The total value of en bloc deals for the first half of this year closed at $1.73 billion – just below last year’s score.
(The en bloc market has seen ups and downs. Image courtesy of Singapore Tourism Board and the Singapore in Pixels Contest.)
The last deal involved a walk-up apartment block in River Valley Road, for which Alliance Land forked out $70.5 million. This worked out to $1,035 per sq ft (psf) for the 22,107 sq ft project (inclusive of its 10% balcony allocation). Meanwhile, each homeowner will receive a gross sum of $1.75 million to $1.77 million.
Insiders inform The Straits Times that the project’s current 40 units can be redeveloped into 130 apartments, each with an area approximating 500 sq ft. The block was one of Singapore’s first residential projects of the 1960s, and has a lease spanning a whopping 999,999 years.
A Brief History of En Bloc
The en bloc market has seen a rollercoaster ride since its 2007 heyday. It saw a boom back then, when 87 sites worth a total of $11.4 billion were transacted. Things moved much slower in 2009, and began to pick up speed when 36 deals worth a combined $1.77 billion were sealed in 2010.
Still, when compared to 2007’s brilliant record, this year’s $1.73 billion is “relatively small, with low absolute values” per deal, says Credo Real Estate managing director Karamjit Singh, who observed that buyers of late tend to be small to medium sized developers with insufficient resources to bid for larger government residential sites.
The Current Scene
But how low is ‘low’? Well the average en bloc sale this year is $54 million, just surpassing last year’s $49 million. In the past 18 months, the top five deals ranged between $137 million and $214 million. Compare these figures with 2007’s average collective sale of $131 million and top five deals worth well over half a billion dollars each.
One possible reason for the low values is that larger collective-sale sites are more challenging to close, as the sheer value of the land takes potential buyers (who are more reserved due to the price sensitivity of end consumers) aback. Adding on to the problem is the aggressive government residential land sales programme, which pulls buyer interest away from collective-sale offers.
The result is en bloc sites readjusting their reserve prices, especially larger ones. Tulip Garden in Farrer Road, in particular, had an initial price tag of $650 million, but recently trimmed it down by $50 million to $600 million. Others like Pine Grove, Pearl Bank Apartments, Laguna Park and Hawaii Tower have all priced their en bloc launches just above $500 million.
In the meantime, new en bloc sites continue to pop up and increase competition within the en bloc market. Royalville at Bukit Timah Road is priced at between $370 million and $400 million (that’s $1,383 psf ppr to $1,495 psf ppr), with a breakeven amount of above $1,900 psf. St Patrick’s Garden, located just off East Coast Road, is asking for $188 million ($888 psf ppr), with an estimated breakeven price of $1,440 psf.
The Future of En Bloc
Although a shadow of its former self, Singh says the market outlook for the second half of 2011 is positive. “With owners becoming more realistic on reserve prices and sustained interest from developers, we expect deals in the second half to be at similarly healthy levels.”
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Related Categories: Market Reviews & Market Outlooks, Private Residential
Tags: Alliance Land, Credo Real Estate, East Coast Road, en bloc, en bloc market in Singapore, Farrer Road, future of en bloc, Hawaii Tower, history of en bloc, Laguna Park, market outlook, Pearl Bank Apartments, Pine Grove, property trends in Singapore, River Valley, St Patrick's Garden, Tulip Garden
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