07 October 2009

A horse dumbstruck by a mutant three-hump camel

For those of us who haven't seen a mutant three-hump camel, this is what it looks like:

1. Mutant three-hump camel. On 12 Sep 2009, the following Forum Letter was published in The Straits Times about a mutant three-hump camel: http://lushhomemedia.com/2009/09/12/property-index-and-saga-of-the-three-hump-camel/camel/
QUOTE: Singapore‘s Private Property Market Index looks like a mutant three-hump camel, registering a 45 per cent bust from the second quarter of 1996, a 40 per cent boom from the fourth quarter of 1998, a 20 per cent bust from the second quarter of 2000 and a 58 per cent rise from the first quarter of 2004, with the latest figures in the second quarter of this year dropping back to below the second hump.

Yet National Development Minister Mah Bow Tan said on Sept 2 that ‘as far as (private home) prices are concerned, we want to make sure… there is no excessive speculation’.

With a three-hump camel of boom-busts in 13 years, at what point is speculation deemed ‘excessive’? When a slew of sub-sale advertisements appear on soft launch and when kettles are owned for more than five years, yet property ownership of less than five years may not be ‘property trading’, it makes a mockery of tax laws.

Currently in land-scarce Singapore, we have 4.84 million residents (6,814 people per sq km), with a 6.5 million target population in 40 years. As Central Provident Fund savings are largely locked in home ownership, residential real estate goes beyond Mr Market’s wheeling and dealing. To draw a parallel, it is equivalent to rice harvests in Vietnam as an agro-economy – except we are in perpetual drought.

Mr Mah urges Three Thinks – ‘think carefully, think long term, think about the unexpected’ – before we buy property.

I did Three Thinks before buying a condominium unit. Now I cannot do even One Thing when my neighbours sell the roof over my head.

Property is all about location and timing. Retirement wealth is at stake. Can Mr Mah follow South Korean laws and do One Thing for Singaporeans: ‘Sell one, return one’ instead of ‘Double the price or half the size’ in collective property sales?

2. Horse kept mum. As pointed out in the Straits Times Forum Letter, most bona fide home owners and prudent investors (as opposed to speculative flippers) would have done the Three Thinks (viz, “Think carefully; Think long term; Think about the unexpected”) before committing to buy a private condo which is generally considered to be a significant purchase in expensive land-scarce Singapore.

To date, National Development Minister Mah seems to be dumbstruck as to what is the One Thing that private condo owners could do when the only roof over their heads is sold by courtesy of their neighbours. Is that why Mr Mah is keeping mum? Perhaps in a more sensitive and sensible frame of mind, Mr Mah is not parroting what he spouted and blurted out in Jun 2007 during an interview about en bloc sales (please scroll down to para 8 below). However, Mr Mah's silence probably means that what he spouted in Jun 2007 is the One Thing private condo owners could do -
3. Behind the curve (yet again). Almost two years ago, I posted a blog entry that drew an analogy between (a) the then withdrawn Deferred Payment Scheme and (b) the morphed Interest Absorption Scheme as being the equivalent of "half cati, eight taels” in para 4 of my 2007 Christmas Eve blog entry entitled "In the coming year of 2008": http://singaporeenbloc.blogspot.com/2007_12_01_archive.html

It took the Gahmen almost two years to ban Interest Absorption Scheme on 14 Sep 2009 after it withdrew the Deferred Payment Scheme on 26 Oct 2007! Tsk, tsk, a bit slow in trotting out the ban, eh?

4. One-for-one exchange in enforced en bloc sale. In Aug 2007, MinLaw was alerted about South Korea’s mandatory one-for-one exchange scheme under the Hapdong Redevelopment Scheme. How long will the Gahmen take to study the South Korean urban renewal model and re-calibrate a similar model to suit Singapore’s context? Isn't it high time that the amended en bloc legislation be substantively revamped (not just tinkered with peripherally)? All the more so in the light of the typical Gillman Heights en bloc experience set out below.

5. Face-off between Gillman Heights and The Interlace. There were media reports about shouting by Gillman Heights en bloc sellers who were invited to a preview of The Interlace condo that will be built on their land after Gillman Heights is demolished. Putting aside issues about limited choices or dumpy-looking building model, the dollar numbers were totally stark!

- Gillman Heights en bloc sellers were paid about $498 psf.
- The Interlace prices ranged from $850 - $1,150 psf during soft launch.

