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This time it's different

En bloc sales are back, with the market moving at an unprecedented pace, shifting the landscape in significant ways.

THIS TIME IT’S DIFFERENT: The making of the en bloc sale market.

THIS TIME IT’S DIFFERENT: En bloc sales are back, with the market moving at an unprecedented pace, shifting the landscape in significant ways.

"The biggest tip that most consultants give to owners these days is the importance of reasonable pricing. We need to strike a balance between getting the 80 per cent quickly and going to the market at a realistic price, so that you can attract bidders." - Cushman and Wakefield's executive director Shaun Poh

PROPERTY agent Shaun Poh remembers the time when owners were hostile to the very idea of a collective sale - one set his dog on him. It happened about 15 years ago, when Mr Poh made his third house visit to the owner, to try and convince the man to agree to a collective sale for an apartment development in which he owned multiple units. The man got annoyed, quietly opened the electric gate to his house and unleashed his dog.

"It was a big, fierce-looking dog and we had to run a few blocks," Mr Poh chuckles.


Mr Poh, who is now executive director of capital markets at Cushman & Wakefield, finds owners are much more receptive these days and driven towards pushing their sites to the market in the shortest possible time.

"They are quite focused and motivated. Some of them have tried a collective sale in their development at least once before. Hence, they are familiar with the process and already know what to do."

They are moving quicker too. Tang Wei Leng, managing director of Colliers International, notes that with a greater sense of urgency among owners, the required 80 per cent minimum consent is achieved faster these days - usually in under three months or at times, within weeks.

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Nicholas Wong, consultant of Knight Frank, said that in previous en bloc booms, this could have taken eight, nine or even up to 12 months. "These days, owners are more united, they want to get on the bandwagon and launch their sites fast because they are afraid developers don't have unlimited funds. We don't know the depth of their hunger for land."

Fast and furious is how it's going. Just last month, nine collective sales were launched, with four announced on a single day, Nov 15: the iconic Pearlbank Apartments, Riviera Point in the River Valley area, Derby Court near Novena and Parkway Mansion in Katong.

Why the change of heart? One reason that some owners are so motivated this time round is that they missed the boat during the last cycle in 2006/2007 and don't want to miss another cycle, says JLL regional director Tan Hong Boon.

Agents say another incentive for these owners to hit the en bloc trail is that their building may be ageing and it may be financially more viable to sell the site for redevelopment rather than incur escalating maintenance costs and capital expenditure. Owners of older developments built on 99-year leasehold sites also face prospects of declining values for their properties as the the balance land tenure shortens.

With the market hotting up, there is also the fear of government action, such as an increase in the Government Land Sales (GLS) Programme for the first-half of 2018, or fresh property cooling measures being introduced if, say, private home prices spiral again.

"Back in the 2006/2007 period, most people were just (exuding) pure optimism and thought the property boom would continue," says Mr Tan. They were holding back, and the thinking used to be that if they dragged things, they could sell at a better price.

"These days, people are more understanding, compromising - so as to move faster. They have a greater awareness that the market may not always be going up."

Ms Tang offers another reason owners tend to agree more quickly to an en bloc sale: "They have a better understanding of the en bloc process which is more defined and can be more easily followed now, compared with 10 years ago. Case law decisions have also set out what can and cannot be done - which takes away the ambiguity."

Another big difference between the last collective sale boom in 2007 and the current uptick is that the earlier cycle was led by the high-end segment whereas the current run-up is being fuelled by mass-market developments. This reflects the fact that private home buying volumes have gravitated to the mass market due to affordability.

A confluence of market factors

Apart from more motivated owners,there has beena confluence of factors in the property market that is driving the current collective sale fervour, says Ms Tang. "Chief among them is a surprising pick-up in new private home sales from February 2017 amid a dwindling stock of unsold units, depleting land banks among developers, and the rosier economic outlook."

With tight supply of private housing land on the confirmed-list of the GLS Programme in recent years, developers' bids at state tenders have soared this year, analysts note, and the bullish bids have extended to private-sector collective sale sites. It is this sudden surge in land values - that could feed into higher property prices down the road - that has made viable again en bloc sales that could not be done for the past 10 years.

The authorities lowered the GLS confirmed-list supply due to concerns of an oversupply because of cooling measures weighing down home buying. However, the market has perked up this year. Developers moved 9,460 units in the first 10 months of 2017, after three consecutive years of selling 7,000-plus units a year of private homes in the primary market - aided by a sentiment boost after the government unveiled its maiden tweaks to the property cooling measures including the seller's stamp duty in March.

With healthy primary-market sales, the stock of unsold units has shrunk. The inventory of unsold, uncompleted private homes in projects with planning approvals fellto 16,031 units as at end-Q3 2017 from 20,577 units a year earlier, and is down from apeak of 43,473 units at end-Q2 2008 during the global financial crisis.

Accordingly, developers have a new incentive to start buying land again.

For the year to date (as of Dec 5), around S$8 billion of collective sales across all property segments have been inked, up from slightly over S$1 billion last year. In the peak year, 2007, the figure was S$11.5 billion.

Of concern in some quarters is the record land prices being paid by developers at state tenders and collective sales. High land prices translate to higher breakeven costs which in turn will mean developers would want to launch projects at higher prices.

One may debate whether developers will indeed be able to command their desired pricing, given the five-year deadline to finish developing and selling projects from the site's purchase. Moreover, new traffic feasibility requirements may put a lid on developers' predilection for carving a high proportion of smallish units to achieve higher per square foot selling prices on a project-average basis.

Bidding high for land to stave off competition in the ongoing land replenishment race comes with risks for developers.

