The year 2022 was, all things considered, a favorable one for en bloc transactions. Properties like Loyang Valley, Meyer Park, and Oxley Garden continue to be offered in collective sales even as signals of a worldwide recession become more apparent.
Despite the Government increasing the ABSD rate to 35% for companies and an extra 5% non-remittable ABSD for developers in December 2021, as of July 2022, there have been 12 successful en bloc transactions with a total value of $3.5 billion.
Is an increase in en bloc sales in 2023 likely? Well, let’s find out.
During the years 2017-2022, En Bloc Transactions
The performance of en bloc sales from 2017 through 2022 will be examined first.
More than sixty projects went up for collective sale in 2017 and 2018, a significant increase from the preceding two years. Revenue reached $18.9 billion. With a total of 65 transactions totaling $19.1 billion, the en bloc cycle that ran from 2016-2018 came very close to surpassing the record-breaking $21.8 billion recorded during the cycle that ran from 2005-2007.
In 2018, the government took steps to chill the property market by increasing the Additional Buyer’s Stamp Duty (ABSD) on property developers from 15% to 30%. This move reduced the en bloc frenzy in 2019, although en bloc sales are still doing well.
Collective sales of $2.2 billion were achieved at 11 en bloc locations in 2021. In contrast, there were just 10 successful en bloc transactions reported in 2020 and 2019, with many more properties entering the unsuccessful en bloc list.
As developers attempted to refill their land bank in 2022, it was speculated that there may be an uptick in collective sales. In addition, modest to medium-sized en bloc debuts were forecast by developers in the Housing Market Group Singapore Property Market Report. Thus, the issue still begs to be answered…
Will 2023 Bring Additional En Bloc Transactions?
Economists warn that consumers and developers might feel the effects of a recession next year, despite the en bloc market’s apparent success.
Housing Market Group Country Manager in Singapore, Josef Lorenz, agrees, noting that one must also take into account the relatively higher ABSD rates (due to the December 2021 property cooling measures), rising interest rates and building expenses, and increased land betterment fee rates. Rising mortgage interest rates might dampen demand in the local economy because of their impact on homebuyers’ capacity to borrow.
Smaller to medium-sized collective sales sites are used by land-constrained developers as a risk mitigation technique. There are more difficulties in the current en bloc cycle, especially in light of the latest wave of cooling measures, than in the 2018 cycle, when developers had a greater need to refill their land banks.
In 2023, developers that haven’t been successful in getting an en bloc arrangement may be incentivized to try again. After initial collective sales attempts fell through, several of these properties actually reduced their asking prices in subsequent attempts, making them more appealing to developers.
In addition, the Collective Sale Committee may re-list the property for sale once a 12-month period has passed.
Did Any of These 73 Sites Sell in a Previous Attempt at an En Bloc Sale?
For reference, the following are properties whose owners have previously floated the idea of selling their properties in a single, consolidated package. We also mention the current status of the items, as well as whether or not they have been successfully sold following the price reduction.
It is important to keep in mind that the en bloc/collective sales structure may need more than one listing of these assets. This is by no means a complete list. If there has been a change that we are unaware of, please let us know.
