who says singapore is not creative!
En bloc
Uniquely Singapore
At a rate of one deal every three days, this property culture
hardly exists anywhere else. By Seah Chiang Nee.
Jun 23, 2007
SINGAPORES hot property market has developed a new culture rarely
seen anywhere else in the world.
Its something called en bloc sale, in which a developer pays out
a small fortune to owners of an expensive condo estate, tears it
down and builds an even more expensive one.
In other parts of the world, the term if used at all would
probably apply to slum clearance for commercial development, but it
takes on a different form in this land-scarce city.
By this process of renewal, developers are squeezing values out of
existing condos in exclusive areas to take advantage of a property
boom.
An influx of funds from abroad and a re-rating of the citys
economic future have contributed to the frenzy.
It started soon after Singapore awarded contracts to build two
high-end casino resorts and announced plans to attract the worlds
rich and talented.
Collective sales last year hit a whooping S$8bil (RM18bil), turning
thousands of homeowners into multi-millionaires almost overnight.
(Indonesians and Malaysians have long been the two top investing
groups here.)
The tempo intensified this year. In the first five months, 57 more
condo projects including relatively new ones have changed hands
for S$7.59b, almost reaching last years total.
It works out to one deal every three days.
Its spreading like wildfire. As soon as one price record is
established, it is replaced by a higher figure, said a real estate
agent.
The action has mainly been confined to the exclusive Districts of
9, 10 and 11 in the centre and southern Singapore, the choice of
wealthy investors.
The ripples are, however, felt in varying degrees by the rest of
the island state, affecting even some public Housing and
Development Board (HDB) flats, where 80% of the people live.
A collective sale allows owners to sell their properties for a much
higher price than they can fetch individually on the open market.
It must be approved by at least 80% of the residents.
One example is Farrer Court. Two years ago you could have bought a
unit for S$460,000. Developers are offering owners S$2.8mil each in
an en bloc deal for the 20-year-old estate.
Then a short distant away, the owners of Leedon Heights sold their
homes for S$2.4mil (RM5.4mil) each.
Developers paid the residents of Char Yong Gardens in Cairnhill
near Orchard Road S$1,788 per square foot (psf), a new
benchmark.
That record lasted only a few days before another en bloc deal
crossed the magical S$2,000 psf mark. The 24 owners of The Ardmore
got an eye-popping S$11mil each in a S$262mil deal for the S$2,337
psf up-market property.
Until the recent revival, property had been languishing some 40%
below its 1995 peak.
The pre-casino early birds who invested in the luxurious condo The
Sail, a stones throw from the Sands resort, have already doubled
their money.
With a projected 6% annual growth for the next few years and a
projected population of six million to seven million, more
foreigners are placing their bets on the island-state.
Their money is going into the stock market and properties.
Singapore is a small place with limited land. Its size cannot
expand but demand for land is growing, a long-time agent once told
me.
As long as there is strong growth and stability, the demand for
land here will outstrip supply.
The en bloc strength underlies the industrys faith that at least
for five to 10 years, the market will continue to be strong.
This uniquely Singaporean trend is raising activity in the general
property market to a feverish pitch as some 10,000 en bloc
beneficiaries with a lot of cash seek alternative homes.
Two of them just had record prices S$675,000 and S$720,000 in
cash for five-room HDB flats, or S$150,000 higher than market
valuation.
Few things in life are a one-way traffic, not even en bloc
sales.
While the majority ends up a happier lot, a few who had bought
their units at the height of the last boom may have ended up losers
despite the high price.
Some elderly citizens who had grown too attached to their homes to
want to sell were also compelled to move out because 80% of the
residents voted to sell.
The minority has no legal resort against the decision.
Broadly, Singaporeans welcome the rise in property values because
90% of them own their homes.
This is checked, however, by concern among the middle class of
being left behind by a widening wealth gap.
While the values of private properties leap manifold, those of HDB
homes move far more slowly.
Another group that worries about the boom is the thousands of young
graduates just starting off in life who see the dream of owning a
condo slipping away.
At this rate we may not be able to afford even an HDB flat, said
an IT engineer who is saving to get married.
That, of course, would be a political disaster for the government,
so it is closely monitoring the market to ensure enough cheap
affordable homes for all.
Foreign funds can come and they can also go, so is the boom
sustainable?
Some who believe it will end are planning to sell into strength.
But, at least for now, the feeling is that the flourishing market
is a re-rating of values rather than a property bubble.
The buyers are looking into a future global city of seven million
affluent people who will need a lot of new homes.
(This article was first published in The Star, Malaysia, onJune 23,
2007)