30 November 2010

Who to blame and shame?

The Macroeconomic Surveillance Department's "Financial Stability Review" released by the Monetary Authority of Singapore (MAS) on 25 Nov 2010 makes for interesting reading:
Property-related extracts: http://www.scribd.com/doc/44214510/Financial-Stability-Review-25-Nov-2010

1. Heart-thumping or heart-stopping? From the above MAS chart using CEIC Data Company Ltd’s source data, it would appear that the roller-coaster ride of Singapore’s property index was the most heart-thumping (to a flipper) or heart-stopping (to a home-buyer or genuine investor) compared with the other 4 countries, viz, Hong Kong, Taiwan, Korea and China.

Either you get the adrenalin rush as your heart beats race. Or you drop dead from heart attack ... you infarct (serially or acutely) as Gahmen pace-out the fart! To wit: Minister for National Development, Mr Mah Bow Tan, proclaimed in Parliament on 18 Oct 2010 that Gahmen will take "calibrated steps one at a time" so that they can "let the air out of the bubble".

Excuse me ... but what did The Man say a year ago? As reported in The Edge (14 Sep 2009) , Minister Mah said this when he announced bubble poopers at the time: "Given the current market conditions, the government has decided to adopt several measures to temper the exuberance in the market and preempt any speculative bubble from forming".

A Bloomberg columnist, Mr William Pesek, Jr, attributed it as a "Freudian slip" by Minister Mah at the time (Business Times, 17 Sep 2009). Mr Pesek also commented that "Mr 'We Can't Detect Bubbles' probably never thought he could learn a thing or three from an economy of 4.8 million people. This week, Singapore's National Development Minister Mah Bow Tan unveiled measures to prevent excessive price swings in the real estate market." Now that the CEIC data up to 3Q 2010 is out, I wonder if Mr Alan Greespan is sniggering whilst Minister Mah polishes up on the fart-pacing technique.

With 20/20 hindsight, could I now say the Oct 2007-Aug 2010 policy measures were bumbles in bumping bubbles? Could I also claim prescience and gloat "I told you so" in various blog postings from 2007 to date?

When I showed our Ah Beng a la Forrest Gump the Macroeconomic Surveillance Department review, the Hansard and the old newpaper reports of ministerial comments on Singapore's property market and the Gahmen's attempts to take "calibrated steps", this was what Ah Beng exclaimed as he slicked back his hair: "Wah, they so clever hor! They know how to si-mi 'cali', si-mi 'brake'. Then, how come got bubber hah? Don't know how to stop bubber before, meh? 2009 high, 2010 some more higher - the line cheong up leh! But they say no bubber mah. If no bubber, then why now come and talk about si-mi 'brake' after 398 days? Oi, '398' - nice number to start new gang - bigger number, sure can hantum '369'." Wow, has our local stand-up comedian, Hosan Leong, being outclassed or what???

Look at the above graph again. The excitement started in 2007. Singapore’s upswing was even SHARPER than Hong Kong’s (our green line cut over Hong Kong’s purple line). Continue to trace these two lines and it would show that our deep plunge became much STEEPER than Hong Kong’s when the crash came. In comparison, Korea was the most successful in keeping an even tempo after 2005 right up to the present (even the Korean graphical "mountain" from 2001 to 2005 had a much more rounded top than the sharp conical tops of the other countries' "mountains" in comparison).

2. Blame and shame. Does this point to Singapore’s policies being too PRO-cyclical (as opposed to being COUNTER-cyclical)? Does it mean that our Gahmen have failed to do their job in keeping things steady and on an even keel to the extent possible? How did Singapore end up on such a blistering roller-coaster ride with such wild swings and sharp yo-yo gyrations from 2007? Is it correlated to the en bloc frenzy up to 1H 2007? Singapore's meteoric upswings are already downplayed because data for en bloc sales are EXCLUDED from URA's property indices.

