En bloc changes: More redevelopment of ageing condos, reuse of old buildings yield benefits

[SINGAPORE] Might the buzz be returning to the en bloc market for property deals?

Last month, Kingsford Group signed a deal to buy freehold Tan Boon Liat Building for S$950 million – likely the largest collective sale transaction in Singapore year-to-date, according to Cushman & Wakefield.

The industrial warehouse and showroom landmark located at the crossroads of Outram Road and Zion Road can be redeveloped into a residential-led development.

Late last month, the government announced changes to the additional buyer’s stamp duty (ABSD) regime to support housing developers in undertaking large-scale en bloc redevelopments.  

For sites that yield at least 700 homes but less than 1,400 homes upon redevelopment, the completion and sale timelines for ABSD remission was extended to six years from 5.5 years.

For sites that yield at least 1,400 residential units upon redevelopment, the completion and sale timelines for ABSD remission was extended to seven years from 5.5 years.

However, developers will need to sell a minimum of 50 per cent of the homes at the end of six years.

As part of efforts to support the renewal of ageing estates, the Ministry of Law proposed on Aug 4 lower thresholds for older developments to secure an en bloc sale.

Under the Land Titles (Strata) (Amendment) Bill, the consent threshold for developments aged 40 to 59 years would be lowered from 80 per cent to 70 per cent, and from 80 per cent to 65 per cent for those aged 60 years and above.

The existing requirements of 90 per cent consent for developments less than 10 years old, and 80 per cent for those aged between 10 and 39 years are unchanged.

Meanwhile, the proposed legislation would tighten rules governing en bloc attempts.

Also, the collective sale regime will be extended to non-strata-titled private residential developments, where the flat owners have long leases but do not own the underlying land. These include large developments such as Neptune Court and Orchard Court.

More en bloc activity

The above changes will likely herald a more vibrant housing en bloc market.

With more time to complete a big project and sell the housing units, developers will be less hesitant to take on large housing en bloc sites. In short, the risks of large housing en bloc redevelopment projects are reduced substantially. 

With lower consent thresholds for older private non-landed housing developments, a larger number of such developments may be launched for en bloc sales, at possibly more competitive prices, thus raising the chances of a successful sale.

Many owners of units at ageing condo developments will be happy to be able to divest their homes more easily via a collective sale.

After all, a development that is 50 or 60 years old might be reeling from much wear and tear, and in dire need of costly building improvement works to make the living environment more pleasant.

Certainly, elderly owners who want to live in their homes for the rest of their lives may find a lower consent threshold for an en bloc sale problematic.

Might hostilities among neighbours break out easily when the objections of possibly about one in three homeowners get overruled in the en bloc sale of a 60-year-old development?

Buyers seeking older condo homes which sit on initial 99-year land leases because they want the space and much more reasonable per square foot prices of such homes may have fewer choices, should more old condo developments be successfully sold en bloc. 

In addition, people keen to buy old leasehold private non-landed units for owner occupation may think twice because such a home could be prised away from them against their will, in the event of a successful collective sale.

Optimising land use

Nonetheless, having more ageing condo developments successfully sold en bloc and subsequently redeveloped can yield rich benefits to the wider community. 

Currently, there are around 20,000 private non-landed residential units more than 40 years old, official government records showed. This number will rise as the Republic’s private housing stock ages. 

Redeveloping housing en bloc sites can help optimise land use in land scarce Singapore.

Take Pine Grove – a housing development with 660 units, which is over 40 years old. Should Pine Grove be sold en bloc and redeveloped, a new development might yield over 2,000 units or over three times the existing number of homes.

More homes are needed amid rising household formation. More young married couples and singles want a home of their own, while many seniors live alone.

Land parcels that house ageing non-landed residential developments can be worked harder by redeveloping them to provide more homes and units that better suit today’s lifestyle needs. This optimises land use.

With a more vibrant housing en bloc market, perhaps some pressure on the government to touch existing green spaces, among others, for redevelopment will be alleviated.

Sustainability

As numerous homeowners, developers, property consultants and other professionals eagerly eye a possibly much more active housing en bloc market, let’s not forget sustainability.

Demolishing old buildings that are structurally sound instead of retaining them could be sub-optimal from an environmental viewpoint.

In the redevelopment of en bloc sites, consider offering developers strong incentives to put existing old buildings to new uses wherever possible. 

The sale of the Golden Mile Complex along Beach Road for S$700 million marked the first collective sale of a large strata-titled development as a conserved building.

In this case, the economics for the new owners was helped by the Urban Redevelopment Authority providing incentives including increase in floor area with a waiver of part of its development charge. 

As more private non-landed homes age, having a vibrant housing en bloc market can be a winner for homeowners, home buyers, the real estate industry, the government and Singapore in general.

Through the years, Singapore has done well in meeting its residents’ housing aspirations. The Republic excels in optimising land use to meet growing as well as evolving needs for living, working and playing.

Let’s welcome active redevelopment of old private non-landed residential developments, with such work carried out sensitively, including by imaginatively repurposing old buildings to serve new purposes.