24 December 2007

In the coming year of 2008 ...

POSER FOR POLITICIANS:
En blocs should push everybody up.
Read on ... in my Nov 2007 blog update ...
difference between Gahmen "being right" versus "doing right" ....
and difference between Singapore's and South Korea's en bloc laws.
Singapore is NOT the only country that needs urban renewal!
"Uniquely Singapore" is in fact NOT that unique!

En blocs should NOT pull everybody down! ... ending up as Squatter, Refugee, Downgrader or Downsizer after an en bloc.

En blocs should NOT push up ONLY SELECTIVE PARTIES! ... viz, Gahmen who load up public coffers from hefty development charges and multi-transaction stamp duties from incessant en bloc cycles every 15-20 years, Developer-Buyers who get prime land unlocked and handed to them on a silver platter, marketing agents/lawyers who earn fat commissions, and crass en bloc flippers who speculate wildly at other people's expense. QUESTION:
In the face of (i) sub-prime mortgage woes in the US spinning off into credit crunch on both sides of the North Atlantic and investment jitters which surfaced globally only in 2H 2007 and (ii) anticipated global economic slowdown in 2008 in varying degrees, why are predatory marketing agents and Developer-Buyers still lurking and sniffing around our private residental estates? No doubt, these predators are more subdued but they are no less determined!

ANSWER:
These marketing agents and Developer-Buyers in the real estate industry may know something that we ordinary folks don't!!!

FACTS:
Singapore's five-year Master Plan 2003 is coming up for review in 2008. What goodies and/or nasty surprises are in the upcoming Master Plan 2008 is for the Gahmen to know ... and for the rest of us to "guess" until around 2H 2008!

Pursuant to URA's announcement in Nov 2003 , the new definition of Development Baseline will come into effect on 1 Jan 2008 (ie, 4+ years later). Instead of computing the Development Baseline by taking the highest value from (i) Master Plan 1958, (ii) Master Plan 1980 or (iii) approved development, the new definition will be pegged only to the last one (ie, value of approved development). Based on the current Master Plan, this change only affects 1,700 land plots (2%) - mostly in the city area - but it corrects an existing anomaly by levelling the playing field and collects more Development Charges for the Gahmen.

Within this change, however, there is an embedded goodie to mitigate the impact for those estates whose approved development is lower than Master Plans 1958 or 1980 because that portion of the historical values of 1958 or 1980, not exceeding that in the current Master Plan 2003, will be offset from the new computed DC payment by way of a Development Charge EXEMPTION within the allowed use and intensity of such current Master Plan. Figure 1 in Question 5 of the following link illustrates the answer most graphically:
http://www.ura.gov.sg/dc/baseline/baselineQnA.pdf

In Jul 2007, the Gahmen sprang a surprise hike by revising the Development Charge rate from 50% of appreciation in land value to 70%. As part of the semi-annual review cycles, the Gahmen further hiked the actual Development Charge rates in Sep 2007.

Looking from the Gahmen's perspective, there are three chess pieces to shuffle around:

(a) Development Charge which they have moved in Jul and Sep 2007;

(b) Development Baseline which they will be playing in Jan 2008;

(c) Development Ceiling parameterized by plot ratios and storey height controls which they may OR may not tinker with in Master Plan 2008 underpinned by 55 Development Guide Plans within Concept Plan 2001 (NOTE: Concept Plan 2001, drawn up for the next 40-50 years, was based on 5.5mn population in 2001, not the latest announcement in Feb/Mar 2007 of 6.5mn "target" population!).

Here are some summary points largely distilled from my 4-part Nov 2007 blog update:

1. The underpinning rationale for en bloc sales. The concept of “ Dào Lǐ “ (道 理) ("rationale" in Mandarin) comprising of – " Dào " which denotes "the Way" under the Chinese philosophy of Daoism and " Lǐ " which denotes "Logic" – as applied to the sense and sensibilities of enforced en bloc sales.


