Wednesday, August 01, 2012

En bloc deals picking up pace

En bloc deals saw a big boom in the mid-2000s when many lucky homeowners became instant millionaires after closing profitable collective deals. Since then, many Singaporeans have been trying their luck, hoping to emulate the same success.

But with the property market riding a roller coaster wave of events in the last few years, it has to be asked if en bloc deals are as lucrative as they used to be.

With the global financial crisis hitting the market hard in 2008 and 2009, en bloc activity slowed considerably but has gradually gained momentum in the last two years.

However, the collective sales market is “not as vibrant as it used to be and investors who are looking to find the next en bloc deal would have to be more selective and not jump at any old development”, said property consultant Getty Goh who is Director at Ascendant Assets.



He noted that recent deals were “not uniformly distributed across Singapore and some districts have more en bloc transactions than others”.

According to Ascendant Assets’ research on en bloc transactions recorded since 2009, the top five districts with the most number of transactions are District 15 (22.56 percent), District 19 (13.27 percent), District 11 (9.98 percent), District 5 (9.75 percent) and District 14 (9.02 percent).

Among the key factors affecting the trend is land, which is a significant component in any property transaction. The report cited that “developers who wish to profit from housing demand in locations that have little (or no) public land for sale would have to turn to en bloc deals”.

Meanwhile, a number of en bloc properties have transacted in the market recently, one of which is Westvale Condominium (pictured
), comprising 32 apartments spread across a four-storey walk up block.
The property was acquired by RL West, a wholly-owned unit of Roxy-Pacific Holdings for S$77.5 million or around S$883 psf ppr with no development charge. The sale entitles each owner to receive between S$2.2 million and S$3.1 million or a premium of 50 percent above the current market valuation.

With a plot ratio of 1.4, the 62,710 sq ft site has a potential gross floor area (GFA) of 87,798 sq ft based on the 2008 Master Plan.

“There was strong interest in the site during tender closing despite the restriction on the number of units allowed on the site with 1.4 plot ratio imposed last year in November by URA (Urban Redevelopment Authority),” said Nicholas Ng, Associate Director of Investments at Jones Lang LaSalle.

Another notable en bloc transaction was the sale of the 19-unit Sophia Mansions for S$43.3 million to Roxy-Pacific. With a land area of 17,545 sq ft, the 20-year old freehold site was sold for S$1,175 psf ppr based on a gross plot ratio of 2.1.

Owners of three-bedroom apartments are expected to receive between S$2.5 million and S$2.7 million in gross sales proceeds while those owning two-bedders will get around S$1.8 million to S$2 million.

Marketing agent Credo Real Estate said the site could yield an additional GFA of 1,105 sq ft (or about three percent of the GFA) for balcony space, with no development charge. Inclusive of the three percent balcony space, the land rate will be S$1,140 psf ppr.

Meanwhile, Kemaman View was sold en bloc for S$45.5 million to Aylesbury Pte Ltd, a privately held developer.

Commenting on the deal, Jeffrey Goh, Head of Investment Sales at marketing agent HSR, noted that “it is clear that developers’ confidence remains high and intact because of the genuine home buyers’ demand coupled with the low interest rate environment here in Singapore”.

Completed in 1995, Kemaman View features 30 apartments at 1,324 sq ft each. Aylesbury was said to have paid around S$935 psf ppr for the 17,388 sq ft property which was zoned for residential use under the 2008 Master Plan. Owners will receive around S$1.517 million each or 30 percent above the resale price if the units were sold individually.

Meanwhile, the 84-unit Asia Gardens condo development has recently been put up for collective sale. Located within the upcoming Spottiswoode residential cluster, the development sits on a 72,059 sq ft land parcel and has a GFA of 201,465 sq ft, according to marketing agent Savills Singapore.

Featuring a plot ratio of 2.8, the property has an indicative guide price of between S$273.2 million and S$300.3 million, or S$1,354 and S$1,488 psf ppr respectively.

At the same time, analysts are generally bullish about the market. Credo, which specialises in en bloc sales, noted that mixed-use en bloc deals climbed 10 to 15 percent in the past year.

“There is also another hybrid segment of the market, involving mixed-use (property) where the developer can explore options including having some retail component, commercial component,” said Karamjit Singh, Managing Director at Credo.

“That is beginning to get some traction nowadays because it opens up opportunities for developers to create new products, to capitalise on changing investment patterns and also changing lifestyles.”

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