Friday, June 17, 2011

En-Bloc Millionaires Reap Singapore

En-Bloc Millionaires Reap Singapore Real-Estate Gains as Forced Sales Jump
By Kristine Aquino - Nov 4, 2010 8:02 AM GMT+0800
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Rising property prices prompted the government on Aug. 30 to increase down-payments for second mortgages and impose a stamp duty on property held less than three years. Photographer: Charles Pertwee/Bloomberg

Kong-Thean Wong sold his Singapore apartment in June for S$800,000 ($620,000) more than its market value. So did all his neighbors.

Hoi Hup Realty Pte. offered the premium to Wong and other owners in a private Singapore condominium called Pender Court, according to government data. Known as an en-bloc sale, such a deal allows the developer to buy the whole building, knock it down and build a new one that would command higher prices.

“It’s a good retirement program,” said Wong, 55, a former banker who owns other flats and will get his S$2 million payout by the year end, 67 percent more than a similar unit fetched in November 2009. “Everyone’s looking forward to the money.”

En-bloc sales are a barometer of the private residential property market in land-scarce Singapore, where most apartment buildings are replaced before they are 30 years old. They give builders like CapitaLand Ltd. and Ho Hup the chance to redevelop prime locations and they fuel price gains in the private and rental markets as ejected families seek new accommodation.

At the peak of the real-estate boom in 2007 there were 86 such sales, netting more than S$11 billion, according to data from Credo Real Estate. Last year, amid the global recession, there was one for about S$100 million.

Now en-bloc sales are making a recovery, with 21 deals so far this year worth a total of almost S$1.09 billion, including five since the government announced measures to cool the market in August, according to real-estate agent CB Richard Ellis.

In the past six months, a 38-member gauge of the nation’s real estate stocks has risen 13 percent compared with an 11 percent gain in the benchmark Straits Times index.

Small Island

Under Singapore law, all owners in a building can be forced to accept a developer’s offer if a residents en-bloc committee gets the requisite 80 percent agreement. Pender Court, a 6-story, 48-unit complex built in 1985, sold at the third attempt.

“Singapore is a very small island with a natural growth boundary,” said Chua Yang Liang, head of Southeast Asia Research at Jones Lang LaSalle. “There is a need to maximize land parcels.”

Hoi Hup Realty declined to comment on its plans for the Pender Court site. Among its developments is Residences@Killiney, a 68-unit condo two blocks from the main shopping street of Orchard Road that replaces Killiney Apartments, which Hoi Hup purchased in a collective sale in 2007.

The premiums generated by en-bloc sales can skew the rest of the market, particularly rental prices, according to Chua Chor Hoon, head of Southeast Asia Research at DTZ Group. “When people give up their own home, they have to find somewhere else to stay,” she said.

Meng Garden

The unprecedented wave of collective sales in 2007 helped lift rental rates by a record 41 percent and condominium prices by the most in almost eleven years.

En-bloc committees to negotiate a sale have been formed by at least 46 properties in 2010, according to data from CB Richard Ellis. The list includes Meng Garden, a 25-year-old complex near Orchard Road that sold for S$137 million -- the most expensive this year.

“We’re beginning to see a pickup in activity in the mid- to-high-end market,” said Donald Han, managing director for Cushman & Wakefield. “When that happens, I think we’ll see a snowball effect of some of the larger developers coming in.”

Rising property prices prompted the government on Aug. 30 to increase down-payments for second mortgages and impose a stamp duty on property held less than three years. The market jumped 23 percent in the third quarter from a year earlier, according to data from the Urban Redevelopment Authority.

New Deals

Analysts said the measures would have a bigger effect on the Housing & Development Board’s public apartment projects that house 80 percent of locals than private condos, which typically include facilities like swimming pools and tennis courts.

Two days after the cooling measures were announced, a condominium in the Balestier area sold collectively for S$44 million with homeowners expecting up to S$2.26 million each. The same day, a building in nearby Newton was offered en-bloc for S$48 million, Channel NewsAsia reported.

The government’s measures “will certainly have some cooling effect,” said Irvin Seah, economist at DBS Group Holdings Ltd. “Sellers will be holding back.”

