Are the pipes cracked and the paint peeling? Are the air vents choked with dead insects? Do the residents gaze at toxic waste sites with envy? Then you’re looking at a building with en-bloc potential. But don’t go buying everything that looks like a second-hand (and thoroughly used) bomb shelter just yet. Old buildings are just one sign of a potential en-bloc. Here are the others:
We’re not ready to en-bloc dammit. The roof only collapses every other day.
1. Land Value vs. Existing Value
At the simplest level, en-bloc sales occur when the value of the land is exceeds the value of the property on it. The most common cause of this is age.
As a building ages, it becomes less valuable than the land it’s on. Maintenance costs grow higher, and it is harder to attract new tenants. But age is not the only consideration; under-utilization of land space is also an issue.
According to property investor Rayner Siew, some buildings (from the late 70′s to mid-80′s) under-utilize the plot they’re on:
“A lot of old buildings don’t fully utilize the plot. For example, in the past, buildings were not as high as today. So sometimes you will see a busy, central location, where the building is only four storeys. If torn down, a developer might be able to put up something bigger, 10 storeys, or whatever. The location can generate more profit.
I have seen some en-bloc properties where everything was still in good condition. So you don’t just see the condition. You should see if the building is not fully utilizing the plot; that is potential for en-bloc.”
We’re buying over Sim Lim to build a jail for commercial crimes. No, there won’t be any changes.
Rayner also pays attention to changes in URA’s master plan:
“Sometimes, URA allows the land to be used for other purposes. For example, maybe they only now decided to allow for high rise. Such changes may encourage a developer to buy up the land.”
2. Price and Availability of Surrounding Properties
The biggest problem with en-bloc sales is the CSA (Collective Sale Agreement). En-bloc sales require 80% of the residents to consent (90% if the development is less than 10 years old).
So how do you guess if residents will sign?
You can’t. It’s mostly hope and guesswork. But one key indicator is the price and availability of surrounding property. Property investor Charlie Ng says:
“Usually, residents do not want to move too far away. If someone stays in Jurong, he will probably want to stay in Jurong even after he sells. Maybe he might move to Jurong East, but he probably won’t move to Pasir Ris. This is a big deal for parents, because their children’s schooling can be affected.
Moving to Bedok won’t affect his schooling what. From Bedok can take direct bus to Clementi.
So you should check the prices of the nearby houses. If the residents sell, will they be able to comfortably afford the nearby properties? And are these good alternatives? If not, the chances of an en-bloc are much lower. Not impossible, but lower.”
3. Survey the Residents
As mentioned before, you need 80% consensus for an en-bloc. Before you bet on this happening, it’s best to ask the residents.
Money isn’t everything (it’s just most things). Residents agree to move out for different reasons. Some will only agree if they can keep staying in the vicinity; some will only agree because they can’t stand the old facilities. And some won’t move unless it’s in a box to the crematorium, so just give up.
Survey Question #8: If I put down my bat, would you sign the sale agreement?
Don’t make assumptions about the residents’ thought process. They may whine and complain about old facilities, but perhaps they also work in the area. Or maybe it’s close to their parents. Such residents might see their ageing home as a necessary evil, and vote against the en-bloc.
4. The Location is Good
Location can work both ways in an en-bloc.
On the one hand, a great locations means a lot of money: Premiums from Orchard area en-blocs, for example, can hit 100%. That said, location can also cause an en-bloc to fail. In well situated properties, residents start making excessive demands. A well-situated shop in Orchard, for example, might only vacate at the most exorbitant price.
For commercial properties with high traffic, expect to wait a long time for consensus. Charlie says:
“It can be a risky move. If the location is very good, the tenants will put up a lot of fight against the en-bloc; probably their expectations will not be realistic. This can result in the buyer holding on to the unit for a long time. But without good location, en-bloc is unlikely to begin with.”
See if you can convince them to en-bloc by Thursday
5. Market Confidence
En-bloc fever last hit in 2007, when the property market was booming. As developers grow in confidence, they become more aggressive in their bidding. As such, the likelihood of an en-bloc grows with an up market.
Problem is, it’s difficult for the layperson to know market sentiments. Even amongst experts, a degree of guesswork is inevitable. But signs to look for are:
- Increasing volume (not necessarily price) of property sales
- Numerous other en-blocs
- A low interest rate, and
- Significant rises in rental rates
En-bloc attempts have happened in a down market. However, developers will be cautious, and their offer will be the financial equivalent of spare change. Unless you’re sure the residents have low expectations, don’t bet on an en-bloc during a downturn.
Wait…did you say the building was 72 Grange Road or 72 Grange AVENUE?
You can follow us on Facebook, if you want updates on property market sentiments. And before buying to en-bloc, ensure you get the cheapest loan; in case anything goes on. Visit free sites like SmartLoans for the cheapest bank rates.
Image Credits:
alex.ch, neajjean, Thirteen of Clubs, alantankenghoe, Editor B
What are signs that tell you of an en-bloc? Comment and let us know!
