Condo owners hope potential reforms will help them see en bloc success

Key Concepts

• En bloc sales
• Collective sale threshold
• Regulatory requirements
• Urban renewal
• Land use efficiency
• Holding costs
• Government land sales (GLS)
• Additional Buyer's Stamp Duty (ABSD)

Challenges in En Bloc Sales and Proposed Reforms

Private property owners are seeking reforms to the en bloc sale regime to improve the success rate of their collective sale attempts. A primary concern is the current "one-size-fits-all" 80% owner consensus threshold, which is seen as impractical, especially for older and larger developments.

• Laguna Park Case Study: Homeowners at the 47-year-old Laguna Park are on their fifth en bloc attempt. They highlight the logistical challenges of achieving 80% agreement in a mixed-use development with diverse owner profiles and varying vote shares, particularly when dealing with over 500 units (Laguna Park has 528 units). A handful of undecided owners can significantly delay or stall the process, even if the vast majority support the sale.
• Loyang Valley Case Study: The 40-year-old Loyang Valley is undergoing its third collective sale attempt since 2018. Owners face numerous time-consuming regulatory requirements and need to address specific questions from potential developers, such as access routes and potential road placements. A significant hurdle mentioned is height restrictions due to proximity to Changi Airport.

Reasons for Declining En Bloc Sales

Real estate agencies note a significant drop in en bloc sales, with only four recorded last year compared to 36 in 2018. Several factors contribute to this decline:

• Increased Construction Costs: Construction costs have risen since 2018.
• Higher Additional Buyer's Stamp Duty (ABSD): ABSD rates have increased, making development projects more expensive for developers.
• Competition from Government Land Sales (GLS): Developers often prefer GLS sites, which are perceived as "cleaner" and more straightforward development sites with fewer regulatory hurdles.
• Hidden Costs and Holding Costs: En bloc sites can involve hidden costs associated with regulatory requirements. Furthermore, developers typically receive a six-month rentree period after completion before they can demolish existing developments, incurring holding costs. This makes en bloc sites less straightforward compared to GLS.

Perspectives on Policy Review and Market Equilibrium

A market observer emphasizes the importance of a carefully managed policy review to prevent a sudden surge in en bloc attempts and an oversupply of land.

• Risk of Price Crash: If changes to the threshold lead to a significant number of projects becoming viable for en bloc sales, it could result in developers having more options. This increased competition among developers could naturally lead to a price crash in the Singaporean property market, potentially affecting resale condominium prices, HDB flats, and landed properties.
• Need for Equilibrium: A "good equilibrium" is crucial to maintain stability across the property market.

Arguments for Timely Review and Land Use Efficiency

An analyst argues that a review of the en bloc regime is timely to ensure efficient land utilization in Singapore.

• Urban Renewal: The process is seen as part of urban renewal, particularly in prime locations or areas with good amenities and connectivity. Older, less densely built buildings are demolished to make way for newer, more intensive developments.
• Increasing Pressure: Pressure for en bloc sales is expected to rise as more flats reach the end of their lease. Currently, over 30% of condominiums in Singapore are at least 30 years old, a figure projected to exceed 40% in the near future.

Law Ministry's Stance

The Law Ministry has stated that proposals for reform will be announced when they are ready.

Conclusion

The current en bloc sale regime faces significant challenges, leading to a decline in successful sales. Homeowners are advocating for reforms, particularly a more flexible collective sale threshold, to address practical difficulties. While a review is considered timely for efficient land use and urban renewal, it must be carefully managed to avoid market instability and a potential price crash. The increasing age of existing developments suggests that the pressure for en bloc sales will likely continue to grow.