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.
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.
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.
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.
“The situation was very unfriendly and un-neighborly,” said Ye, who started website saveclementipark.com 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.
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.”
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