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The resort-like setup of palm oasis and cascading waterfall makes you feel coming home everyday a holiday experience.
If you can find one two-bedder at $1200 psft, this should be within your budget,and you should go for it. Keppel Land will be launching their project at least @$1400 psft on new Upper Changi Road soon.
Optima@Tanah Merah is the latest development in the Tanah Merah area, and where sub-sales hit $1,350 psf last month Cluster near Tanah Merah MRT station sees buyer interest
| BY AMY TAN | THEEDGE SINGAPORE | OVEMBER 12, 2012
The District 16 neighbourhood in the vicinity of Tanah Merah MRT station has seen a surge in activity, owing partly to the sale of three government land parcels and the launch of eCO on Bedok South Avenue 3.
The developers of eCO are a consortium made up of Far East Organization, Frasers Centrepoint and Sekisui House, which won the 308,330 sq ft, 99-year leasehold site with a bid of $345.9 million ($534 psf per plot ratio) in February. The consortium launched eCO in late September and, as at Nov 6, 547 units of 620 released in the project had been sold at an average price of $1,300 psf. eCO comprises a mix of five residential types, with 244 condo units, 237 suites, 220 SOHOs, 17 lofts and 34 townhouses.
The take-up in eCO has been strong, and prices achieved have also set new benchmarks for the area. Based on caveats lodged between Oct 19 and 25, transaction prices had ranged from $1,172 to $1,491 psf.
Most potential buyers of eCO had initially compared the project with Optima @ Tanah Merah, which was completed earlier this year and is adjacent to Fragrance and World Class Land’s Urban Vista. The 297-unit Optima was launched for sale in 2009, and most of the units were snapped up within three days at an average of $810 psf. The project is developed by TID, a joint venture between MitsuiFudosan and Hong Leong Group. In recent subsales done in October, prices of units ranged from $1,027 to $1,350 psf.
Most recently, on Oct 23, an 850 sq ft, two-bedroom apartment on the sixth floor changed hands for $1.1 million ($1,294 psf). The previous owner had paid $748,000 ($880 psf) for the unit at launch and has enjoyed a price gain of 47% over the last three years. A similar sized unit on the 11th floor was sold for $1.02 million ($1,199 psf), compared with the original purchase price of $804,800 ($946 psf).
Meanwhile, two larger units at Optima were also transacted recently in the secondary market. According to Dan Soon, associate branch manager of PropNex Realty, which brokered the sale of the units, sellers are pegging their asking price to those achieved at eCO. For instance, Soon had brokered the recent sale of a 1,259 sqft three-bedroom unit on the sixth floor of one of the blocks at Optima for $1.7 million ($1,350 psf). The original owner paid $1.04 million ($828 psf) for the unit three years ago, thus seeing a capital appreciation of 63%. The other one sold was a slightly smaller three-bedroom unit of 1,195 sq ft located on the third floor of another block. It went for $1.5 million ($1,255 psf). The previous owner purchased it for $955,200 ($799 psf) in2009, so his capital appreciation was 57%.
“Increasingly, more young couples are looking for small units below $1.2 million in the East,” observes Soon. The area has also attracted more expatriates, as it is near Changi Business Park, where banks such as Citi, DBS, Standard Chartered and Credit Suisse have their global support and backroom services. The Singapore University of Technology and Design coming up near Changi Business Park is also a draw. With amenities such as the upcoming Bedok Mall, the new Changi City Point mall and the proximity to MRT station, the area has become a more desirable neighbourhood to live in, adds Soon, with cheaper rents relative to the CBD.
Older condos in District 16 have also seen their prices being driven up by the new launches. PropNex’s Soon observes, however, that there have been fewer transactions in these older developments, as many owners are reluctant to sell. “Once they sell their unit, it is difficult for them to find a replacement property in the same neighbourhood, as the newer units cost more and are generally more compact in size,” he says. Besides, most of them are owner occupiers, so there are also few units for rent in the older condos.
Of the 620 units released at eCO, 547 have been sold at an average of $1,300 psf
At the eight-year-old Tanamera Crest, a 1,173 sqft three bedroom unit on the 10th floor was sold for S1.90 million recently
Most of these older condos are trading in the $1,000 psf range or lower. For instance, at the eight-year-old Tanamera Crest, a 288unit, 99- year leasehold condominium developed by CapitaLand, a 1,173 sq ft three-bedroom unit on the10th floor changed hands at $1.09 million ($927 psf) on Oct 19. It last changed hands in February 2010, for $735,000 ($626 psf). Prior to that, it was sold for $460,000 ($392 psf) in 2006. The original buyer paid $593,800 ($506 psf) for the unit in late 2001.
At the 1,038-unit The Bayshore, developed by Far East Organization 13 years ago, a 1,184 sq ft three bedroom unit on the 10th floor was sold for $1.16 million ($980 psf). Also, a 1,012 sq ft two-bedroom unit on the 28th floor of another block was sold for $1.1 million ($1,087 psf).