Another classic case of “twice the price, half the size, quarter the value” as land use efficiency would be fully maximized in the redevelopment of Gillman Heights into The Interlace. Yet once again, my last year’s National Day trilogy blog entry rang true on “Why en blocs are NOT right for Majority Consenters nor Minority Dissenters”: http://singaporeenbloc.blogspot.com/2008/08/en-bloc-why-it-is-not-right-for.html

This typical post-en bloc experience of Gillman Heights owners makes for a highly cogent argument and justifies a mandated and managed one-for-one exchange in an enforced en bloc sale, as discussed in my previous National Day trilogy blog entry entitled "So what's the alternative in the end": http://singaporeenbloc.blogspot.com/2008/08/so-whats-alternative-in-end.html

6. Multi-generational “sacrifice”. Putting the typical Gillman Heights en bloc experience into context, it was exceedingly perturbing to read MinLaw’s account of the history and impact of land acquisition in Singapore (Straits Times, 4 Sep 2009): The Government's land acquisition schemes have mostly affected land owners. The general public, on the other hand, have been the primary beneficiaries of such acquisitions, through public housing, building of infrastructure for public benefit and various other developments, including the building of condominiums - the latter allowed condominium owners to enjoy the land which was originally enjoyed by land owners.”How many generations of Singaporeans must sacrifice in the Making (and Re-Making) of Singapore?
(a) My grandparents’ residence was acquired by Gahmen for historic conservation.
(b) My parents’ residence was acquired by Gahmen for infrastructural development.

(c) My residence could be force-sold by my neighbours due to a law passed by Gahmen and we would end up as Squatters, Refugees, Downgraders or Downsizers post-en bloc.

And the next generation too? Is Singapore a circus of clowns or what??? Not funny, eh?
Whilst I won’t and can’t quarrel with MinLaw’s assertion in the same article that “we also need to take into account the need for modernisation, rejuvenation of estates and optimisation of land use”, it makes me wonder wherein does the Gahmen find “the appropriate balance” in the uniformly stark post-en bloc spectre of “twice the price, half the price, quarter the value” (ie, the typical Gillman Heights en bloc experience) in possibly ALL en bloc estates to date??? As a citizen, I just pray that the oft-touted "appropriate balance" is not just hot air and we do NOT wait for yet another decade before the en bloc law is next meaningfully re-calibrated and re-balanced to finally "do right" by the people!

7. Democracy vs Collectivism. Even after the Horizon Towers en bloc saga and especially after the Regent Garden fiasco, slimy things are probably slithering stealthily around in Golden Mile Complex as smart alecks try to do an en bloc via the back-door (The Straits Times, 19 Sep 2009).

Over time, I have blogged intermittently about how the "collectivism" element in en bloc sales has been effectively and legally undermined (eg, para 5 of my 2008 National Day trilogy blog entitled “Greek mythology: The Source and Themis”): http://singaporeenbloc.blogspot.com/2008/08/greek-mythology-themis-and-source.html

The slimy slitherings in Golden Mile Complex are yet another manifestation of this shenanigan. It makes a mockery out of the collectivism element of “collective” sales! If the authorities continue to sit on their hands, the market will render en bloc sales to be "fait accompli" exercises because the law can (and will) be legitimately twisted by the market to allow the consortium of Developer-buyers to force the hand of the Minority by (i) timing the market and (ii) buying low for the last 20% to average-down the consortium's lock-in of upfront purchases.

It goes back to the fundamental question as to whether in land-scarce Singapore with a high target population for the coming decades and home ownership as one of our core socio-political factors, property speculation is to be facilitated as opposed to genuine home ownership. As a general rule of thumb, will a bona fide homeowner or real estate investor expect to sell a property within five years of purchase?
Hence, it was facetious to read a Business Times article (24 Sep 2009) by a specialist en bloc marketing agent positing that: “There is no way that any rule can please everyone. Democracy goes by majority rule.” That is equivalent to saying if majority of the whites think lynching of the blacks is acceptable, then we should pass a law to that effect and all the whites can merrily (and legally) lynch the blacks! That’s “democracy”, eh?

8. The Cockerel and the Horse. It amazes me to no end as to how politicians either shoot off their mouth or shoot themselves in the foot!

