There was a bit of a shocker this week, when the government announced the demolition of 68 to 74 Thomson Road. While this is an old building, it’s also a freehold property; and because of its good location (it’s just across the road from United Square), this could be a devastating loss for the owners.
This property has been noted for its en-bloc potential, given its prime location and proximity to United Square Mall. What happened here presents some important lessons for homeowners and investors alike:
What happened at 68 – 74 Thomson Road?
68 – 74 Thomson Road is a mixed-use building, completed in 1964. It’s a small development (8,352 sq. ft. in total), located about six metres from where the new North South Corridor (NSC) tunnel will be dug through Thomson.
The proximity could impact the old building, but studies of it already took place in 2013. At the time, it was deemed able to handle the construction.
In 2020 however, Land Transport Authority (LTA) engineers conducting their impact assessment came to a somewhat different conclusion – they said the building’s foundations had to be reinforced.
The owners and tenants were asked to temporarily move out, which occurred in February this year. From what we understand, some owner-occupiers and tenants even left most of the existing furnishings intact, expecting to return.
Last Friday (April 16), however, the owners were given notice that the entire development would be demolished. They would be given compensation in accordance with the Land Acquisition Act, although the exact amount has yet to be disclosed.
(The Act states that it should be based on the market value of the land, but this is likely to open up a few disputes).
How much is the land plot likely to be worth?
There isn’t any existing price data on 68-74 Thomson Road. However, we did manage to locate some nearby properties, to get a sense of the price.
The closest point of comparison would be Lion Towers and Derbyshire Heights, which are adjacent. While transaction volumes are low, these surrounding developments are both also freehold:
1. Lion Towers
Location: Essex Road (District 11)
Lease: Freehold
Completion: 1974
Number of units: 52 units
The last transaction in 2018 was at $1,343 psf.
2. Derbyshire Heights
Location: Derbyshire Road (District 11)
Lease: Freehold
Completion: 2004
Number of units: 24 units
The last transaction in 2020 was at $1,339 psf.
It’s possible that, if the valuation cleaves close to this, it would be at around the same range (approx.$1,400 psf). If that’s the case, it would only come to roughly $12 million for the entire development. A bit of a raw deal, given it has a prime location close to a mall / office.
(This is just a guess, so we could of course be wrong, and the authorities may be much more generous).
How much would a new replacement home cost?
Let’s say the owner-occupiers want to buy a new condo in roughly the same area. This would Fyve Derbyshire, which is located just around 150 metres away (it’s also a freehold condo). This is how much it would cost them:
3. Fyve Derbyshire
Location: Derbyshire Road (District 11)
Lease: Freehold
Completion: Est. 2022
Number of units: 71 units
Median developer pricing was at $2,346 psf, with the lowest price at $2,295 psf, and the highest at $2,397 psf.
DATE
UNIT AREA
(SQFT)
PRICE
($ PSF)
PRICE
($)
APRIL 4, 2021
657
2,390
$1,569,000
APRIL 3, 2021
592
2,372
$1,404,000
MARCH 24, 2021
657
2,295
$1,506,925
MARCH 14, 2021
797
2,397
$1,909,000
FEB 25, 2021
936
2,301
$2,155,000
FEB 5,2021
592
2,350
$1,391,000
Latest transactions at Fyve Derbyshire
As you can see, the price disparity would be huge, if 68-74 Thomson really is saddled with a value of around $1,400 psf.
Some key lessons we can learn from this:
Freehold doesn’t always mean forever
Look beyond unit maintenance for older properties
Never assume you can exit via an en-bloc sale
Keep aware of changes to the neighbourhood
1. Freehold doesn’t always mean forever
The Land Acquisition Act applies whether your property is freehold, or only in the first few years of a 99-year lease. If the government needs your land, they can take it with fair compensation (i.e., whatever the approved valuer says its worth).
So if you’re under the impression that a freehold property will be passed down for generation upon generation, there’s a good chance you’re wrong.
