Thursday, 24 May 2007

Another Anti-enbloc Blog - Botanic Gardens View

Well, this is a disappointment.

I've always found that Botanic Gardens View was an excellent example of what a good management council could do to an aging estate - by pursuing an aggressive upgrading and maintenance policy to upkeep the property, and improve it's sale/rental yield. Situated at Taman Serasi, facing the new buildings at Botanic Gardens, this estate is over 30 years old (built in 1970) and while it does not have much in the way of facilities, its location is really superb - next door to the Gardens, near a hospital, at the doorstep of Orchard Road, embassies nearby etc.

Heard from a colleague who stays there that there were talk of en-bloc early this year, then everything went silent, and today CBRE wrote to everyone, telling them that the protem sales committee (PTSC) has selected the agents and lawyers, the CSA is almost ready for signing at their FIRST owner's meeting. They're fast tracking it, obviously hoping to hit the 80% before parliamentary changes to collective sale legislation occur later in the year. Included in their proposal is the application to maintain the gross plot ratio of 1.78+ (their existing buildings are 10 storeys I think, but the current Masterplan plot ratio for BVG is 1.4 or 5 storeys should they wish to redevelop.) Can they do that, given that there are explicit restrictions to the area around Botanic Gardens, as clearly outlined in the Masterplan 2003 and the circular, where it states "the current height restrictions will remain to protect the visual amenity of the Singapore Botanical Gardens"? This of course applies to new redevelopments near BVG and not to BVG which was built before MP2003's revision.

Not good news from my colleague who loves the place and whose family calls it home. A group of owners there have started a blog (it's still new) to gather dissenters to the enbloc of Botanic Garden View:-

Residents of the estate do feel free to express your thoughts of the enbloc at their blog.

Wednesday, 23 May 2007

Asset Valuation and Market Equilibrium

It's often rare nowadays to see something published in the Straits Times's Forum pages on en bloc sales, much less a letter and a response. Let me reprint the 2 letters first and then discuss them :-

Collective property sales: Check the frenzy
Straits Times Forum
19 May 2007
By Magdeline Goei (Ms)

I AM all in favour of collective property sales in land-scarce Singapore, but measures should be put in place to check the frenzy we are witnessing now. This, in my opinion, is not healthy for the economy and not healthy for the fabric of Singapore.

When we buy an apartment, the price we negotiate reflects the view, layout, floor level and prestige factors such as in the case of a penthouse. But we are not able to negotiate the share value allocated to the apartment, which is set by the developer and approved by the Commissioner of the Buildings Management Unit.

Share values were established purely for the apportionment of running costs in a development. They may be fair for the apportionment of running costs, but it in no way follows that they are a fair reflection of the respective stake owners have made in a development. Therefore, they should not be taken into consideration in the calculation of price or in important collective-sale decisions.

When it comes to valuing apartments, marketing agents do not take into consideration floor levels or prestige factors. This means the apartment on the second level will get the same price as one on the 20th level. This is not the practice in the real world. Is this fair?

Hopefully, amendments to legislation will incorporate the following:

  • Valuations must give due recognition to different floors;
  • Voting rights in collective-sale decisions should be weighted according to the size of the flat, not the share value allocated to it as is currently the case. This is because we have no say in the allocation of share value but we have a say in the size of our apartment.
  • A bigger say must be given to owner-occupiers as they will need to acquire a replacement property and may suffer a loss; and
  • The bar should be raised from the current 80 to 85 per cent. This will still allow steady growth in prices - which we all desire - but will moderate the current feverish pace of collective sales.

Collective sales can be a useful engine of growth in the key property sector of our economy. But now that they have become so important and so frequent, it is vital that the upcoming review of legislation corrects certain imbalances which have become apparent.

Let the market find its equilibrium for collective property sales
Straits Times Forum Online
22 May 2007
By Tay Sing Poo

I REFER to the letter, 'Collective property sales: Check the frenzy' (ST, May 19), by Ms Magdeline Goei.

In any asset valuation, the asset's terminal valuation is a key consideration. In collective property sales, the terminal value of a private estate is merely its land value.

The potential yield of a piece of land on redevelopment depends on its locality, prevailing plot ratio, land size and legislations on development control.

