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An en-bloc sale is an ideal, windfall scenario for many property investors. But while it’s happened for numerous people, buyers of old properties need to be cautious - when all things considered, there’s often more potential for failure than success. It’s not just about having a good location; it’s a delicate balance of timing, housing policies, owner demographics, and more. In 2014, it was said that 2 out of every 3 potential en-bloc hopefuls would fail. So here are some commonly overlooked factors as to why an en-bloc may fail:
- Last minute policy tweaks and changes
Examples would be the Additional Buyers Stamp Duty (ABSD), or Total Debt Servicing Ratio (TDSR).
- Complex ownership dynamics
For an en-bloc sale to succeed, there must be consent from owners with 80 per cent shareholding.
In some cases, a single owner may be a very large shareholder, with voting power that outweighs the others so you will want to watch out for that.
- Development is still too new
The en-bloc requirement for consent is *90 per cent*, instead of 80 per cent, for developments that are less than 10 years old. This is calculated from the Temporary Occupancy Permit (TOP) date.
In rare cases where en-bloc attempts are made so early, the ownership dynamics matter a great deal (see point 2). Unless almost every owner happened to be looking at a short-term investment, even generous amounts are likely to end up rejected.
- Too many recent sales in the development
If your unit goes en-bloc within the first three years of buying it, you still need to pay the Sellers Stamp Duty (SSD). This is 12 per cent in the first year, eight per cent in the second year, and four per cent in the third year.
The SSD costs, coupled with new renovation and furnishing, can make an en-bloc unattractive to recent owners.
- Market demand and development size
This is because the five-year ABSD deadline is irrelevant to the development size. Whether they build a boutique development with 30 units, or a mega-development with 1,000+ units, the developer still has the same five years.
There’s also the added fact that smaller developments have fewer owners, making consensus easier to reach.
- Legal entanglements
This last happened with Thomson View in 2013, when the marketing agent was accused of paying some owners to back the en-bloc deal.
Don’t be under the impression that, just because the 80 per cent consensus is achieved, the deal is done. Those objecting to the en-bloc can still take further action, and snarl up the proceedings.
- CAAS and LTA restrictions
Regardless of what the new GPR suggests, the Civil Aviation Authority of Singapore (CAAS) can step in and disallow certain building heights. This is one reason why en-bloc hopefuls are wary of airfields nearby, or don’t want to buy close to Changi airport or military airbases.
For the full article, please visit: stackedhomes.com/editorial/wi...
Chapters
0:00 - Intro
0:48 - #1 - Last Minute Policy Tweaks And Changes
2:18 - #2 - Complex Ownership Dynamics
4:30 - #3 - Development Is Still Too New
5:29 - #4 - Too Many Recent Sales In The Development
6:23 - #5 - Market Demand And Development Size
7:56 - #6 - Legal Entanglements
9:14 - #7 - CAAS and LTA Restrictions
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