium prices for freehold properties.

This pull on foreign investors will be further fortified by the strengthening Singapore dollar and the rising action in the local property market.

However, one drag in attracting foreign buyers for Singapore property will be the exorbitant Additional Buyer’s Stamp Duty (ABSD) aimed at foreign investors.

Suburban Demand to Grow

Meanwhile, the suburban and HDB resale market is set for a great pick up with the upcoming en bloc sale of many erstwhile government housing projects and estates belonging to the Housing and Urban Development Company (HUDC).

Overall, the outlook for en bloc sales in 2018 is positive. The current cycle of collective en bloc sales will stay robust and it will unlock more growth in demand and supply of property in Singapore.

 

 

 

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