Considerations such as higher floors, layout, good views and prestige such as that of a penthouse do not affect the potential yield of a piece of land.

In an efficient market, prices reflect these considerations. I am fully confident that the current legislation on collective property sales is still relevant and that the Singapore property market is efficient.

The issue at hand is thus not with flaws in our legislations but how well informed buyers of Singapore properties are.

Overly legislative controls and frequent reviews will disrupt what is already an efficient market.

We should let the market find its equilibrium for collective property sales.


Mr Tay brought out two issues in counter to Ms Goei's comments - (a) Land value as potential yield and (b) market efficiency.

Land value as potential yield
What Mr Tay seems to be confusing is that Ms Goei is not talking about the 'terminal value' or land value, which is the prerogative of any developer wishing to pay for the land. She's referring to the Collective Sale Agreement's method of apportionment (or method of distribution). In most enblocs, the popular method is "50/50" or each owner will get a chunk of the sale proceeds based on 50% of their unit size and 50% of their share values. Ms Goei's point is that irregardless of the land value, the method of apportionment must take into account other valuative factors that a unit in the estate has (be it unit height, view and yes, unit size).

After all, according to Mr Tay's logic, all methods of apportionment should exclude unit size, and take into account share values only, since a unit's size does not "affect the potential yield of a piece of land". In fact, taken to its logical conclusion, methods of apportionment should be distributed equally among all owners irregardless of share values, unit size, floor height, view, feng shui, what have you, since all these do not affect potential yield.

So why, one must ask, do agents and the STB allow for the 50/50 method of apportionment? Why not allow for a 33/33/33 method of apportionment that factors in valuation of individual unit according to its uniqueness, share value, and unit size?

  1. Equity. When an owner purchases a flat, he/she pays a premium for particular selections - unit size, floor height, angle/view. It is only fair for that owner, when collectively selling, to gather back some of that premium. Otherwise, if we use Mr Tay's logic, even the smallest unit in the 3rd basement level under the carpark next to the unmarked grave would be distributed the same amount as the 3 storey penthouse suite in the same estate.
  2. Laziness. We've been through briefings by agents which went for the popular 50/50 method, and by some more fastidious agents that tried to include the valuation method (unfortunately they did not reveal the weighting in their calculations, claiming it proprietory). It's more complex but it's possible, and it's a question of whether they'll do it or not.
  3. Greed. Some SC members will lose out if the 33/33/33 method was used. There are cases where SC members would calculate the profits they'd gain from the various agents' methods of apportionment, and took that into account when deciding who they'd award the contract. So if the members had units that would disadvantage them if the 33/33/33 method was used, why select these agents?
Market efficiency
I'm not fully familiar with economics but I do believe that any economic argument almost never takes into consideration irrational conditions such as ideological considerations (eg government's best interest to let the market escalate, the greater division of income gap and disappearance of the middle class) or social considerations (eg the house is more than a mere 'asset' but a 'home' to many). The point of dissent and frustration for many who asks for regulation of enbloc sales arise from these reasons.

  1. The current 'efficient' market is creating a situation where middle class Singaporeans will not be able to invest in a condominium as a form of upgrading their social status. With prices skyrocketing, only the upper class and foreigners with capital will invest in non-landed residential property, and rent them out. One of the 5 'C's will become increasingly harder to obtain. It isn't just how 'well informed' buyers are, but how 'cash ready' they are in order to purchase what many perceive to be a sign that they have 'made it' in Singapore.
  2. As a consequence it is creating the so-called 'New Poor' in Singapore, where the middle class have to remain in the HDBland. Note the attempt to appeal to this group, when the government tried to build HDBs with the trimmings of private condominiums (private facilities, branded fixtures etc).
  3. A unit in a non-landed residential estate is to many BOTH an asset and a home to some. The current en bloc legislation is creating a market that is weighted in favour of developers and not home owners, much less owner-occupiers. Left to its own, many owner-occupiers will be forced to downgrade, squat, downsize or become a refugee, as the Pariah often pointed out.
Will the government slap back the capital gains tax that some argued stopped the property market frenzy in 1997 to 2004? I don't know, but left unchecked, the 'efficient market' is creating problems that economics often excludes in their rationalisation.