As the government has pointed out,the redevelopment of en bloc sites as well as supply from GLS sites could potentially generate about 20,000 new private homes (including executive condo or EC units, a public-private housing hybrid). And these new units will enter the supply pipeline and could be made available for sale in the next year or two.

As at end-Q3 this year, 17,178 units (including ECs) with planning approvals remained unsold. When the additional 20,000 units are completed in the next three to five years, the stock of private homes will rise. If this is not matched by an increase in occupation demand - given slower population growth - vacancies could rise further while rents and prices could come under pressure, the Monetary Authority of Singapore warned last week. A recent BT commentary discussed the impact of supply from en bloc sales, at

Recycling & urban rejuvenation

Notwithstanding the impact on supply, many agents and owners argue that collective sales are a good way of recycling land and spurring urban rejuvenation. For ageing buildings, it may be difficult to get owners to do a major refurbishment; moreover the development's design may be too out of date to incorporate the latest energy-efficient technology.

However, the current en bloc mania has even enticed owners in relatively new developments to check out the possibility of doing a collective sale. A senior agent told BT that he has received an enquiry from an owner in a District 10 development completed just 12 years ago. "I advised him not to even start an en bloc because for a relatively new project, you don't have much collective sale premium. The project would have maximised the site plot ratio already and being relatively new, prices on an individual unit sale basis are holding very well. So there's practically no collective sale gain."

Lee Hon Kiun, director of Landmark Property Advisers, says: "If you knock down such new developments and rebuild, you're wasting so much energy and resources. In the interest of combating climate change - which is the big issue now - the authorities may want to consider setting a minimum age for a development before it may go for an en bloc sale."

Agents stress the importance of reasonable pricing. Says Cushman's Mr Poh: "We need to strike a balance between getting the 80 per cent quickly and going to the market at a realistic price, so that you can attract bidders."Cushman & Wakefield head of Singapore research Christine Li says that in the past two years, about two dozen developers have clinched at least one Singapore residential site or site with a residential component - either at state tenders or through private-sector deals including en bloc sales. She estimates that another 15 parties are on the look-out for residential land here but have not had much success in the past couple of years.These include Far East Organization, Wheelock Properties and CapitaLand.


"Once every developer has enough land to last a couple of years' development activity, developers will start to be more reluctant to pay toppish prices," she reasoned.

Most consultants expect the current en bloc boom to last at least till the end of next year. "If owners go overboard with asking prices, developers might just focus on GLS, which will cream off some of the demand for en bloc sites," said Ms Li. Other factors that may bring this en bloc boom to an end include a big jump in the GLS programme, rising interest rates, hikes in development charge rates payable to the state for redeveloping some sites, and an economic downturn.

"All these factors will impact demand for collective sale sites, but the effect will probably be gradual. If the authorities want to put an abrupt stop to things, they will come up with another cooling measure. They've already fired a few warning shots," said Mr Poh.

How it all began

THE principle behind collective sales is that individual owners in a development can reap a higher price for their units by joining forces and selling their homes together to a developer that is interested in the land.

While there had been instances in the past of neighbours teaming up to sell to a developer, the first collective sale through a public tender conducted by a property agency was that of Cosy Mansions in the Upper East Coast area in 1994.

This marked the start of a wave that lasted till 1997, triggered by widespread increases in plot ratios in the Development Guide Plans or DGPs that were exhibited by the Urban Redevelopment Authority (URA) between 1993 and 1997.

DGPs are detailed plans for each of Singapore's 55 planning areas specifying land use, plot ratio, building height and other planning and design details. When a DGP was completed, it was gazetted as the new Master Plan for the particular area. When all 55 DGPs were completed, they were gazetted as Master Plan 1998.

As Steven Choo, adjunct associate professor at the National University of Singapore's Department of Real Estate, explains: "With the DGPs, you can now see very clearly where the market potential is, how different areas or districts have been earmarked for higher development potential compared with previous versions of the Master Plan."

The increase in plot ratio - or the ratio of maximum gross floor area to land area - allowed the opportunity to unlock the redevelopment potential of land. As a result, land values escalated. Even prior to the release of the DGPs, a key change had already been made that allowed developers to build more floor area, noted veteran property consultants. This was the conversion of the measurement of intensity of residential use from the old persons per hectare population density system, to the more straightforward equivalent plot ratio method from Sept 1, 1989.

At the time, though, the local property market was not yet out of the woods after a major recession in the mid-1980s. In the early 1990s, the liberalisation of rules governing Housing and Development Board resale flats and the use of Central Provident Fund savings to repay housing loans helped to fuel a recovery in property prices.

And as Knight Frank Asia-Pacific president Tan Tiong Cheng puts it: "The greater clarity from the plot ratio system supported the assessment of development potential, setting off greater awareness on planning intentions and development opportunities."

Summing things up, Dr Choo, who is also chairman of property consultancy VestAsia Group, says: “Collective sales take place due to three main factors: No 1 is market conditions. No 2 is the player, ie developer's and No 3 is the planner (ie government). It is up to the planner to decide whether or not to raise plot ratios. But the players must also be there.  Property owners can ask for, say, S$1 billion for a collective sale site, but if it is not in the developer‘s interest to pick it up, nothing will happen.”


The en bloc wave that started in 1994 lasted till 1997, when it was cut short by the Asian Financial Crisis. The next waves were:

1999-2000: When legislation was introduced to facilitate collective sales upon securing 80 or 90 per cent consent from owners depending on the age of the development. Previously unanimous consent was required.

2005-2007: Spurred by Singapore's focus on becoming a global wealth management hub and plans for the two IRs, which put Singapore back on the radars of international investors, this boom ended with the global financial crisis.

2010-2013: This cycle was brought to a close by cooling measures, before the current wave began last year.

Typically collective sales booms are contemporaneous with buoyant market sentiment and supported by rising land values.


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