Urban Renewal
through En Bloc or SERS
= Being right


Result of En Bloc:
Squatter, Refugee,
Downgrader or Downsizer
= NOT doing right


Cash or 1-4-1 Exchange Option
(through serious increase of plot density ratio and
incentive scheme for plot amalgamation)

= Doing right
(leave the choice to "Qualifying Owners" as to whether we'd want to
cash-out now OR cash-out in the near/distant future
OR keep our rebuilt homes in the same locale)

2. The defining difference between Singapore's and South Korea's en bloc laws (and comparison between Singapore and Hongkong). Like Singapore, the city of Seoul also needs urban renewal. Interestingly, South Korea's en bloc laws mandate 1-4-1 exchange as the first option. In South Korea, if an owner wants cash instead, the onus of proof is on that owner to justify it.

MinLaw learned of this South Korean en bloc law just before the amendment bill went for the 2nd/3rd parliamentary reading in Sep 2007. Whatever "practical difficulties" there may be in 1-4-1 exchange option (as per Law Minister Prof S Jayakumar), they are NOT exclusive only to Singapore. If the South Koreans can do it, why can't we? The South Korean law makers have exhibited a Sense of Rectitude TO DO RIGHT by their people through such "Hapdong Redevelopment" (the etymology of this Hanguel phrase of "Hapdong" traces back to the Chinese word for "Cooperation, Partnership" - now, that's the spirit of it all, won't you say?). Surely, our Singapore Gahmen who - as per MM Lee Kuan Yew - "shares the trials and tribulations of our populace" will NOT lose out to their South Korean counterpart, right? One can hope, eh???

Our closest economic rival, Hongkong (already much more congested than Singapore) has even more intense urban renewal needs! Like Singapore, Hongkong announced in Jun 2007 increased population target by 40% from their present 7mn to 10mn in the coming decades! With its laissez-faire colonial legacy and despite being part of Communist China's "one-country-two-systems" framework - Hongkong (similar to South Korea) has a complex set of ordinance, rules and regulations to "manage" and "govern" urban renewal. Singapore's amended en bloc law pales in comparison! Check out HK's URA link added to the list in the right-hand column of this blog (other new links: NMP Siew Kum Hong's blog, MinLaw's responses to the Public Consultation exercise, other en bloc estates).

3. Tripartite effort. An en bloc sale is a truly ingenious way to achieve PUBLIC URBAN RENEWAL at PRIVATE COST - this is a NATIONAL CAUSE as it is part of the mammoth task of Re-Making Singapore in the Third Millennium. Hence, is it too much to expect that it would be a TRIPARTITE EFFORT involving:

- INDIVIDUAL CITIZENS who SACRIFICE (in the case of Minority Dissenters, they are obliged by law to sacrifice) their homes/real estate investment assets bought with PRIVATE FUNDS (viz, WITHOUT a single cent of public funding/subsidy);

- CORPORATE CITIZENS who must therefore shoulder some SOCIAL RESPONSIBILITY as they merrily reap the benefit from such individual citizens' sacrifice, thereby unlocking current land value for Developer-Buyer companies and consequently swelling their corporate profits;

- GAHMEN who must correspondingly make some DIRECT CONTRIBUTION by substantive increases of plot density ratio, imaginative incentive schemes to not only facilitate but also motivate (!!!) meaningful and attractive 1-4-1 exchange options with a good rate of acceptance by qualifying owners (eg, through Development Charge rebates, additional bonus Gross Floor Area for plot amalgamation, etc), thus DOING RIGHT by her people, inculcating a sense of community as part of our NATIONAL VALUES and NOT messing up the long-term financial/retirement plan of citizens who bought private residential property with a huge chunk of their CPF/private savings and who may NOT want to liquidate their real estate asset at same time as (1) the 80% (90%) majority of flipping serial en bloccers and opportunistic owners of smaller-size units (facilitated in no measure by the authorities with their hands-off laissez-faire policies in respect of apportionment of collective sales proceeds), (2) cash-strapped frantic businessmen, (3) cash-poor frightened retirees and (4) a motley bunch of frazzled owners who are worn-out/"sotong"/"kiasee" (patois for "clueless" and "afraid-to-lose-out", respectively)? The Four F words - Flipping, Frantic, Frightened and Frazzled! Prim and proper F words!