More than two years ago, when en bloc fever was at its height, Sunday Times (17 June 2007) reported that when interviewed about en bloc sales, National Development Minister Mah advocated that Singaporeans should downgrade and said: "If you can't buy an executive flat, buy a 5-room. If you can't afford central area, go to the suburbs. If you can't afford Tampines, go to Woodlands or Yishun.”
Fast-forward two years later, with growing public criticism over HDB (public housing) price affordability, the Straits Times (2 Oct 2009) reported that Minister Mah asserted that comparing the prices of public flats today with those of 20 years ago is “not meaningful”. Mr Mah went on: “If we did that, we’d be comparing many things that we did 20 years ago, do we want to go back 20 years?”
So it begs the question: Say, 20 years ago, you bought a condo at $1mn. Now you sell it on en bloc basis at $2mn (the so-called "en bloc windfall" hype). Yet the $2mn en bloc pay-out would only buy you half the size of your en bloc condo in the same neighbourhood. Or you would have to move way out into the suburbs since you would not be able to “afford central area” (as Minister Mah squarely puts it). So is it “meaningful”??? Do we have a cockerel talking out there somewhere? Do we have many chickens running around sans their bird-brained heads as they die-die-must-sell-en-bloc?

To add salt to wound, Minister Mah goes on to talk about monetizing the real estate asset for income later in life which – in the case of HDB flats – involves selling the flat or participating in HDB Lease Buyback Scheme. Likewise for private condo owners who may similarly need to sell the condo in their twilight years as part of asset monetization, these condo owners will end up with a half-size condo or an outlying condo or a HDB flat to monetize eventually.

9. Singapore out-of-whack. With 44 years of nationhood under our belt, our people have toiled and competed and today Singapore has achieved a high GDP per capita, much to the envy and marvel of many other countries, I dare say.

Hence, it made me wonder why there seems to be a certain pervasive quiet desperation for (a) private condo owners to die-die-must-sell-en bloc and (b) HDB (public housing) owners to participate in Lease Buyback Scheme. It was interesting to read that there were 409 Lease Buyback applications to HDB but only 80 qualified and HDB may expand the target group for this scheme.

Then it all made sense when I read a UBS report (30 Jul 2009) covering 73 international cities entitled “Prices and Earnings (a comparison of purchasing power around the globe”.
Just for the heck of it all, I did the above table (please double-click on the table for legible viewing) to compare Singapore with:

(i) Zurich (since the 1980s, Singapore aspired to be “Switzerland of the East”),

(ii) Tokyo, Hongkong, Taipei and Seoul (the other Asian dragons),

(iii) Next rival city (for statistical proximity), and

(iv) Kuala Lumpur (for geographical proximity).

Compared against the above cities, Singapore’s pattern was interestingly parodoxical.

(A) In the areas of:
- GDP at PPP per capita (nearest rival: USA)
- Cost of Living (nearest rival: France)
- Price level incl rent/energy (nearest rival: Germany)
Singapore scored well and our nearest rivals are from First World countries! Ahhhh ...

(B) In the areas of:
- Wage Index (nearest rival: Russia)
- Domestic Purchasing Power (nearest rival: Malaysia)
- Purchasing Power of Wages for a Big Mac (nearest rival: Czech Republic)
- Purchasing Power of Wages for an iPod nano 8 GB (nearest rival: Slovenia)
- Average working hours/year (nearest rival: Turkey)
Singapore scored poorly and our nearest rivals are from Third World countries! Sheesh!!!

The picture is pretty telling, eh? But it is NOT a pretty picture at all for Singapore! In contrast, the scores are tightly correlated for all of the other abovementioned cities. In other words, where Zurich, Tokyo, Hongkong scored high in GDP/COL, they similarly scored high in Wage Index/Purchasing Power. Likewise, as Kuala Lumpur scored low in GDP/COL, they also scored low in Wage Index/Purchasing Power.

So the pattern matches for all of the abovementioned cities EXCEPT Singapore! In all the other cities, Life makes Sense (you are rich and so you live well; OR you are poor and so you live not so well) ... but here in this little red dot called Singapore, we are ensnared both at the wrong ends of the spectrum where we are so-called rich but we live poor!
Something is so out-of-sync in Singapore!!!

No wonder after working our whole life to buy a roof over our heads and despite home ownership being a cornerstone of the Gahmen’s political and social platform, most of us are now caught in a quiet desperation to monetize our family home (ie, HDB owners via Lease Buyback Scheme and private condo owners via die-die-must-go-en bloc even when faced with the guaranteed prospect of “twice-the-price, half-the-size, quarter-the-value” post-en bloc)! Are we a pathetic lot or what???
Have we failed in a way, dare I ask rhetorically?