Sunday, 20 May 2007

Resistance is NOT Futile - Anti-Enbloc Blogs on the Rise

[Added a post below. Keeping this post as first entry for now]

It is always difficult being the minority, whether it's in terms of collective sales, or other markers of differentiation (race, ethnicity, SES, and even those with different political views). Some say the internet is a fantastic avenue for opening up spaces for such minorities. Maybe it is, but a lot depends on how visible these spaces are.

So what I have found, and have been approached to connect with, are other 'anti-enbloc' blogs that have appeared recently. I'm sure others will appear in the near future, as en blocs continue to frustrate many owners who do not wish to sell or move, for various reasons.

Anti-En bloc Blog for Teresaville (Lower Delta Rd): Save Teresaville
Anti-En bloc Blog for Pearlbank Apartments (Outram Park): No Enblock!
Anti-En bloc Blog in General: Pariah's En Bloc Block

Some advice from yours humbly that's been running this blog for a while now:-
  1. Always have a way for others to contact you, be it comments or (better) email.
  2. Advertise your blog on technorati, google, etc for maximum publicity.
  3. Link up with other blogs (like those listed above) for visibility.
  4. Search around the internet for others that may have talked about your estate's en bloc attempt, and invite them to discuss in your own blog.
  5. Try not to moderate your blog. If you're pushing for transparency in collective sale attempts, the same should apply to your blog. It's only fair that even majority owners have a right to say something on your blog, even though you may not agree with their comments.
  6. Most important of all - be civilised and rational. En blocs can create rifts and tempers may flare, but you gain nothing by being irrational against others who may disagree with you. It's an ugly world out there, but that doesn't mean you have to be too.
If there are other people that are attempting to start their own anti-enbloc blogs for their estates, let me (and those listed above) know. Of note, and I won't publicise it here, is the fact that there are signs of pro-enbloc blogs online too :) :)

Good luck :)

This from Channelnews Asia - Members of Parliament to raise questions about the property market, including "measures to ensure that en blocs are transparent". START BUGGING YOUR MPs NOW!!!!

Bound to Happen - Multiple Sales Committees

The Electronic New Paper on Saturday reported that the Watten Estate Condo in Bukit Timah has:

  1. 2 Sales Committees
  2. 2 Marketing Agents (DTZ Debenham Tie Leung and Dennis Wee)
  3. 2 Law firms (unknown with DTZ, Phang & Co with DW)
  4. 2 Collective Sale Agreements
  5. 2 Methods of Distribution (DTZ = Straight Cash Offer, DW = Hybrid Deal)
You can read the actual article here (with pictures of the ads).

This was bound to happen. With absolutely no regulation to stipulate how many SCs can be formed, how often they can be formed, who they should comprise etc, there is no limitation to how many SCs can be created in any estate, subject to these SCs obtaining an agent and a law firm to represent them. Another big reason why the collective sale legislation needs to be seriously reviewed. I've been asked before - can an estate have more than one SC/CSA - and I said legally there's nothing stopping an estate from having 100 SCs/CSAs. Now it's happened.