So who misled Minister Mah? Could Minister Mah be taking more flak than he deserved whilst others (eg, MinLaw, MOF, MOM, MHA) took cover even though they were equally culpable by their action (or inaction)? Were Minister Mah and Minister Shanmugam NOT listening? [Mah has oversight authority for land supply from Government Land Sales; Shanmugam has oversight authority for land supply from en bloc sales with double whammy effects of instantly and simultaneously shrinking supply and spiking demand.] Could both Ministers even hear? I ask that because Minister without Portfolio, Mr Lim Swee Say,
was probably describing his ministerial colleagues when he recounted the froggy anecdote in Parliament on 3 Mar 2010: "We are like the little frog, we are deaf to all these criticisms". To read about the froggy anecdote, please scroll to the Seventh Point in this blog posting: http://singaporeenbloc.blogspot.com/2010/06/lady-gaga-goes-aha-with-possibly-deaf.html

As a "lesser mortal" (as a PAP parliamentarian labelled us plebians), my squawks do NOT matter (my first squawk was in 1999 and I re-started in earnest since Feb 2007). But even the MAS and the IMF sounded their alerts. Don't their squawks matter?

In Nov last year, MAS cited in their previous Financial Stability Review the "risk of renewed escalation of speculative momentum", as reflected in paragraph C-2 of this blog posting:
http://singaporeenbloc.blogspot.com/2010/03/trilogy-part-c-pm-said-i-am-saying.html At around that time, MAS even conducted a survey entitled “Do you feel lucky, punk?” to suss-out property speculators' sentiments!

In my Mar 2010 blog posting -Paragraph C-3.4(k), I commented on URA's chart on Annual House Price and Rent Indices:

As it happened, a month later in Apr 2010, the International Monetary Fund (IMF) also released a Global Financial Stability Report cautioning that "by some measures, housing valuations are stretched. Although the average price-to-income ratio has risen modestly, in some markets - notably, China, Hong Kong, Singapore and Korea - price-to-rent ratios are 'elevated'. It adds that many purchasers have been buying 'in the expectation of price appreciation, rather than simply for dwelling purposes'" - Business Times (22 Apr 2010).

Who were responsible for the Private Property Price Index (PPPI) big yo-yo swings?

3. MinLaw/Singapore Land Authority (SLA) to blame. It is no coincidence or providence that the green line for Singapore in MAS chart 1.50 started the yo-yo gyrations only from 2007. The following collective sales chart documents the most frenetic bout of en bloc sales from 2006-1H 2007. Although en bloc sales are EXCLUDED from PPPI, I reckon that there is a correlation. Why? Because en bloc slosh (or slush) would consequently feed into the PPPI after due lag time, especially when most en bloc sales were typically driven by flippers on the Sale Committees. Slush monies from such flips took on their own momentum, spinning off into more new sales, sub-sales and resales (whether with en bloc potential or otherwise and exuberant Cash Over Valuations where displaced condo owner-occupiers downgrade to HDB post-en bloc). The only respite was from 2H 2008 to 1H 2009 due to the Great Recession with inherent real estate laggard effect.

4. MinLaw/SLA failure in land supply management. Land supply in Singapore comes from two sources: Government Land Sales and en bloc sales. Gahmen could tweak land supply in Outside Central Region (OCR) and parts of Rest of Central Region (RCR). But in its tool box for Core Central Region (CCR), especially for districts 9 and 10, Gahmen are helpless and hapless. Gahmen do NOT have any sizeable CCR residential land (other than the newly created Sentosa pocket) for it to directly affect supply side of economics.

Yet what did MinLaw/SLA do? One word: Nothing. MinLaw/SLA stood idly by as swathes of CCR and some parts of RCR fell to en bloc sales, starting from 2005 until the frenetic peak during 1H 2007, resulting in triple whammy effects that adversely affected Singapore's competitiveness (viz, property purchase and rental demand both shot up, property supply plummeted down, competition for construction materials/labour spiked up).

