Are you dreaming of becoming the next En-Bloc Millionaire

December 25, 2021
0 Comments

Who wants to be the next millionaire? Specifically, are you looking to be the next en-bloc millionaire?

Well! Before you even start looking for that next en-bloc potential, do consider what exactly you want to achieve? Are you prepared for the hefty sums of stamp duty fees being imposed under the new ABSD regime introduced on December 16, 2021, and do you really think that particular property development is definitely the next en-bloc candidate? What if it is not? Are you even prepared to invest in so much capital in an older development if your plans go awry?

Understand the rules of the property investment “game” first

To even reach to the en-bloc stage, meaning the property development is being marketed through an collective sale tender, a collective sale tender committee needs to be appointed through an extraordinary general meeting (EGM) being called for. Under Singapore’s Land Titles (Strata) Act, 80 to 90 per cent of the subsidiary proprietors (meaning owners) depending on the age of the development must give their thumbs up before members of the collective sale tender committee can even be set up.

Along the way, there could be rejections, or disputes which the Land Titles (Strata) Act has sought to address. If you are interested to know more about the details of the Act, please kindly refer to the following link for more details.

Given the process of getting the votes, and signatures, to even appointing the marketing agent, not to mention disputes which could lead to the dissolution of the collective sale tender process, do you think that you would want to be part of the process if you are just thinking of getting the fast buck of it?

What about the ABSD fees you need to cough out

Source: Ministry of National Development (MND)

As you can see, if you are a first-time home buyer, regardless of whether you are Singapore citizen or Singapore Permanent Resident (SPR), you are unlikely being impacted by the new Additional Buyers’ Stamp Duty (ABSD) tiered fees, but do take note if you can even take out a bank mortgage loan because of financial institutions (FIs) require you or the youngest applicant to cover till at least 95 years of age, and most of these FIs are typically quite hesitant in lending the full 75 per cent Loan-To-Value (LTV) limits for first-timers like yourself given the age of the development initially seen by you as a “potential” en-bloc candidate.

Or else, if you are second or third-timers, the higher ABSD rates might probably need to be given an in-depth thought before diving into it. You must first ask yourself, are you even prepared to pay so much stamp duties or top of the usual 3 to 4 percent buyers’ stamp duties (BSD) depending on the quantum of your transaction which is typically less or more than S$1.0 million respectively.

As you might have noted, corporate entities investing in residential properties are not exempted from ABSD. Under the new requirements with effect from December 16, 2021, their tax burden is increased to 35 per cent from 25 per cent previously, with a 5 per cent remission if the property development can be fully completed by 5 years, and all the units are sold within the next 2 years upon completion.

A lot of risks to consider

Over the past few weeks leading to the end of 2021, we have witnessed several no-go” en-bloc transaction deals including  the latest High Point en-bloc transaction being abandoned with the developer, Hong-Kong listed Shun Tak Holdings Limited having cold feet and has forfeited its S$1.0 million deposit, and the second en-bloc potential deal, Lakepoint Condominium having its tender bids being priced at below the reserve price, and it is now in a private treaty negotiation phase.

Moreover, with a series of looming interest rate hikes coming in 2022 and beyond by the United States Federal Reserve Bank (US Fed), the local mortgage rates will soon be adjusted upwards as well. Interest rate risks are seldom being discussed, but they are part of parcel of the whole home mortgagors’ list of important considerations to take note.

Think before you jump into the en-bloc bandwagon

Yes. There are several successful enbloc private residential deals with approximately 586,000 square feet (sf) worth S$1.24 billion of transactions being recorded in 2021, according to AuctionJia, an online-to-offline proptech startup based in Singapore.

2021
No.DateProjectTenurePlot Size (‘000 sf)Total Price (S$’millions)PSF per plot ratio (ppr)Developer
1Jan-2193B, 93C, 95 Lorong N Telok KurauFreehold1924911Not disclosed
2Jan-21Surrey PointFreehold11471,434Amara Holdings JV
3Apr-212,4,6, Mount Emily RoadFreehold5181,115ZACD Group
5Oct-21Flynn ParkFreehold2083711,355Hoi Hup Realty and Sunway Developments
6Oct-21Watten EstateFreehold2205501,723UOL Group and Singapore Land Group
7Dec-21La VilleFreehold471521,540ZACD Group
8Dec-21Peace Centre Mansion9976761,426CEL Development, SingHaiyi Crystal and Ultra Infinity
   Totals5861,238  

Source: AuctionJia.com.sg

However, every private residential enbloc transactions have its own trials and tribulations, and we cannot ignore that. Take for example, in the most en-bloc deal involving LaVille and ZACD Group who is the buyer, it took three times before the deal was eventually sealed in December 2021, according to an EdgeProp article dated December 01, 2021. So, imagine you are one of these en-bloc owners who have to navigate several challenges, not to mention the near misses, are you able to manage these stresses that come with it. It is sometimes beyond your control when the proposed en-bloc transaction did not go through due to several reasons. But, if you are simply looking to make a quick buck out of it, then you got to be prepared to manage these risks, while watching over your finances to make sure that there is some adequate headroom for any unexpected events in your life.

    Have Questions For The Author? Kindly Send Us Your Enquiry.