Some questions that must be raised:-

  1. If an owner signs on BOTH CSAs, which one applies? Both? The earlier dated one? Since both CSAs are legally binding, what happens to the owner? Previous reports by en bloc law firms have stated, quite categorically, that a CSA is a contract and one cannot renege it. If this is the case, once an owner has signed on both CSA what will happen?
  2. However on earth, if both SCs, agents, law firms are not going to coordinate their efforts (since I'm assuming both will be highly competitive to obtain the prerequisite 80%), are both law firms going to monitor whether a particular owner has NOT signed on the other parties' CSA? There has to be a checking mechanism, presumably, to ensure that said owner has signed on only one CSA. Of course, given the legal language that is embedded in many such documents, some owners may get royally confused on what is required of them (ie not to sign the other CSA).
  3. Given that the two CSAs are equally valid documents in the single collective sale (depends on which CSA you sign), what happens to owners who signed the first CSA, and then realised that the 2nd CSA (formed later) is more appealing/equitable/profitable? Can they renege the first in favour of the 2nd, given the special circumstances? Or are they stuck, which would seem unfair since most who signed the first CSA obviously would've thought that that particular CSA was the only option they had.
  4. Is there not some sort of professional courtesy angle that should apply to law firms and agents (SCs are excused), that compels them not to step onto each others' turf? I mean, once law firm/agent X finds out that the estate is already handled by law firm/agent Y, should they not abstain from representing the estate, to prevent potential conflicts and confusion from arising? Or is it really a free-for-all no-holds-barred winner-takes-all goldmine grab? How does this reflect on the professionalism of such law firms and agencies?
  5. What is to stop multiple SCs from sprouting up now, with the latest SC offering a higher RP, better method of apportionment, a free lucky draw for a unit in the redevelopment thrown in?
  6. I noticed in one of the ads reprinted in the NP article, that the term "hybrid en bloc" has been trademarked. I'm assuming this was trademarked by a particular law firm that specialises in such mechanisms. Is this allowed, and if so, what implications does that have if the government wishes to pursue a process similar to the New South Wales' Renewal Plan (fairly similar to a legislated collective exchange mechanism)? Does that mean any hope of a hybrid deal is impossible without the permission of the firm, or without paying royalties to them?
I can imagine the consequences: (a) don't like your current SC, think they're not aggressive enough or too kiasu, start your own SC, ask your neighbour to start their own SC, see who gets to the finishing line first; (b) hybrid deals will become increasingly rare or even impossible unless someone comes up with an alternative mechanism (and then trademarks that, ad nauseam, think "mutant deal" "rojak deal" "fusion deal" "mixture offer" etc).

That, folks, is what happens when we leave things to "market forces" :)

Saturday, 19 May 2007

An Alternative to Collective Sales - NSW's Renewal Plan

Well, who would have thought this is impossible.

New South Wales is undergoing urban renewal reforms as well, and the Property Council of Australia has looked into the Collective Sale process that we have in Singapore. And they came up with an alternative that looks like (a) they've drawn from the Singaporean experience, (b) they've thought things through more thoroughly, not shirking from the complexity of what they hope to achieve, (c) they've taken into consideration the fact that Australian owners may not like the Singaporean model which favours financial stakes over social stakes and issues of hearth.

They call it the "Renewal Plan", and is akin to a systematic model of legislated collective exchange.

Note that, as far as I can tell, it is still under discussion or refinement. Anyone who has more information on it please contact me. (Wish I had found this earlier; it'd have gone into the MinLaw document!)

The original document that discusses the Renewal Plan can be found here.
The subsequent document that refines the Renewal Plan can be found here.
[These are pdf files - you'll need Acrobat Reader to read them. Search for "Renewal Plan" within the documents]

A choice quote from their document, which critiques the Singapore collective sale scheme:-

However, this scheme does not give owners the confidence that they [owners] will receive fair and equitable financial benefit from the termination of the scheme. Specifically, if objections have been made against the application for termination of the strata scheme, the Board will not approve the application if there is the potential of financial loss to an owner, or sale proceeds will be insufficient to fund or to redeem a mortgage or charge. The Property Council does not support this, as there is potential for manipulation of financial records and misinterpretation of “financial loss”. It may be more effective if the level of financial return was resolved through a “just terms” provision.
Similarly, this model lacks detail regarding the process to be followed once agreement that the strata scheme be terminated has been obtained. Detailed provisions relating to the vacation of the building by owners, redevelopment of the building and transfer of the remodelled units must be clearly established, however this could be set out in documents attached to the application for sale and termination of the strata scheme.

"Vacation of the building by owners" relate specifically to my discussion (Myth #6) on Completion Date. Redevelopment and transfer refers to their Renewal Plan scheme. Feel free to discuss the Renewal Plan in the comments section.

Friday, 18 May 2007

So What If It's The Biggest En-Bloc? One Youth Laments the Loss of her Home.

This from a blog by a growing youth who stays in Farrer Court. When someone so young could write about the impending loss of her home, and her emotional attachment to Farrer Court, I'm heartened to know that there are youths like her who have not (yet) been tainted by material greed.

So what if Farrer Court's going to be the biggest collective sale ever. To this young lady, the loss of her home is immeasurable. Sometimes, people lose sight of their soul in the pursuit of progress.