MinLaw/SLA failed to consider alternative measures to indirectly influence supply and to ensure constructive destruction where redevelopments would be poised for renewable energy solutions in the coming decade, eg, creating en bloc quota by region and by type, incentivising plot amalgamation, etc. These suggestions were ignored by MinLaw/SLA (who incidentally didn't or still couldn't come out with other ideas to date) as it would have required MinLaw/SLA to break out of their silo mentality and cross boundaries to work with Ministry of National Development (MND), Urban Redevelopment Authority (URA) and Building and Construction Authority (BCA), and vice versa. Regrettably, I reckon that organizational structure issues and inter-ministry/agency competition prevented synergy whilst the singular common drive towards GDP Growth that determines GDP bonuses eroded institutional cross checks-and-balances. Double troubles, ugh?

MinLaw/SLA were probably under the misconception that such en bloc quotas, plot amalgamation incentives, etc, would be taken as tinkering with demand side of economics and hence taboo to MinLaw/SLA. They were unable to draw the same parallels as the Land Transport Authority (LTA) who correctly saw the Certificate of Entitlement (COE) quota system for vehicles as road use management (rather than vehicular demand-side meddling).

That, I reckon, was how MinLaw/SLA failed to manage land policy in CCR and parts of RCR. Failed to preempt ... failed to react ... and still sitting pretty on their hands up to this day!

5. MinLaw/SLA failure with en bloc law. The Land Titles (Strata) Act (LTSA) governing en bloc sales was incepted in Oct 1999. Even after two rounds of legislative finetuning in Oct 2007 and Jul 2010, MinLaw/SLA have failed to meaningfully re-calibrate and revamp the structurally flawed law, typically taking two baby steps forward and one sweeping leap back. Hence:

- LTSA is structurally flawed in many ways. To have a grasp of the legislative provisions, please read the following two blog postings:


- LTSA even made en bloc public tender process contradictory to the best practices enshrined in Government Land Sales ("GLS") with (i) back rooms for private treaty negotiations, (ii) side doors for private sale and (iii) amateur volunteers empowered as Sale Committee to sell-first-and-tell-later - basically, a legalized scam!
For a skeletal understanding of GLS, do click on the following blog posting to appreciate how Estimated Market Value under GLS is zealously guarded by only IRAS Chief Valuer up to 12 noon on public tender close date (whereas en bloc Reserve Price is known by hundreds for up to 12+12=24 months) and NO private treaty talks in back-rooms are allowed post-public tender even when the Gahmen as seller is represented by well-paid big guns in URA, SLA, JTC or HDB (as opposed to Sale Committee volunteers signing multi-million or billion dollar private treaties with Developer-buyer AFTER FAILURE OF PUBLIC TENDER based on a Reserve Price that was set up to 12+12=24 MONTHS AGO under the guidance of en bloc agent/lawyer who are both operating on NO-SALE-NO-FEE basis!!!):

- LTSA is Pro-Developer (which by extension is therefore Anti-Owners). For elaboration, please read paragraphs 8.1 and 8.2 of the following blog posting:

- LTSA is not counter-balanced to "do right" by the Owners. For specific negotiation points and actionable measures at three critical milestones of en bloc process, scroll down to paragraph 2 in the following blog posting:
Although the Civil Service's mantra is that "no one has the monopoly of wisdom", MinLaw probably think they are the exception. Despite en bloc models of one-for-one (1-4-1) exchange in South Korea and Taiwan and more sustainably calibrated en bloc laws in Hongkong, MinLaw continue to be INCAPABLE of tapping (or UNWILLING to tap) other countries' best practices and customizing them to suit Singapore's context. Again, MinLaw are doing NOTHING.

- Upon demolition, LTSA unlocks land value for Developer-buyers (NOT extant Singaporean Owners), viz, post-en bloc:
For Owners: 2X Price or ½ Size
For Developers: 2X Price and 2X Size

For "Before" and "After" en bloc comparisons, please check out the numbers in the following bloc posting:
Similarly, MinLaw are INCAPABLE of publishing (UNWILLING to publish) comparative data pre- and post-en bloc (estate-by-estate with dates for en bloc vacant possession, redevelopment sales launch(es), expected/actual Temporary Occupation Permit) with broad breakdown of (i) land cost (segregated into en bloc aggregate purchase price, en bloc sales proceeds for each size/type of units, development charge/differential premium/stamp duty), (ii) construction/materials cost, (iii) financing/marketing/professional cost and (iv) sales proceeds for the number of units and sq m sold to date and the number of units and sq m unsold/to be launched to date. Such broad categorical breakdown would NOT compromise the sensitivity of competitive business data. To date, there is NO STATISTICAL ACCOUNTABILITY in MinLaw's web-site compared to the wealth of data available in URA's web-site. Yet again, MinLaw are doing NOTHING. Perhaps MinLaw believe that they not only have the monopoly of wisdom but they are also beyond accountability, eh?