The Gahmen has already taken the lead with HDB's 50-storey public housing project at The Pinnacle @ Duxton. And private residential redevelopments at recent en bloc sites are still averaging 25-30 storeys (other than the 54 storeys of super-luxury apartments at The Orchard Residences)??? Geez ... do keep in mind the Gahmen's "target" population of 6.5mn people in the next 40-50 years (announced in Feb/Mar 2007, this is a 45% increase from our present 4.5mn) and 17mn tourist arrival target by 2015 (a ten-year target announced in Jan 2005; Singapore just hit 10mn tourist arrival in Dec 2007)! Based on 2006 statistics, Singapore's population density (ie, excluding tourists!) stands at 6,369 persons per sq km (presumably yet another feather in our cap for being the 2nd most densely populated country in the world ... in comparison, Hongkong has 38 persons more per sq km)! If you are already feeling squashed with our present 4.5mn population, you don't need a terribly vivid imagination to envisage how you'd feel when our population hits 6.5mn target in the coming decades ... not forgetting the growing obesity trend and the shrinking room sizes in new developments! In other words, there will be more of us growing old ... and fat together ... in smaller rooms!!! Daunting Singapore Dream, eh? Yeh, it already is starting to haunt me.

As the amended Land Titles (Strata) Act now stands, it is ONLY the individual citizens who are being led to the sacrificial altar ...

... willingly as a Majority Consenter who die-die-must-sell for immediate cashflow/liquidity needs or purely exploitative reasons,

... half-willingly as part of the consenting herd on the basis that if-you-can't-beat-them-you-might-as-well-join-them, or

... unwillingly as a Minority Dissenter who die-die-don't-want-to-sell for personal reasons of rootedness or sense of community or capital preservation as part of their long-term financial/ retirement planning!

Just as 20% of the Singapore electorate who are NOT living in HDB estates may cock their heads at the priority basis for HDB Lift Upgrading Programme, so too will 80% of the Singapore electorate who are living in HDB estates commiserate with us. Singapore is very small ... ripples have a way of enlargement, more potent at the centre and less distinct at the outer circles but nonetheless there. Yet, some wonder why Singaporeans are " the most dissatisfied people" despite enjoying "the highest per capita income in Asia, short of Japan"!

4. Red flags. In Part C of my Nov 2007 blog update (scroll down to past Green Froggy), the issues of the amended en bloc laws are discussed in terms of what's there and what's missing. In Part D of my Nov 2007 blog update (scroll down to the Hanging Orang Utan), there are "tips" on what to do and what NOT to do under the amended en bloc laws. Work within the law but outside of the box!

To tamp down the speculative level, the Gahmen (finally) withdrew the Deferred Payment Scheme on 26 Oct 2007 after a near-decade since it was first introduced and after the property market run-up for more than a year from 2Q 2006! What does the market do? Well, market will do what it does best ... outsmart and outwit the Gahmen! These days, Developers offer Interest Absorption Scheme! Without going too much into the technicalities of financial risk weightages and loan structures, the bottomline remains that home buyers only pay 20% of purchase price upfront and start paying interest and principal installments upon issuance of Temporary Occupation Permit. DPS or IAS ... To the flippers, it's "half cati, eight taels" in the East and "eight ounces or half pound" in the West. Mark Twain was dead wrong - East and West did meet on this score!

If you can't get bank financing for your 4th real estate investment purchase, there are ways to get round it if you know how!

Do NOT be tempted into "penny wise, pound foolish" situations. Under the amended law, MinLaw tried to accord Owners with more protection in en bloc sales by requiring lawyers to take on more duties. Guess what ... some lawyers are very wary that if they slip up real bad in handling an en bloc deal, they may be sued for hundreds of millions or a billion dollars or more. Compared to marketing agents, a lot more is at stake for lawyers because they may be disbarred and/or made bankrupt. No amount of professional indemnity insurance can cover a law firm for such quantum! So under the guise of cost-savings for the Owners, they get the Developer-Buyer to bear the legal fees. Ahh ... effectively the "financial contract" is now between the Developer-Buyer and the lawyer. Errr ... but the "representational contract" is between the Owners and the lawyer! To whom do you think the lawyer owes a duty of care in such an en bloc sale? This is quite a novel "conflict of interest" situation that skirts round the present prohibition of the same lawyer representing both the buyer and the seller ... one wonders what the Law Society will do, ugh?