From xiaoyuan of "leave me alone", a youth living in Farrer Court, her home. [Changed from SMS Engleesh to somewhat more standard English lol]

[anyways] one damper
the damper really very big lor...
[anyways],we were driving past the gates of farrer court
then saw the words COLLECTIVE SALE outside
mummy said "don't think i lie to you
really yao mai [going to sell] lar,they passed the 80% needed to sell lar"

at first thought i okays coz i seem to be getting more okays
then in the car,my tears just rolled down when i thought of my home
[remembered] on monday night was walking thru lingx's nice neighbourhood on monday night,it's really nice,really really nice
but even as i walked thru, i knew it wasn't farrer court,my home
the feeling was different and i missed my home
it's the place i return to after coming back from overseas trips,from sleepovers,from work,from sch
in this insane world,it anchors me in my world
my small private haven in which i healed and grew up and lived here for 18+years
and the feeling of walking back home at night via the hc way as in from the back is magical
it's irreplaceable, it's special, it has a healing effect on me
farrer court is my private haven,really my home
it's beautiful
but i can't help feeling quite heartbroken
i am losing one of the most [important] things that mattered to me
i have lost so many things over the years, i healed in farrer court
now i'm losing my home and private haven and one of my protection against the world thanks to some [people]
the nightskies are beautiful from all parts of the world
but it will never be the same as the one you see from farrer court
and i just feel like telling those _____

Thursday, 17 May 2007

En blocs Creating Rifts in Neighbourliness

Now that the MinLaw Public Consultation is over, I've been slowly getting back into updating the blog. The En-bloc List is updated as usual, and I'll be abstracting parts of the letter I wrote to MinLaw onto the blog when time allows.

In the meantime, an article in the oddest of places in the Straits Times - Mind Your Body - talked about the issue of neighbourliness. Written by Sharon Loh, it points to the issue of strong bonds and long-term ties by people who stay in the same neighbourhood for years. What en blocs seem to have done, and Sharon rightly pointed this out, is to not only create rifts among neighbours (ugly rifts at times between majority and minority owners), but also to remove the need to be neighbourly, particularly when (a) some people don't even stay in the estates but rent them out (owner-investors), (b) you anticipate moving out in 10 years when the enbloc consensus becomes more tenable at 80%. Social relations is often the glue of any nation, but what is en-blocs doing to middle-class Singapore, when it is forcing a large number of citizens to relocate? This relates to one of the myths I have written, about the need to consider social stakes in any en bloc process.

Love thy neighbour
Straits Times 16 May 2007

Recent events have been making me think about neighbourly ties, never as strong since high-rise dwellings replaced kampungs, apparently.

More than the reports of warring neighbours in court, I am disturbed by the rash of collective sales, some of them acrimonious. It is tyranny of the majority - neighbours forcing neighbours to sell their homes.

Are our homes merely financial assets? If they have no emotional ties, we are in trouble.

I thought another sign of trouble was the story of an elderly woman who fell in her kitchen and lay there for two days before neighbours noticed she had not left her house.

But that turned out to be a story of good neighbours. Once the alarm was raised, a group of them swung into action to make sure she was all right.

Maybe all good neighbours are not lost. I have been the recipient of many quiet acts of kindness from my own, most of whom, I am ashamed to say, I still barely know.

What is neighbourliness?

According to a paper by UK think-tank Smith Institute, it is not 'heroic forms of help and support' but 'small and unremarkable actions and behaviour that give people a sense that they are secure and at home in their own places'.

Neighbours do not need to be best friends. Keeping an eye on each other's property, exchanging greetings and not making too much noise late at night are small things we can do for each other.

Perhaps neighbourliness has receded because we are no longer so reliant on one another. My mother had to ask the family next door to keep a watchful eye on me and my brother when she went to work because none of our nannies would stay.

These days, with many more resources, there is much less need to go next door for help.

But as the population ages, that proximity will become important. More than anyone else, elderly people who live alone and are no longer as mobile as before, need their neighbours.

Neighbourliness is a balance of reciprocity and altruism. People look out for each other not only because they expect the same in return but also because they gain satisfaction from knowing they can help. Old people do not want to be dependent on others, but interdependent.

How can we promote neighbourliness? One correlation is age and length of residence. Older neighbourhoods tend to have stronger bonds, so perhaps we should work on long-term ties.

