How to spot the next En Bloc condo ? – 8 Characteristics

The business case for owning condo with En Bloc potential 

Before we begin, it helps to reiterate our motivation driving the search for a condo with En Bloc opportunities. 

From an economic standpoint. Condos with potential en bloc opportunities are typically older condo developments with ageing lease. They typically come with the following characteristics

• Lower psf entry price compared to surrounding newer condo developments
• Potentially higher rental yield due as a consequence of lower entry price 
• Spacious layout, with generous allocation of space to yards, living room, balcony

Matched this with a potential 80% to 100% windfall return from an En Bloc exit. A purchase into such condo development brings about a high margin investment. While simultaneously providing a spacious property for homestay purposes, for owners who do not mind living in an older condo development. 

Chuan Park Enbloc as a success story 

Owners of units in Chuan Park receive gross proceed of $1.16 mil for smaller 710 sqft units and $2.53 mil for larger 2,045 sqft units as a result of a successful enbloc in 2022. 

Considering the cost price of a 2,045 sqft unit is priced at $1.5 mil in 2019, you are looking at a profit of at least $1.0 mil. 

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Studying common characteristics of condo that have successfully En Bloc

The focus of this article is to identify the common characteristics of condo developments that have successfully enbloc. The goal is to equip our readers with the right knowledge to identify development with potential for enbloc. 

We studied all condo developments that have successfully enbloc from 2018 to 2023 as part of our analysis. 

#1 – Previous Enbloc Attempt

We marked this as our first characteristics to look out for in a condo development. From our analysis most of these condo developments that have successfully enbloc went through at least 1 failed enbloc attempt. 

No of Enbloc attempt indicates consensus amongst residences towards enbloc

For an enbloc to take place, it would require the consensus of at least 20% of share values or owners comprising 25% of the total number of subsidiary votes to form a collective sale committee. At 2nd attempt this requirement is increased to a threshold of 50% and 80% on 3rd attempt. 

Hence the number of enbloc attempts also indirectly indicate a higher % consensus towards a collective enbloc sales process. Buying into a condo with zero attempt means that you are betting in a development that has yet to show any track record of enbloc consensus, while buying into a condo attempting for the 2nd or 3rd time infer that most residences are geared up for an enbloc sale. 

More realistic target asking price for most owners after 1st En Bloc attempt 

For developments that are looking to enbloc for the first time, owners are still looking to calibrate their target price. And at the first attempt, they tend to have high or even unrealistic expectations. Hence, at the 2nd attempt, owners tend to have developed a more realistic target price, increasing the probability of success. 

List of developments that have attempted to enbloc but failed

To help you narrow your search, this is a list of developments that have attempted enbloc recently,  but have not been successful.

#2 – Desirable Districts

Out of 70 condo developments that have successfully enbloc, disproportional no of developments came from prime district 15, 10, 9 and 11. 

• District 15 – Tanjong Rhu, Amber, Meyer, Katong, Dunman, Joo Chiat, Marine Parade
• District 10 – Tanglin, Bukit Timah, Holland
• District 9 – Orchard, Somerset, River Valley
• District 11 – Newton, Novena, Dunearn, Watten

These are all prime, premium districts in Singapore. Developers are generally more keen on enbloc opportunities in these area for the following reasons

1. Aspirational district – opportunity to price at a premium after redevelopment
2. Presence of multiple smaller plot of freehold development for enbloc purchase
3. Limited Government land sales sites in this areas

No of Successful Enbloc by District 

#3 – Age of development

Age plays a significant factor in influencing the probability of triggering an enbloc and the success rate of closing one. 

As a condo ages, owners are mindful of its declining resale value due to its ageing lease. And as it crosses the tipping point of the 30 year mark, owners felt a greater urgency in offloading their units.

In addition to that, as a condo ages, its facade and facilities deteriorate and more issues and faults start appearing within the units. This increases the likelihood of owners exploring enbloc sale as an option. 

From our study 39% of successful enbloc project takes place within the 40 to 49 year mark, while 46% of successful enbloc projects took place for development within the 30 to 39 year mark. 

No of Successful Enbloc by Age

#4 – Tenure Status

78% of the successful enbloc projects are of Freehold status. This is driven by the fact that new Freehold land is no longer available for sale via the Government Land Sale (GLS) program. The only means for developers to get their hands on a freehold land is via an enbloc purchase. 

Scarcity coupled with continual demand from buyers in the market for freehold condo perpetuated the trend of freehold condo forming the majority of the successful enbloc projects. 

No of Successful Enbloc by Tenure Type

#5 – Small project size

When developers build projects that increase a land’s value, they are required to pay a tax known as development charges. These charges increase in relation to land size that is being redeveloped. 

Increased cost and risk for developers purchasing large land plots

The development charges increased from 3% to 6% in 2021. 

Based on latest ABSD rules, developers purchasing residential land after 2021 are subjected to a 40% ABSD with a 35% remittable component upfront. If developers do not complete selling all units within 5 years from site acquisition, this 35% remittable component will be clawed from the developer as a penalty. 

With the 2 evolution in development charges and ABSD rules, the appetite for developers purchasing large land plot has been reduced significantly. 

Hence in line with our analysis, 55 out of 70 successful enbloc projects were for smaller developments with smaller land plots comprising less than 99 units. 

No of Successful Enbloc by Project Size

#6 – High plot ratio but underdeveloped 

Inline with the section above on a small to medium sized land plot. Developers look for a constellation of small land plots, with a small number of units with a high gross plot ratio. 

Gross plot ratio refers to the permitted density of build allowed by URA on the plot of land. It determines the maximum number of units and no of storeys that can be constructed on the target land plot. 

A small number of units being currently built on the land with a high gross plot ratio meant that there is opportunity for developers to enbloc this land and redevelop it into a greater number of smaller units to be resold for higher profits. 

Here’s a breakdown of Gross Plot Ratio and the number of storeys that can be built on a piece of land. 

#7 – Supply of new property in the area

This factor can be interpreted from two perspectives. 

Firstly, developers will be more inclined to consider an en bloc purchase for a development in a location where there is pent up buyer demand with limited new supply in the area. These are areas characterised by limited government land sale sites and limited to no new condo being launched. 

This is synonymous to the Chuan Park enbloc purchase. 

On the other hand, developer can also be incentivised to consider a enbloc purchase in an area with several enbloc purchase and launches that have been well received by buyers setting healthy resale price. 

Developers will see greater incentive and interest in en bloc opportunities of surrounding land plot due to its proven profit potential. 

#8 – Price gap 

Price gap is another indicator of potential profit for developers. If there are older condo ageing condo developments reselling at a significantly lower price than its new counterparts. Developers will infer that there is opportunity to en bloc the older development, redeveloping and reselling it for a higher profit. 

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Relevant Read Regarding En Bloc Condos

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