02 April 2007

Ministry of Law Public Consultation

Thank you, Dr Minority from www.enblocsingapore.blogspot.com for your comment to my "Message for blog-site visitors". It's an excellent suggestion.

Further to the Minister for Law's parliamentary speech on 2 Mar 2007, the Public Consultation for REVIEW of the present laws on Collective or En Bloc Sales has just started today, 2 Apr 2007 and will end on 12 May 2007.

You could snail-mail or e-mail your suggestions and comments to:

Snail mail:
The Ministry of Law, 100 High Street, The Treasury, #08-02, Singapore 179434, Attn: Mr Gary Goh


Do consider the wide-ranging implications of this law. For most of us, real estate purchase is a chunky investment of our LIFE SAVINGS as it is a HOME for ourselves and our loved ones.

What do your instincts tell you when buildings of 10-20 years age are torn down if en bloc is successful OR estates are left to deteriorate or minimally maintained if en bloc has failed? Is it ok that when you buy, you pay for every sq cm and every share value but when you sell, it is NOT on that same FACTUAL basis? The owners of Paterson Lodge were really smart - they cut a deal with the developer such that they each would get a replacement unit at the same location after redevelopment. This way, they don't need to be a Downgrader or Downsizer or worse still, become Squatter or Refugee!

There are 2 types of Consenters:

1. Investor-Owners: They have more than one property (either because they are so well-off and are able to own multi-properties OR they bought the property speculatively for its en bloc potential OR they had over-committed themselves and are struggling with bank loans because of higher interest rate these days). For this 1st group, the dollar proceeds from the collective sale have a HIGHER time-value because they can take the money and wait out the property cycle to re-invest (if at all) only after the property market slows down/crashes. Moreover, they are NOT losing their homes as they have another roof over their heads.

2. Owner-Occupiers with only 1 property: They are indeed losing the roof over their heads but they are seemingly resigned to their fate of being a Downgrader or Downsizer after the en bloc. OR they are long-time expats/emigrant Singaporeans only waiting to cash-out from the Singapore property market to buy a much cheaper property in their original/new home country, respectively. Generally, in contrast - For this 2nd group, the dollar proceeds from the collective sale have a LOWER time-value because they need to buy a replacement unit in Singapore at the height of a property boom unless they are prepared to be a Squatter or Refugee for the next few years. Not wanting to miss out the current property boom, they consent to the en bloc by cashing-out, thus unlocking the equity in their real estate. They may also be worried about having enough cash to see them through retirement, especially with the escalating Cost of Living as Singapore evolves into a Global City. If you are of this profile, I'd urge A SERIOUS RETHINK - Why???

(a) You had the vision to invest your capital into your present property years ago. Shouldn't you preserve your capital by getting a replacement unit? Real estate is about 3 things only: LOCATION, Location, location. In the process of unlocking the equity in your real estate by taking the cash, do you realise that you are in fact unlocking the land use potential for the happy-happy Developer-buyer?

(b) You take the cash now - fine. But are you an astute investor with a healthy risk appetite and a dose of good luck? If not, by leaving the cash hoard as a Fixed Deposit in a bank or in some conservative investment instrument, do you think that you will get a better rate of return from your Fixed Deposit compared to (i) selling your replacement unit in the open market (if you still prefer cash after redevelopment, say, some 3 years later) OR (ii) moving back to the same vicinity and enjoying the replacement unit until you have an eventual need for the funds, say, some 5-25 years later?

(c) You downgrade, say, from Tanglin area to Seletar area OR from freehold to 30-year lease/HDB. Or you downsize from, say, 180 sq m to 100 sq m. With the passing years, let's say you fall very sick or grow old with chronic illness or your retirement savings have dwindled to a low level. At that future point in time, you may need to liquidate your home to meet medical/long-term care expenses. REGARDLESS of the state of the property market at that future point in time, which asset will have better value appreciation - an apartment in Tanglin or Seletar, a bigger unit or a unit half the size? If the remaining lease is less than 30 years at the time of liquidation, the property is not even marketable.

If you are an Owner-Occupier and you are NOT in dire straits for cashflow now, it makes sound financial sense to gun for a replacement unit based on size (NOT based on value). In a way, you are "cashing-out" too - NOT in DOLLARS but in KIND. Even in an ENFORCED collective sale, I see this as the next best win-win for all: The owner-occupiers with only 1 property get an option to move back to familiar territory if they wish and preserve their capital for eventual liquidation into cash or bequest to a loved one at a time of their choice. The Investor-Owners grab the $$$. The Developer-buyers have a shot at making profit (still profitable - only less so) from redevelopments at prime/popular locations which are much more saleable. The Gahmen achieves the social objectives of intensive land use, urban renewal and a greater semblance at preserving community ties.

This suggestion is valid financially for ALL age groups: To the post-65s (ie, those in their late 30s up to the 40s) because you need to build-up your retirement savings for maximum multiplier effect, to those in their 50s-60s as you may live past 80 and capital preservation and asset value appreciation are therefore key to your financial security, to those in their 70s and beyond if you are NOT needing the cash now and want to bequeath something valuable to your loved ones. There are various intricacies involved in such "exchange" - SEE MY OTHER COMMENTS UNDER "ONE-FOR-ONE EXCHANGE" IN THIS BLOG-SITE.

It is one thing to lament (eg, seeking empathy because you are losing your home). It is yet another thing to do something constructive about your lament (eg, giving MinLaw a suggestion to mandate developers to do an "exchange based on size" for the apartment that you are forced to sell in the en bloc exercise or some other better idea that you could spin off from here). So Stand Up (constructively) for Your Home (even if it is a reconstructed one in the end)!


Anonymous said...

Sad to say, you are absolutely right - this is no Switzerland. We no longer have the freedom of choice to live in our own homes - it's like the corner the government has painted itself into regarding cars.

As beneficiaries of the well-paid ministers' great visions, we now are on treadmills to renew our cars every four or five years and have to downgrade or whatever our homes every 10/15/20 years.

This whole island is being turned into a transient camp (history will tell if it makes it as a viable IR) with Singaporeans paying for it all.

Depriving us of our homes is the worst possible thing our government can do to us; those who decide cannot be living in condos.

Anonymous said...

Mountain, Molehill.

The Pariah said...

Be it a mountain or a molehill, it remains a lump that is hard to swallow in civil society (... Ooops, but then are we a civil society???).