UPDATE on 6 Jan 2008:
Flurry of letters published in Today newspaper ... I am no clairvoyant when I posited in Mar 2007 (that's when I started this blog) that Owner-Occupiers with only 1 residential property would end up as Squatter, Refugee, Downgrader or Downsizer after an en bloc sale!
In the Today newspaper (27 Dec 2007 edition), there was an "I say" commentary by Lucy Huang recounting her pathetic plight as an En Bloc REFUGEE as she and her husband have already been hit by two en bloc sales. In looking for a replacement unit in the not-brand-new private residential estates, Lucy Huang was told that these replacement possibilities are likely en bloc potentials! Hence, she may be hit for the 3rd time! Lucy Huang also mentioned the option of renting but that would put her at the mercy of lessors who may keep upping rentals or take rental unit out from the market (effectively, she will be reduced to a SQUATTER during tenancy).
In response to Lucy Huang's piteous plight, there were two Voices Letters published in Today newspaper (28 Dec 2007 edition) on how to break the vicious refugee/squatter cycle.
===> One letter suggested that Lucy Huang should buy a brand-new (a) private apartment that has just obtained Temporary Occupation Permit or (b) HDB public flat under the Design-Build-Sell-Scheme. On the one hand, human territorial instincts tend to gravitate back to same neighbourhood vicinity (even evidenced in next-generational's preferences in selecting their matrimonial abode) but on the other hand, collective sales proceeds are far, far short of the replacement cost of a brand-new unit around the neighbourhood unless one opts to DOWNSIZE significantly (eg, by 50% usually)! To buy a HDB public housing flat (DBSS or otherwise) or a private apartment way out in the suburbs after a so-called "en bloc windfall" from selling (or being forced to sell) a Private Condo or HUDC/Executive Condo is a DOWNGRADE, however you dress it up!
===> Another letter said that Singapore should follow the lead of South Korea's en bloc laws that mandate a 1-4-1 EXCHANGE to break this vicious cycle of being a Squatter, Refugee, Downgrader or Downsizer. You will notice from this blog that I have been expounding this idea of 1-4-1 exchange option since I started this blog in Mar 2007 and I learned of South Korea's en bloc laws in this respect only in Aug 2007.
In Lucy Huang's rejoinder (Today newspaper, 2 Jan 2008 edition), she lamented about where to stay in the meantime. This is a VERY REAL problem indeed! And solutions???
In response (Today newspaper, 4 Jan 2008 edition), it was suggested that Lucy Huang's concerns about "where to stay in the meantime" could be overcome if the Gahmen and Developer-Buyers play their part in a tripartite effort. Surely, solutions are NOT beyond the imagination of the Gahmen as evidenced by the Gahmen's immediate and innovative responses to the recent office space squeeze. So why did the well suddenly run dry on this en bloc issue??? We know of "selective amnesia" ... perhaps, there is also "selective abdication"! Wicked, eh?
Anyway, here are some ideas for consideration:
- HDB flat rental priority could be ranked high for en bloc exchangers, or the ethnic quota for HDB flats could be waived for temporary accommodation of such exchangers with resale back to HDB upon TOP of en bloc redevelopment. All HDB rules and regulations for qualifying criteria should be suspended for Owner-Occupiers with only one residential property in Singapore who are caught in an en bloc sale.
- REDAS (Real Estate Developers' Association of Singapore) members could pool resources from their massive en bloc purchases under the Remaking of Singapore within this decade or two. Not all of these purchases are meant for immediate redevelopment. Those designated as part of the Developer-Buyers’ longer-term land banks could serve as temporary accommodation for en bloc exchangers whose sites were slotted for immediate demolition/construction. Units owned by Investor-Owners of these longer-term land banks would be made available upon expiry of the vacant possession period under the Collective Sale Agreement for such temporary accommodation of en bloc exchangers. As a quid pro quo, the Gahmen could waive property tax on such temporary sites.
- Developer-Buyer’s compensation for temporary displacement could be used by en bloc exchangers to source for alternative accommodation within a 3 km radius. The displacement compensation should be based on industry rental benchmark for private residential property of the immediately preceding calendar quarter within such radial distance.
- Given Singapore's teeny size, this en bloc phenomenon is a permanent hallmark. The Gahmen could consider designating a few newly built HDB blocks in the 4 corners of Singapore for rotational rental to qualifying Owner-Occupiers during an en bloc frenzy who would qualify for top priority or service apartments for short-stay travellers (eg, tourist families, small-scale foreign entrepreneurs doing market studies or starting up new businesses, professionals on short project contracts) during an en bloc doldrums.
If you have any brilliant flashes of inspiration to add other possible solutions, I welcome you to share them and contribute comments to this blog ... c'mmon ... tease those grey cells, stand on your head or do whatever works for you ...
1. Precedent set by HDB - Our Housing & Development Board (HDB) has set a laudable precedent called SERS (Selective En Bloc Scheme) that alleviates to some degree the displacement suffered by existing owners in such an en bloc redevelopment.
2. Tapping on original owners' land use potential - For private properties under collective sale, it should be recognized that the buyer/developer is tapping on the land use potential belonging to the original unit owners. The original unit owners had the foresight to invest in their respective properties at the point of purchase which the developer is capitalizing upon at the point of collective sale. SEE MY OTHER COMMENTS UNDER "MAJORITY VS MINORITY VS INDIVIDUAL" IN THIS BLOG-SITE.
3. One-4-one "exchange" - Hence, developer-buyers should be mandated by law to offer a same-size, same-level replacement unit at the redeveloped estate or within a 1-km radius of same or higher quality to Owner-Occupiers with ONLY 1 RESIDENTIAL property at the point of completion of the collective / en bloc sale as one of the “settlement consideration” options in addition to outright cash.
