En bloc rules have unintended effect of distorting the market
Straits Times Forum Online
by Waleed Hanafi
7th Feb 2007
In the article excerpting a speech by Mr Ngiam Tong Dow, 'Maximising the lie of the land' (ST Review, Feb5), there is the claim that Singapore's rules governing en bloc sales of private property are innovative and that the 'happy outcome is that both the individual and public interest are served'.
Singapore's en bloc rules have led to people being forced from their homes and neighbourhoods, and to rampant speculation in the property market.
Rather than maintain their buildings, owners are incentivised to suspend maintenance in order to maximise profit at the expense of those who truly want a home instead of just an investment.
Why use the sinking fund to repair the building when you can just wait until things deteriorate and you can persuade your neighbour to give up and sell out?
Mr Ngiam says he is 'glad to see that the invisible hand of pricing has often worked its wonders'.
In fact, it is the distorting hand of government that has permitted the abrogation of property rights and the distortion of pricing.
If the market was truly efficient, the price of flats would fully reflect the value of the building and the land they stand on.
With construction costs running at about $200 per square foot, how does one explain the sudden jump in value of a property from $1,000psf to $2,400psf simply by destroying the existing building?
It is because the prospect of an en bloc sale encourages short-term thinking and treats buildings as tradable assets, instead of homes.
If one takes the example of Ardmore Park, it is hard to understand any reason for the destruction of pretty much every building on the street and the surrounding neighbourhood. These were sound, desirable residences. What exists now looks like a war zone.
In most other economies, these buildings would increase in value, given their location and quality. If an owner wanted to profit from the increase in valuation, he would sell to a new buyer, not vote for the destruction of the property.
When a building does go en bloc, it is not a triumph of the majority over the individual, as Mr Ngiam asserts, but rather the triumph of the developer, the estate agent, and a few speculators.
The environmental cost of destroying perfectly sound buildings because of this price distortion is inexcusable.
The real cost is borne by those forced to live through the destruction of the existing building and eventual construction of a replacement.
The reality on the ground is quite different than the idyllic picture painted by Mr Ngiam.
Rather than an efficient market in which willing buyer and willing seller set prices, the en bloc rules have had the unintended consequence of distorting the market, disincentivising building maintenance and upkeep, raising housing costs and destroying the quality of life for tens of thousands of residents of Singapore.
Why demolish perfectly livable old apartments? New isn't necessarily better
Straits Times Forum Online
by Susan Amis (Mrs)
9th Feb 2007
In the craze to sell older condos en bloc, has anyone stopped to consider the consequences of demolishing perfectly livable old apartments and replacing them with new developments? Many expatriates who come to Singapore want to spend their housing budgets on large, older style condominiums because they offer large amounts of space for children to run around in, established gardens, three or four bedrooms and big balconies or courtyards. There is low demand for brand new small apartments for a typical expat family of four.
As these new developments are completed over the next few years, who will be buying the thousands of expensive new apartments on the market? Surely there will be a glut of these types of properties once the developments are completed? Potential buyers who intend to rent out these apartments to high-income earners will need to investigate the pitfalls of investing in these new developments.
Noise pollution from construction sites is also a huge problem and will become worse over the next few years. It is becoming increasingly difficult to find a quiet place to live in. Many expats are insisting upon a 'construction clause' in their rental contracts that allows them to break the lease should construction noise from surrounding properties impede their quality of life.
New isn't necessarily better, and a lot of expats are lamenting the current lack of desirable older housing in Singapore.
Ensure no one suffers financial hardship
Straits Times Forum (Printed)
by William Foo Kuo Meng
9th Feb 2007
I AM shocked by the landmark ruling of the Strata Titles Board that losses incurred in one's CPF account are not considered a financial loss in the case of an en bloc sale ('Couple lose fight on collective sale'; ST, Feb 6).
CPF funds are for our retirement, housing and medical needs and are our hard-earned savings.
With the current buoyant property market and frequent en bloc sales, it is time that the rules governing such collective sales be reviewed to ensure that no one else will suffer similar financial hardship as a result of actions beyond their control.
En bloc sales: Have laws to protect minority
Straits Times Forum (Printed)
by Valerie Ong Guek Kim (Mdm)
9th Feb 2007
I REFER to the article, 'Couple lose fight on collective sale' (ST, Feb 6).
I sympathise with the couple who lost the fight when the Strata Titles Board ruled that their CPF principal amount and accrued interest owed to their CPF accounts are not considered a financial loss.
My condominium is also going through an en bloc sale. That very term now sends shivers down my spine. With large estates like Waterfront View and Gillman Heights being demolished, where are the owners to find another abode? Demand is outstripping supply and home prices have escalated. The amount reaped from an en bloc sale would rarely get an owner an equivalent property. New developments that spring up on properties that have gone en bloc are almost double the price per sq foot of the original.
Also, friendship and neighbourliness are thrown aside in the name of progress. En bloc sales are blind to whatever reasons a family may have for not wanting to move, be it proximity to the children's schools, elderly dependants and amenities or plain attachment to one's home or neighbourhood.
So what benefit is there for the majority? It is the developer, the marketing agent and speculators who benefit.
Will the Government consider the environmental cost of destroying perfectly sound buildings in the light of the scarcity of sand that Singapore is facing?
With all the negative consequences of en bloc sales, I request lawmakers to put themselves in the shoes of the minority and protect their quality of life.
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2 comments:
Thanks for linking to my ST Forum letter. It was actually heavily edited, and anything referencing the Government was deleted. The original, uncensored version is on my blog at:
http://whanafi.blogspot.com/2007/02/singapore-en-bloc-sales-show-tyranny-of.html
Who needs the ST Forum to voice our disgruntled views, just come on board this much used website. I read from London and this is far more accessible.
I share your sentiments on what is a home emotionally.
Eventually, Singaporeans will remain migrants, our genetic makeup is adaptable to change. Singaporeans are now widely travelled, our education has allowed us to seek opportunities all over the world. HOme is where the heart is . If we cannot stay put or life becomes meaningless in a fast pace changing scenario, just pack and go find our paradise else where. Ever thought of getting all the people in your block who are paid handsomely to move, move out to another country altogether and bring along all your memories to simulate elsewhere?
History repeats itself, if our forefathers migrated to Singapore in search of a better life for their posterity , so can we, the migratory birds, the global nomads. Head out , there are lots of dream homes abroad!
Allegiance is a matter of the heart, we can be anywhere and still think of Singapore as home but don't need to be there living in a pigeon hole.
I am a pigeon who has flown the nest for over 20 years, but my home nest is now the subject of en bloc sale too! So be it , if they want the pigeon hole, I will just stay out and find an even better home , which will not be dismantled in my life time at least!
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