- Upon redevelopment, LTSA caters for housing preferences of Permanent Residents/Foreigners for sleek and swanky condos in central locations at the expense of Singaporeans' sense of rootedness/community, viz, post-en bloc:

Displacements: Largely Singaporeans. Reason: PR/Foreigner deluge was recent. Business Times, 27 Nov 2010: Citibank economist Kit Wei Zheng said "Singapore's population rose by more than 800,000" during 2005-2009. Singapore's version of "rich IDPs" (Internally Displaced Persons - that's what they are called from Serbia to Somalia and beyond) would typically end up as Squatters, Refugees, Downgraders or Downsizers post-en bloc.

Replacements: Two-faceted proportions ...
– Higher proportion of investor-owners (whether PR/foreign or local) than owner-occupiers - as recently commented by various property marketing experts (Today, 6 Nov 2010) and congruent with my previous posting about Casino Singapore turning into a nation of flippers (en bloc sale, sub-sale, resale). [I reckon data gaps and less astute statistical cuts camouflage the extent of flippers/investors - be it local/PR/foreigner, occupant/owner, private/public housing.]

– Higher proportion of PRs/foreigners for new purchases. Whilst the proportion of local owners will continue to be higher than PR/foreign owners in total, I reckon the proportion of new purchases by PR/foreign buyers will likely reinforce the SAME TREND shown in charts published nearly 3 years ago in Business Times (27 Mar 2008), as commented in paragraph 3 of the following blog posting [BTW, keen observers of Singapore know that statistics have a way of "never appearing again" if the picture painted is NOT what the Gahmen fancies]: http://singaporeenbloc.blogspot.com/2009/03/executive-legislative-judiciary-sans.html

Based on the above "Profile of property buyers by nationality" (EXCLUDING en bloc sales - that asterisked footnote intrigued me until I got it clarified that the exclusion related to foreign developers' en bloc purchases), Business Times (24 Nov 2010) reported:
Malaysians - 21%
Chinese - 20%
Indonesians - 20%
Indians - 14%
So that means the remaining "Others" category makes up a whopping 25%, ugh? Rich riff-raff from A-Z ... Arabs, Filipinos, Koreans, Russians, Uzbeks, Venezuelans, Zambians.

6. MinLaw tardy in tightening Residential Property Act (RPA). MinLaw was far behind the curve in catching up with this tightening exercise of RPA. MinLaw acted long after the floodgates were opened in 2005-2009 by MOM and MHA for newly minted citizens who would have capitalized upon their entitlement to buy landed property. Yeeha ... the horse was way out of the barn a long while ago from 2005-2009 by the time the rancher swaggered towards the barn door to tweak the door screws towards end-2010. Still, it was better late than never.

In respect of Developer-buyers, I am heartened that finally one more of my suggestions NOT to allow en bloc Developer-buyers to land-bank seemed to have been accepted. Under the Nov 2010 amendment of Residential Property Act which will likely come into effect within the next month or so, foreign housing developers with Qualifying Certificates (effectively all listed developers) would be required to complete the projects within the stipulated Project Completion Period (PCP), failing which they would lose their 10% bankers' guarantee for land cost and incur extension fees of 8%, 16% and 24% of land price for, respectively, the first, second and third/subsequent year of extension.

However, in my plebian opinion, PCP of 5 years from SLA's approval of residential en bloc purchase is still way TOO LONG and INCONGRUENT relative to such transaction's DOUBLE-WHAMMY IMPACT of deadly IMMEDIATE CORRELATION (viz, supply shrinkage and demand pumping), bearing in mind the additional 2-year window for Developer to dispose of all units. I'd suggest that for en bloc purchases, PCP should be SHORTENED to three years to ensure immediate redevelopment with PRE-disQUALIFICATION from future extensions or waivers granted by MOF/MND.