Ditto for marketing agent's commissions.

In en bloc sales, it's the flip side of Caveat Emptor (Buyer Beware) ...
it is very much a case of SELLERS BEWARE!!!

Although the en bloc laws have been amended, MinLaw's Study Group has NOT been disbanded. No less than the Minister for Law has made the promise that MinLaw, together with the other agencies, "will monitor very closely the operation of these new provisions" and "if it is necessary to make further amendments", MinLaw will have "no hesitation" to do so. MinLaw's e-mail contact is in my Nov 2007 blog update - keep talking to MinLaw! Maybe ... just maybe ... we MAY have an occasion to celebrate a champagne toast with MinLaw in the not too distant future!

Drawing from the lessons of Citibank and Goldman Sachs in the sub-prime mortgage debacle in the US quoted from the Harvard Business in my Nov 2007 blog update (scroll to above the Soaring Seagull), I repeat my prayer for Singapore to have enough "courageous and thoughtful leaders" (the likes of Frank C Blankfein of Goldman Sachs) who will stoutly shoulder their "core leadership responsibility" and "doesn't keep dancing just because everyone else does"! If I may quote Shakespeare: "Virtue is bold, and goodness never fearful"! And not forgetting AWSJ's quote of a University of Pennsylvania professor who was commenting on the credit crisis in the US that "reputation matters until you get to some serious pain" and that "it matters if the stakes are low" but "somewhere between US$25mn and US$1bn, it shifts".

[PS: Two recent cases of Minority Dissenters winning at Strata Titles Board tribunal hearings can be found at the end of my Nov 2007 blog.]

9 comments:

Anonymous said...

Spot on, man! All that stuff about Doing Right as opposed to Being Right. If those govt people read your blog, you think they will re-think and do a proper job about this law?

Interesting bit about South Korea en bloc law. South Korea can. So why Singapore cannot meh? Peng san! What's more - South Korea ministers are not paid so much $$$!!!

The Pariah said...

Dear Anonymous:
I don't know whether the "govt people" (as you put it) read my blog.

As I am one of those who would not talk behind your back if I am not prepared to say the same thing to your face, you can be assured that I have written directly to MinLaw on most of the issues covered in my blog.

Sigh ... I am but only one lone voice. More need to Stand Up and Be Counted! Share your new en bloc problems with MinLaw, if any, ... and do offer them ideas, solutions too.

Even as our "homes" are being destroyed (or at risk of being destroyed), we should nonetheless try to be constructive in this feedback process.

TP Soo said...

Well said. I fully agree with your points put forward so lucidly and humorously.

Frankly I believe the original aim of the enbloc process in Singapore mgiht have gone out of control, and has degenerated into something ugly and divisive for our entire society, including creating a sense of uncertainty and anxiety for those who just wish to keep their homes. Any wonder why Singaporeans are turning to be so callous and mercenery on the one hand, and contemplating leaving the country for one which offers more permanency for home owners.

I believe the entire issue and objective of enbloc in Singapore should be restudied by the decision makers into its desirability vis and vis its destructive influences against the sort of gracious and harmonious society which we profess to want to create.

The Pariah said...

Dear TP Soo:

Indeed, your concerns are very valid.

They were similarly echoed by NMP Assoc Prof Kalyani Mehta during the 20 Sep 2007 parliamentary debate of the LTSA amendments: "If social communities have to be swept away in the prospect of progress and a cleaner, healthier environment for the people of a nation, such as when the kampongs were eradicated in Singapore, it is a phenomenon that the majority of the population would accept. In the case of the en bloc or CSA, it is basically greed on the part of some subsidiary proprietors and fly-by-night investors as well as hunger on the part of developers that is driving the whole movement in Singapore."

NMP Mehta went on: "Mr Speaker, Sir, it is important that we, as responsible Singaporeans, try to maintain the cohesion of our society. When communities of people who have lived in peace and harmony are destroyed, we are paying a very high price because it takes decades for such living organisms as communities to be formed. On the one hand, we have the Community Development Councils (or CDCs) who aim to build strong communities through programmes to bond people and, on the other hand, we watch the fast disruption of communities without really valid reasons."