Collective sales divide communities between those tempted by the premium and those who don’t want to lose their home.

Susan Ye’s neighbors failed this year in their second attempt to persuade her and other holdouts to sell the 489-unit Clementi Park, a sprawling estate of 11 blocks built in 1985 on a hill in the west of the island.

Heated Exchanges

“The situation was very unfriendly and un-neighborly,” said Ye, who started website with neighbors who wanted to block the sale. “It’s created a kind of a pressure-cooker situation. Many of us face an attempt to sell every two years, which is really exhausting.”

The hotter the market, the more heated become the exchanges between would-be “en-bloc millionaires” and those trying to keep their home. At the 2007 peak, residents reported scratched cars, anonymous hate letters and verbal abuse from neighbors.

Owners at Farrer Court in 2007 received letters warning them to sign a sale agreement or face “bad fengshui” that would bring illness or death, the Straits Times reported.

Farrer Court sold June 2007, becoming the first en-bloc deal in Singapore to top S$1 billion. Owners received as much as S$2.2 million, almost four times the price two years earlier.

‘En Bloc’

The next billion dollar en-bloc “could happen as early as next year,” said Karamjit Singh, managing director at property consultant Credo Real Estate Pte Ltd., which brokered the S$1.3 billion Farrer Court sale to a group led by CapitaLand.

Singapore’s collective sales have even spurred an eight- episode television series. “En Bloc,” from state-owned broadcaster MediaCorp Pte., “explored how the en-bloc sale potentially threatened the breakup of multigeneration families living under one roof,” said Executive Producer and Director Emida Natalaray in an e-mail.

For Ye at Clementi Park, the victory in keeping her home may be temporary as prices rise, increasing pressure for owners to accept a developer’s offer.

“The property market is cyclical,” she said. “There will always be people trying to sell your home from under you.”

To contact the reporter on this story: Kristine Aquino at Singapore at;

To contact the editor responsible for this story: Lars Klemming at

5rm HDB sale at $880,000

A five-room HDB flat at Centrale 8 in Tampines has been put on the market for a whopping S$880,000 (around $750 psf), the priciest new public flat to be released for sale under the Design, Build and Sell Scheme (DBSS) so far.

This comes amid efforts by National Development Minister Khaw Boon Wan to prevent further increases in the price of public housing by launching up to 25,000 units this year.

Measuring between 1,163 sq ft by 1,173 sq ft each, the 178 five-room units at the project cost nearly twice as much as standard flats sold in the recent Build-To-Order (BTO) project in Tampines, where a 1,216 sq ft flat cost up to S$444,000.

Mohamed Ismail, chief executive of PropNex, said that though the flats were built by Sim Lian Group under the DBSS, the price tag is still higher than any executive condominium.

He admitted that he did a double take when he first heard about the prices.

"No doubt it's in Tampines, which is a mature estate with many good things going for it, but it is still extremely high for a public housing flat," he said.

Despite the hefty price tag, a report from The Straits Times showed that the developer only paid S$261 psf ppr for the 21,132 sq ft site.

"The premium is due to its locale in Tampines Regional Centre with mature amenities such as banks, three shopping malls and the upcoming Integrated Lifestyle Hub," said a spokesman from Sim Lian, explaining the rationale behind the high pricing.

PropertyGuru analyst Tejaswi Chunduri said, "According to Sim Lian Group's indicative price range for Centrale 8, the price range for a five-room flat can be anywhere between S$685,000 and S$880,000. The floor area for these flats is in the range of 1163 to 1173 sq ft."

She added, "This will likely increase the asking price for newly developed projects as well as for the resale flats in estates island-wide."

"It is also within walking distance to the existing Tampines MRT Station and the future downtown line 3 MRT interchange."

However, Nicholas Mak, head of research at SLP International, said in an interview with ST that, while the location is good, it does not justify the flats' astronomical price tag.

"Another side effect is that it might encourage resale flat sellers in the area to increase their prices, as buyers would not need to wait for their units to be built," he said.

Prices of HDB flats have skyrocketed due to limited supply resulting from growing demand fuelled by mass-immigration. However, Khaw noted that "sharp property price increases cannot go on forever."

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