(A) One of LTSA's purported SECONDARY objectives was for higher land-use intensity, as proclaimed in Parliament in 1999. Therefore, there is NO JUSTIFICATION to allow Developer-buyers to landbank via en bloc purchases by displacing owner-occupiers/tenants. Going forward, Gahmen should NOT under-estimate Developers' new-found power to control supply and demand with their much strengthened holding power after 2009-10 historical record net profits (eg, delay substantive phased releases for sale after recouping land cost at very achievable break-even, deeper pockets to outlast regulatory impact and shortened market cycles, more intense en bloc predation, etc). The subtleties of the underlying game rules may have already morphed under the regulatory nose before the next Ha-choo splattering sneeze (or the next sulphuric Phoooot flatulent release of the bubble)!

(B) With the top-class efficiency of URA/BCA and other technical agencies, building plan approvals could be obtained within 7 working days from application. Hence, three-year PCP is adequate to obtain Temporary Occupation Permit.

(C) Past track record of PCP and sale disposal extensions by MOF/MND should no longer be available as future loopholes for en bloc purchases which must be pegged to a stricter regime because of displacement impact and purported national objective.

7. MOF/IRAS played scaredy-cat. In Jun 2009, IRAS held a Public Consultation on their proposed tax clarification on property trading (viz, the profit from the sale of only one property on/after 1 Jan 2010 will not be taxed if the individual owner has not disposed of any other property within 4 years prior to such sale). Whilst the proposed tax clarification would not eliminate review on a case-by-case basis upon tax-payer's appeal, it would likely boost IRAS' success rate in nabbing instances of tax evasion
from property trading. After such Public Consultation, IRAS backed down in Jul 2009 and retracted the tax clarification! And the property market continued its ramp-up.

Instead of being a case of "better late than never", IRAS is now a clown fast becoming a laughing stock with the benefit of hindsight. Whoever was the genius in IRAS who proposed the tax clarification must be feeling validated and vindicated. Whoever was the person instrumental in retracting the tax clarification ought to be sacked! Maybe it was the same person. Well, we will never know. The decision was probably a committee, a study team. No doubt, all of them will get their highest bonus ever for 2010.

There is clarity in fuzz and fuzz in clarity – a la Singapore style Civil Service. Everyone is responsible but no one is held accountable.

Ditto for the question I raised as to why MOF did not see it fit to selectively and immediately withdraw and/or clawback the 2009 Resilience Package benefits from developers (eg, Job Credit Scheme instead of including this industry in its extension through Jun 2010) as their sparkling quarterly financial results were progressively released from 2H 2009 with triple-digit or high double-digit percentage increases in net profit. This poser was made in the following blog posting:

8. MND/URA/BCA bending backwards for Developers. It may be of interest to read the mind-boggling backflips that URA/BCA under the umbrella of MND did for the benefit of Developers - please refer to the following blog postings:
Paragraph 4: http://singaporeenbloc.blogspot.com/2007/12/in-coming-year.html
Paragraph 7: http://singaporeenbloc.blogspot.com/2010/03/foxes-outfoxed.html

Here's a recap of various policy initiatives (to be fair to MND, these were jointly announced with MOF and MAS if there is comfort in common misery). This would enable you to evaluate if our Gahmen were effective and/or timely or they were "too little, too late":

26 Oct 2007: Withdrew Deferred Payment Scheme.
BUT forgot about Interest Absorption Scheme (structurally different in terms of bank risk but effectively the same in terms of buyer's upfront commitment and eventually withdrawn two years later in Sep 2009) AND delayed effective date by pegging withdrawal to date of building plan approval (instead of, say, date of option to purchase, offer to purchase or sale and purchase agreement, whichever is the earliest, bearing in mind that this withdrawal was purportedly targetted at flipper buyers, not developer).
Nov 2007 blog posting - end of Section C:

Wrote to MinLaw/MND ... Dec 2007 blog posting - Paragraph 4:

14 Sep 2009: Withdrew Interest Absorption Scheme.
BUT again delayed effective date by pegging withdrawal to date of building plan approval (instead of, say, date of option to purchase, offer to purchase or sale and purchase agreement, whichever is the earliest, bearing in mind that this withdrawal was purportedly targetted at flipper buyers, not developer).