So, TP Soo, great minds think alike, eh?

F Richard said...

I have been following the very cogent comments in your blog and am writing to register my admiration and support of your points. The enbloc process has spawned many a broken heart and much unhappiness, even among those who are supposed to reap substantial financial benefits out of it, as they find themselves unable to find suitable alternative compatible housing within the same locality. Hence your proposal on the 1-for 1 and tripartite effort seems to be the best solution for all concerned.
Yes our government should also, as you say, not only just be right, but also be doing right.

Thanks for your efforts. Keep it up.

F Richard said...

I have been following the very cogent comments in your blog and am writing to register my admiration and support of your points. The enbloc process has spawned many a broken heart and much unhappiness, even among those who are supposed to reap substantial financial benefits out of it, as they find themselves unable to find suitable alternative compatible housing within the same locality. Hence your proposal on the 1-for 1 and tripartite effort seems to be the best solution for all concerned.
Yes our government should also, as you say, not only just be right, but also be doing right.

Thanks for your efforts. Keep it up.

The Pariah said...

Dear F Richard:

Thank you for your kind encouragement.

Indeed, there are moments of self-doubt even as I hear heartbreaking accounts from en bloc victims on the one hand. But on the other hand, most of them won't give voice to their concerns openly ... partly (I sense) out of "Fear" and partly (I am told) due to "Perception" that Gahmen thinks they know best and hence won't listen to the people.

It's NOT for me to comment whether such "fears" and "perceptions" are justified.

Even in my moments of self-doubt, I continue to do my bit on the basis that:

(A) "Nothing Ventured, Nothing Gained"; and

(B) Everyone (including Gahmen) is "Presumed Innocent Until Proven Guilty".

Anonymous said...

I like what you said: Enblocs should not push down everybody!

We haven't heard of any one who managed to upgrade after the enbloc windfall. We know of some who are so cheesed off strata title apartment because of this enbloc law that they decided to pool resources and top up to buy terrace house instead. But that means having to top up with more bank loans - stupid, right? Enbloc windfall - where got?

The Pariah said...

Dear Anonymous:

Thank you for your comment.

"En bloc windfall" is a misnomer!

Like you, I too have NOT heard of anyone who managed to upgrade in the SAME neighbourhood after an en bloc without coming up with more cash or taking on another bank loan!

For a Gahmen so fond of statistics, I wonder if the Gahmen did a study of the extent of DOWNGRADING (whether to less prime locations or to public housing) or DOWNSIZING for Owner-Occupiers in the en bloc aftermath. If the Gahmen did, they are keeping mum. If the Gahmen didn't, it's probably an Inconvenient Truth they'd rather not know about. Ignorance can be convenient bliss, eh?

I know of some instances where Owner-Occupiers decided to rent in the hope that property prices will crash after the en bloc frenzy run-up. These people are now fretting as to what they should do when their leases come up for renewal within the next year or so. Such are the woes of these En Bloc SQUATTERS.

The plight of En Bloc REFUGEES was shared by a certain Lucy Huang in Today newspaper in January 2008.

So, dear Anonymous, I don't claim to be prescient but you can see now why I coined the phrase of "Squatter, Refugee, Downgrader or Downsizer".

Mark my words ... For anyone who is below 70 years old today and who cashes out in this new millennium's en bloc sale, I dare say they would live to regret it in the next two decades.

In the late 60s, who would have thought that a plate of mee siam costing $0.20 then in a kopi tiam in Orchard Road would cost $3 in 2007??? Geez ... 15 times more in 40 years!

With much shorter market cycles these days and a higher base, is it a stretch to imagine mee siam at just 5 times more in another 20 years - $15 in a kopi tiam???


Well, if it is any comfort, that would buy you 40 plates of mee siam in a month with your annuity pay-out - cannot even sustain you for 2 meals/day for that month, assuming that you don't need to spend a cent on kopi (cannot afford kopi in kopi tiam - ironical, eh?), transport, utilities or housing ... or, for that matter, medical costs as that much mee siam would probably send you to Heaven/Hell earlier!