Soon is concerned that, based on the three new parcels sold this year (including eCO), there will be about 1,900 new homes coming up over the next few years in the neighbourhood around the Tanah Merah MRT station. In addition, more supply is in the pipeline. For instance, next to eCO is another land parcel (Parcel B), located at the junction of New Upper Changi Road and Bedok South Avenue 3, that is earmarked for a 595-unit residential project sitting on the Reserve List of the government land sales programme. Adjacent to it, where the Tanah Merah MRT station entrance is located, is a parcel designated for “future development”.
Even though prices have been stable, and the takeup rate at new launches have been healthy, Soon is concerned that there could be an oversupply in the next few years when these new condos are completed.
David See, senior associate director of OrangeTee, who specialises in marketing units in District 16, is more sanguine. He reckons that, based on the bid prices by the developers, the new projects will be launched at higher prices.
For instance, the 343,171 sq ft Land Parcel A, located on New Upper Changi Road and Bedok Road, was put up for sale in August and won by Keppel Land last month with a bid of $434.55 million ($791 psf ppr). The price for the 99-year leasehold site paid by Keppel Land was just 7.1% higher than the second-highest bidder, a joint venture between Fragrance Group and World Class Land.
Incidentally, in August, Fragrance and World Class Land won the tender for a smaller parcel of around 150,700 sqft across New Upper Changi Road, with a bid of $285.22 million ($676 psf ppr). It is estimated that the new condo, called Urban Vista, will have 550 units, and it is expected to be launched in the coming months.
Keppel Land’s bid price of $791 psf ppr was a record price paid for a residential development land parcel in the suburbs, and is at a 48% premium to the price the Far East-Frasers Centrepoint-Sekisui House consortium paid for eCO’s site in February. Following the close of the tender for the site on New Upper Changi Road on Oct 16, Joseph Tan, CBRE’s executive director of residential services, commented: “The 11 bids garnered for the site and the quantum of the bids show that developers are confident that this residential project will be well received when launched.”
Tan estimates Keppel Land’s break even at $1,200 psf, with the selling price of the new project pegged around $1,400 psf, which is slightly higher than the average $1,300 psf achieved at eCO so far. Keppel Land intends to develop a residential project with about 700 units on the site, with sizes ranging from 500 to 1,400 sq ft.
The unit at Casa Merah was sold for $1252 pdf. record price. I am very disappointed to miss out. Do you have any other good projects to recommend? Not necessarily at the east. I think we need to expand our search area. The market is a bit crazy now.
Thanks
Low interest rate will persist till 2015 and hot money will keep flowing into SG and HK during this period. Economy and population are still growing, although at lower rates than before.
So if it is for owner occupation, you can go for it as long as you like the unit and has holding power. For investment, the upside potential is only for long term. How many years can you wait to see a down cycle? It is difficult to wait for that day. Personally I believe two things are the most important: long term view and holding power.
I tend to think so, but when I do the research on other properties, I found many older projects near MRT around Serangoon/Lorong Chuan area are asking for similar price. So I am not sure whether I should bear the risk? Casa Merah itself is good, but I am concerned that i am buying at the end of the property cycle.
Can you help to share your opinion about Singapore property market?
Here are the following station locations for all three stages of the Downtown Line.
Station Number Station Name Interchange/Notes
Stage 2
DT1 BP6 Bukit Panjang Bukit Panjang LRT
DT2 Cashew
DT3 Hillview
DT5 Beauty World
DT6 King Albert Park
DT7 Sixth Avenue
DT8 Tan Kah Kee
DT9 CC19 Botanic Gardens Circle Line
DT10 TS11 Stevens Thomson Line
(under planning)
DT11 NS21 Newton North South Line
DT12 NE7 Little India North East Line
DT13 Rochor
Stage 1
DT14 EW12 Bugis East West Line
DT15 CC4 Promenade Circle Line
DT16 CE1 Bayfront Circle Line
DT17 Downtown
DT18 Telok Ayer
DT19 NE4 Chinatown North East Line
Stage 3
DT20 Fort Canning
DT21 Bencoolen
DT22 Jalan Besar
DT23 Bendemeer
DT24 Geylang Bahru
DT25 Mattar
DT26 CC10 MacPherson Circle Line
DT27 Ubi
DT28 Kaki Bukit
DT29 Bedok North
DT30 Bedok Reservoir
DT31 Tampines West
DT32 EW2 Tampines East West Line
DT33 Tampines East
DT34 Upper Changi
DT35 CG1 Expo East West Line
I did view a few properties at Aquaris by the Park. They are quite dark even at Level 9 and 10. The Clearwater is next door, but it seems much better. Most of the units there have reservoir view.
Do you know the future Downtown line will have a MRT station at Bedok Reservoir?
Casa Merah is new and convenient and highly popular, bu it may exceed your budget. For a two-beder, you can get it at around 1.1-1.2 Million.
Eco is quite expensive, outside our budget of $1m for 2 bedders. Do you have other projects to recommend?
1) Changi Business park;
2) 4th University: SUtD
3) Good environment and transport links
Thanks