14 Sep 2009: Prohibited Interest Only Loans.
BUT the question arises as to whether this type of product should even be allowed at the outset because such "balloon" loan structures are financially imprudent from the word "go", especially when CPF retirement savings are sanctioned for residential property purchases.

14 Sep 2009: Announced reinstatement of Confirmed List for 1H 2010 Government Land Sales programme after this was suspended in Oct 2008 in the aftermath of unprecedented meltdown and credit freeze globally.

6 Nov 2009: Announced Government Land Sales programme for 1H2010.
BUT deviated from the traditional norm of such announcements in Dec because Business Times reported on 7 Nov 2009 that “according to Urban Redevelopment Authority (URA) land sales and administration senior group director Choy Chan Pong, the market has been waiting for updates since National Development Minister Mah Bow Tan said in September that the confirmed list would be reinstated. 'Since people say there is some anxiety about housing supply, it's better to tell people now,' he explained.” [Yet again, another tell-tale sign of how close and responsive the regulators (eg, URA) are to the regulated corporates (eg, REDAS)!]

20 Feb 2010: For all housing loans, decreased Loan-to-Value from 90% to 80%.
BUT made no distinction between borrowers with no or multiple outstanding housing loans until six months later in Aug 2010.

20 Feb 2010: Introduced Seller's Stamp Duty if property is sold within one year from date of purchase.
BUT because one-year holding period was so patently inconsequential relative to the typical three-year period for obtaining Temporary Occupation Permit, this was extended six months later in Aug 2010.
Wrote to MinLaw/MND ... Mar 2010 blog posting - Paragraph C-3.4(j):

Let us pause here. After a lag of more than six months, the effects of the 14 Sep 2009
measures by our world-class Gahmen should have kicked-in by 1Q 2010, eh? But it sure looks like they weren't cutting it based on the following residential property indices as of 1Q 2010 (Business Times, 2 Apr 2010):
HDB resale flat price index: 154.9
URA private home price index: 174.2

Next, we patiently plod on and see if the 20 Feb 2010 slew of measures got more
effective when given another four months to do the trick. Again, it ain't working according to the following residential property indices as of 2Q 2010 (Business Times, 2 Jul 2010):
HDB resale flat price index: 160.9 (up 6)
URA private home price index: 184.1 (up 9.9)

Oooops ... a little "pai seh" (awkward), eh? So they trotted out more bubble poopers as their weaponry on 30 Aug 2010. The day after the following additional measures were announced, a Jones Lang LaSalle property expert was quoted in press reports that "the current measures have been introduced a tad later than expected". [Again, keen observers of Singapore would notice that if the comment is even remotely critical, it would be quoted anonymously. This is probably indicative of outsiders' "fear factor" and/or insiders' "fragility factor" (as fragile as eggs that one has to handle with such care - Hmmm ... does that make them eggheads then?] My sentiments exactly, as a NON-industry expert, although "a tad" is a bit of a big understatement!

30 Aug 2010: Adjusted Seller's Stamp Duty to extend holding period from one year to three years if property is sold within three years from date of purchase.
BUT given that (i) real estate investment is conventionally rated as "long term commitment", (ii) construction period is already three years and (iii) most people don't move house every three years, it makes one wonder if it would send a more representative signal with ten-year period on a declining tax scale. Eg, full SSD rate (1% for first $180k of consideration, 2% for second $180k, 3% for remainder) for first five years and a one-fifth reduction of full SSD rate for each of the next 5 years.