This argument is particularly cogent for properties because "Property" means 3 things: location, Location, LOCATION!!! Also, the stakes are very high for owner-occupiers with ONLY 1 property because they are losing the roof over their heads UNLIKE (a) owner-occupiers with MORE THAN 1 property and (b) investor-owners who force through the en bloc in a cavalier manner because they already have another roof elsewhere.
The status of "Owner-occupier with ONLY 1 residential property at the point of completion of the collective sale" can be factually established by running checks through the records of the Singapore Land Registry (SLA) and the Housing & Development Board (HDB). Hence, if Mr and Mrs A own Apartment 1 which is under en bloc and Mrs A owns Apartment 2 in another estate under a single name or jointly with her daughter Ms A, then Mr and Mrs A do NOT qualify as Owner-Occupier with ONLY 1 residential property at that point in time.
4. Completion and financial risks in an "exchange" - If Singapore can have a Housing Developers (Control and Licensing) Act to cap the risks of buying properties under construction, we should have an equivalent statute to cap the completion risks faced by collective sale owners who are SACRIFICING their private property rights in the larger interests of urban renewal and land use efficiency.
5. Business flexibility required by developer-buyer - No doubt, the developer-buyer needs business flexibility to build units of a design layout and size which would be saleable in today's market. This can be preserved by stipulating upfront conditions for the redeveloped units to be within a certain range of sizes. As construction costs are clearly defined under the Housing Deveopers (Control and Licensing) Act, these figures can be established by the auditor. The development charge paid to the Gahmen is also very transparent.
(a) Where the replacement unit is BIGGER, then the en bloc owner who opted for "exchange" should pay for the differential area at the collective sale price plus construction cost.
(b) If the replacement unit is SMALLER, then such en bloc owner should be paid for the differential space at the first soft launch price less 20% discount.
(c) Upper and lower caps could be set as ADDITIONAL SAFEGUARDS to prevent abuses (say, a differential of plus/minus 30%) so that (i) an en bloc owner with an original small unit of 100 sq m cannot opt to buy a unit of 200 sq m at the redeveloped estate at such preferential price OR (ii) an en bloc owner with a original penthouse unit of 250 sq m can opt to have two units of 100 sq m each and be paid for the 50 sq m shortage based on the upfront formula.
This proposal in the SPIRIT of the law is configured on the basis that the impact of this law is disproportionately huge on owner-occupiers with ONLY 1 residential property and the land use potential belongs to the en bloc owner who also bears (a) the disruption of moving house, (b) the expense of alternative accommodation during the construction period and (c) the vagaries of the property market (although the risks are evened out over the long term for Owner-Occupiers).
Based on the LETTER of the law, there may be no basis to differentiate between the different types of strata-title owners except for the varying (i) unit numbers, (ii) unit size and (iii) share-values. But laws are formulated not for TECHNICALITIES but for EQUITY. Clearly, the impact of the law as it presently stands is vastly different for the different categories of owners.
6. Prohibition against developers building-up land banks - Where developers want to build up their land bank for market cyclical reasons, they should look to Government Land Sales (GLS) and not boot people from their homes. Hence, when the Strata Title Board issues the order for collective sale, it must regulate and set - as one of the conditions for such order - a narrow range of target dates for issuance of Temporary Occupation Permit which would necessarily entail prompt redevelopment. It is NOT the job of regulators to time the inevitable ups and downs of market cycles. It is NOT in the political interest of the Gahmen to facilitate developers' speculation at the expense of citizens' private property rights. It is NOT in the social interest of our nation to "commoditize" residential properties, thus negating the concept of a "home". Sadly, the present legislative gaps are doing exactly that, distorting supply and demand. Going back to basics, the job of the legislators is to ensure that the framework and the laws are robust and equitable in the course of arriving at the greater vision. SEE MY OTHER COMMENTS UNDER "ESTATE MAINTENANCE" IN THIS BLOG-SITE.
7. Change of land use - Where it is a land use change (eg, residential use to hotel or commercial or white site usage), this option would be naturally redundant as the collective sales proceeds would be at a vast premium to facilitate an equivalent/upgraded replacement unit for the collective sale unit owner.
8. Alternatives: Squatter, Refugee, Downgrader, Downsizer - (A) Without a mandatory unit replacement and (B) because the collective sales proceeds will NEVER buy an owner-occupier a new replacement unit within the same vicinity at the point of a successful collective sale, what is the dire predicament of an owner-occupier with only one property to his name??? He could DOWNGRADE or DOWNSIZE. Or he could SQUAT with relatives until the next property market downturn or he come evolve to become a REFUGEE as he buys a replacement unit in an estate of equivalent age which means that he may be subject to yet another en bloc within the next couple of years.
The owner-occupier with only 1 residential property is between the Devil and the Deep Blue Sea, jumping from the Frying Pan into the Fire - what "windfall"??? More like "deep discount"!!! SEE MY OTHER COMMENTS UNDER "SALES PROCEEDS FORMULA" IN THIS BLOG-SITE about the time-value of the dollar amount received as collective sales proceeds.
9. Other benefits: Soft and hard factors - In addition to (a) preserving the original owners’ investment (ie, for owner-occupiers who do NOT need to cash-out immediately and who want a replacement roof in the same vicinity), (b) allowing the owner-occupiers with more than 1 property and investor-owners to grab the $$$, (c) giving the developer-buyers a shot at making very decent profits as redevelopments in prime/popular locations are more saleable even at fatter margins and (d) enabling the Gahmen to renew our urban landscape with more efficient land use, this will also contribute towards a heightened sense of community and bonding in our nascent nationhood as Singapore hits our 42nd National Day on 9 August 2007. After all, we are human beings and territorial/turf issues are very much enmeshed with our sense of time and place.