Wednesday, 16 April 2008

To Enbloc or Not to Enbloc, That is the Question for 2008

Concerns about the US Economy and the Global Economy in general, economic slowdown worldwide. Research reports from real estate firms like CB Richard Ellis (here) which points to a drop in interest in private non-landed investment sales (as compared to the government tenders):

"Compared with the heightened investors’ interest in en bloc acquisitions seen in 2007, demand for private residential land turned lukewarm in the first quarter of 2008. Developers were observed to be less keen to acquire sites compared to last year as most of them have built a relatively strong inventory of freehold residential sites from the robust collective sales market in 2007. Purchases were limited to choice locations as response to recent new launches was subdued." (CBRE Singapore MarketView Q1 2008)

UBS Investment Research (available here) is even more cautious, pointing out that "real economy and home prices could worsen here, before recovering in 2009", and with negative news from Dakota Crescent and Sentosa Cove, home prices could be forced down further, with "high end prices most at risk due to lack of foreigner interest". They also pointed out that some of the enbloc sales that were bought during the frenzy last year, may now no longer be generating profits (if at all):

"Prices at some locations seem to have already fallen by 15% or more, bringing into question the profitability of certain sites bought by listed developers such as SC Global and Ho Bee."

So why do people still persist in trying for enblocs this year?

  1. Condo raiders and investors who bought units last year, need to push for enbloc sales this year, before prices plummet and they can't even sell on the open market for any profit (or worse, a loss). Unless they have holding power to tide them through in estates that some of them have encouraged to deteriorate (hence making it hard for rentals), they are in financial trouble.
  2. Estates that have achieved 80% consensus but failed to achieve a good bid, are now retrying, with many agents urging owners to accept a lower RP. They need to do this before their 1 year mark to obtain a sale expires, and they have to restart the collection of 80% again. Now adjusting the RP, especially to lower it, WITH OR WITHOUT owner agreement/permission is entirely up to how the CSA is drafted, so as always check with your lawyer on the conditions that allow SCs to adjust the RP downwards. You can read the BT Article on the race against enbloc clock here.
  3. Plain arrogance and stubbornness, as overheard from a rather loud conversation between what appears to be SC members at a coffee cafe a few days back. They were absolutely convinced that "owners are sheep" and can be pushed into the sale, and that they must achieve the sale or no agent will take them on anymore. Colourful languages were used to describe owners who refused to sign the CSA, including the use of the words "idiots", "hammer them", along with various rather interesting suggestions such as not cleaning their corridors, ignoring maintenance near their flats, and for one member, even encouraging his kids to play the piano louder at nights, to irritate the stayer next door. Pats on each others' backs followed after such great suggestions. Pity no name of estate was divulged or I'd SO be contacting stayers there. Tip to SC folks: Don't discuss strategies in a public area where potential anti-enbloccers might overhear you and blog about it :)
I'm sorry but I was quite tickled by the SC conversation that I just had to write about it. Pity I didn't bring my trusty digital recorder but even then, the ambient noise in the cafe would make the audio hard to listen to. But thankfully not for God-given natural ears :)

I should visit that cafe more often lol :)


Anonymous said...

enbloc leaves multi-layered unanswered questions. it promotes rivalry, obsession for self-reaping rewards and is also an intoxicated drug. claws are out in various forms .........?

Anonymous said...

enbloc is legal.........but the money earned is dirty.....and corrupt.....?