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Even if an en-bloc sale doesn’t occur at some point (few condos make it past 40 years without collective sale), bear in mind that an increasingly packed Singapore may prompt the authorities to re-acquire it.
As an aside, not all forms of “freehold” are equal.
This is why some investors are willing to pay a premium for freehold properties that are conserved, or within conservation areas (at present, these include Boat Quay, Chinatown, Kampong Glam, and Little India). This isn’t just for the added prestige.
These investors are simply aware that, due to conservation efforts, it’s less likely that an expressway, MRT track, etc. will be built through their neighbourhood or property.
2. Look beyond unit maintenance for older properties
68 – 74 Thomson Road was built on shallow foundations. This refers to foundations that transfer the building’s load only to the ground’s surface, rather than to a deeper layer.
From our enquiries, this sort of foundation is more common among older properties, which predate later condos (the first condos only appeared in around the 1970s). As such, it’s more likely to be found among older walk-up style apartments, as opposed to a full-fledged condo.
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In any case, there was some early warning for 64-78 Thomson Road. This goes back to 1994, when parts of the building had to be propped up with piles; this was following the demolition of a nearby building.
The Singapore property market is used to a high standard of building safety, so we rarely question such issues when they happen; it’s possible that subsequent buyers weren’t even made aware.
The study done in 2013, which gave the building the green light, probably led to even greater confidence.
But as this recent example demonstrates, you should take note of these details when buying older buildings. If work has been done to reinforce the structure, always find out why; these can reflect on issues that can’t be fixed.
3. Never assume you can exit via an en-bloc sale
What Went Wrong for the Thomson Road En‑Bloc Dream
Owners of 64‑78 Thomson Road had every reason to think their block was headed for a bargain‑buster sale. It sits right across from the mall, in one of Singapore’s prime spots – the kind of address that makes even pensioners pause at the news of potential resale.
1⃣ The Big Idea
Because the building was tiny – only 16 units, 14 of which were already leased – the owners figured that reaching consensus would be a cakewalk. Less drama, less negotiation, and all the money piled in a single pot. The market called it a “perfect spot for an en‑bloc” and everyone was ready to play the game.
2⃣ The Shock: Land Acquisition
But just as the pitch was set, the government swooped in. The land was earmarked for a new project, and the owners got blindsided. Suddenly, the great en‑bloc plan was dead, and the only option left was to wait for market value, which will almost certainly be far lower than the collective sell-out dreams.
Why It Fell Apart
- The block is tiny – only 16 units, 14 leased.
- The land got bought out, ending the en‑bloc possibility.
- The market price will be lower than the expected en‑bloc haul.
3⃣ Takeaway: Be Cautious with Collective Sales
Let’s not put all our eggs in one basket. En‑bloc sales can look perfect on paper, but hidden surprises – like land acquisition – can collapse the whole plan. Diversify, keep realistic expectations, and maybe keep a backup plan for a “normal sale.” Good news? Sometimes the worst case is a good lesson in real estate psychology.
4. Keep aware of changes to the neighbourhood
Most people don’t go beyond surface level checks, such as knowing which new malls are appearing nearby, when the MRT station will be done etc.
It’s important to go beyond this, such as knowing that Orchard Road is being revamped, or that Woodlands is becoming a regional centre. This isn’t just to spot investment potential; it’s because it highlights issues such as new roads, or new MRT tracks.
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It’s important to take note of where these upgrades will happen, and if your property will be affected. Even if it doesn’t result in your property being acquired, change can bring new disamenities.
For example, having an MRT station built near your condo could improve rentability; but it could also mean having a raised track nearby, which rattles all the windows on a given floor and facing.
So when you research future upgrades to the neighbourhood, don’t just focus on the positives. Consider the negatives as well, such as whether you’ll face increased road congestion, or if nearby construction would impact your property.
In defence of 64 – 78 Thomson Road, the owners were told in 2013 that the building was good to remain; but now you know to take such news as a skeptic.
This article was first published in Stackedhomes.
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