In the end, though, a good neighbour is something we choose to be.

I hope more of us will choose it. Welfare groups say that people, especially the elderly poor, are falling through the cracks because they do not know where to get help.

Government and welfare agencies can do only so much. We are each other's eyes and ears.

Thursday, 3 May 2007

Tenants in En Bloc Condos - Protecting Yourselves

[Again, information on the REACH discussion forum can be found here and the Ministry of Law public consultation on en bloc legislation here and request for information on STB mediations here]

All these talk about en bloc sales, we tend to forget that aside from owner-occupiers and owner-investors, there's another group of people who will be greatly disadvantaged in the process of a successful en bloc - The Tenants.

Whether they're local or expatriates, the fact is that once an en bloc sale goes through, most landlords are not too concerned about your rental flat (it's going to be torn down), your surroundings (it's going to be torn down), and your contract (typically in the landlord's favour). Consider the following:-

  1. If you do not have any clause protecting you in the event of a successful en bloc sale, the landlord can turf you out anytime (subject to notice, usually 1-2 mths), but YOU cannot move out on the grounds of deteriorating conditions, increased noises etc. You have to give notice, and yes, even though the place will be torn down, the landlord can still deduct costs for damage to property due to wear/tear!
  2. Unknown to many tenants, there's a grey period between the legal completion date and the date of vacant possession. (Click on the "Completion Date" topic on the right.) For example, in my condo which has just been sold, there are clauses in the agreement that allows developers to come in during the period between completion and possession to (a) set up a showflat (b) conduct tests on the grounds (which may include drilling and much banging about).
  3. After legal completion, the estate belongs to the developer and there are no management committee to turn to for any grievances. The developer is within his 'rights' to keep a minimal cleaning/security crew and ignore any urgent repairs (like a leaky roof over your flat). Depending on the agreement between the SC and the developer, there are instances where this period between completion/possession is considered 'rent-free' which means there's no need to pay maintenance fees. Of course, you can expect your landlord to continue to extract that from you (even though there's no more maintenance whatsoever).
So what can you do? Not much, except at the crucial point of accepting the contract you need to think about some of the things suggested below by a chap in the Expat Forum. Bear in mind - TONS of condos in Districts 9,10,11 are going en bloc, which means there's no guarantee you won't be subjected to the above problems unless you stay in a brand new condo (aka pigeon holes). Some suggestions include putting in a 'moving out clause' so that if things get unbearable, the landlord will pay your moving costs to your new home. But some disagree with this...

From "Expat Source" posted at the Expat Forum:

If you opt to put in a clause for your Landlord to pay your moving costs should you be forced to moved in the event of an en-bloc sale, you may end up disadvantaging yourselves. As they will keep you there till the last and then you will have to fight them for the money. You could be surrounded by empty apartments and progressive construction driving you nuts.

I would suggest that instead you put in the following:

1. An en-bloc clause that gives you 3-6 months notice should a sale go through, with the OPTION that you can leave at any point during that period should you find suitable accommodation.

2. A clause that in the event that your living standards are compromised by on-site construction, destruction of facilities, lack of standard of maintenance, facilities not being fixed etc that you have the option of giving notice and being released from your contract.

3. In the event of having to move because of an en-bloc sale that you have one month's free rent to cover your moving and re-siting costs, if your rent is above $5k be reasonable and ratio it down to 2 weeks etc.

This way you get to move out and are not stuck until the final days in a deserted condo with construction workers surrounding you. You have an option of moving out if they start to tear up tennis courts for show flats or drill holes for soil testing.

And you won't have to fight for the moving cost money as you will just simply deduct the rent.

Of course right now you should also look at putting major construction clauses in your contracts, if you move into an area that is currently peaceful with no sign of construction and the landlord or their agent tells you that none of the surrounding buildings are coming down or going up - you should have the option to move out if that situation changes dramatically within the term of your contract. However, you have to be reasonable, if you move into an area with ongoing construction or condos emptying out you have to take the responsibility for your move there. Again you add in the clause about moving costs deducted from rent.

It might be a sellers market but they also need the buyers in order to get the rent.

These clauses make them more accountable for the information they tell you and gives the landlord a cost if they or their agent are not being truthful.