30 Aug 2010: Where there is one or more outstanding housing loan, (i) increased cash payment from 5% to 10% of valuation limit and (ii) decreased Loan-to-Value (LTV) from 80% to 70%.
BUT there are workarounds to qualify for lower cash payment and higher LTV, as the Chinese and Hongkong authorities already know (which explains the strict qualifying criteria China imposed on foreign investors in Nov 2010) and it is therefore unlikely that our Gahmen doesn't.
ALSO, in Singapore's context, because CPF savings are involved, a higher standard of financial prudence should be imposed at both ends of the buyer spectrum: (i) Mickey Mouse units and (ii) super deluxe units. In real estate market terms, shoe-box units with closet-size bedrooms and suitcase-size closets are the equivalent of penny stocks in the share market. CPF savings cannot even be used for penny stocks. Since CPF savings are available for shoe-box units sold at astronomical per sq ft price, higher cash outlay and lower LTV may inject more financial discipline. As total outlay for super deluxe units is significant which translates to higher leverage risk with possible adverse implications for our banks in a fall-out, an acid test for genuinely qualified buyers would be higher cash upfront and lower LTV too.

30 Aug 2010: Housing Development Board (HDB) tightened the pegs for non-subsidised public housing flats by (i) increasing the Minimum Occupancy Period (MOP) from three to five years before it can be available for resale or sub-letting and (ii) barring owners from concurrently owning both HDB flat and private residential property during such MOP. Also, private property owners who buy a non-subsidised HDB flat must now dispose of their private residential property within six months from date of HDB purchase. Ownership of private properties by HDB lessees will be allowed after MOP.
BUT given the differential between public housing flats and private condos ranges from 20% to 2000%, depending on size, age and location, it raises the question if a five-year MOP qualification is incongruent without further correlation. Example: If a person qualifies for two bites of the cherry with subsidized public housing at $xxx based on household income, and that same person is then able to buy a private condo at 4 times $xxx from the 6th year (assuming that he/she did not strike the lottery/jackpot in Casino Singapore or was promoted to ministerial rank in the 5th year of MOP), what is really going on (not forgetting that continuing HDB occupation is easily circumvented and not readily detected)?

There are other factors at play (eg, data gaps and data integrity issues arising from SLA's
super business-friendliness over caveat lodgement). I reckon there are Rubik dimensions to this trend of "super business-friendliness" by regulators. These were mentioned in the following blog postings:
Paragraph 4: http://singaporeenbloc.blogspot.com/2010/11/casino-singapore-part-1-whos-idiot.html
Paragraph 6: http://singaporeenbloc.blogspot.com/2010/11/casino-singapore-part-3-whos-idiot.html

9. What's next? There is a lot of market chatter out there. More announcements are expected in upcoming Budget Day in Feb 2011, depending on, I suspect, (i) the impact of upcoming American Quantitative Easing exercises with carry trade implications, (ii) the extent of economic/financial woes of the weaker EU members and (iii) the astuteness and timeliness of other Asian governments in regulating their respective property markets and capital flows relative to our own.

Another spanner-in-the works is the potential spectre of "ghost condos" (equivalent to "ghost towns" in parts of Southern California and Nevada in the aftermath of sub-prime crisis). This is because of (i) "significant completions of luxury properties from 2010 to 2012" (Business Times, 15 Nov 2010: Mr Ku Swee Yong, International Property Advisor), (ii) "the bulk of supply ... in mass and mid-end markets will be completed in 2013" (Today, 6 Nov 2010: Mr Donald Han, Cushman and Wakefield), and (iii) coupled with the fact that "the proportion of owner-occupier purchases has come down significantly, so the supply of rental units is actually greater" (Today, 6 Nov 2010: Mr Colin Tan, Chesterton Suntec International). I believe the authorities are wary as there are already some initial signs although the industry naturally wouldn't highlight it as that would be cutting its nose to spite its own face!

It would be interesting to see if MAS concerns in the Financial Stability Review 2010 will be heeded: "current global conditions of flush liquidity and low interest rates may lead to upward pressures on domestic asset prices ... there is a possibility that transaction activity and prices could pick up again".

We should note Finance Minister Tharman's parliamentary assurances on 22 Nov 2010 that "we are concerned about property prices rising too quickly too far, and our three rounds of measures so far have been aimed at injecting some stability in that process". He also asserted that "we are not contemplating introducing capital controls, but will continue to rely on a range of policy tools to ensure that capital flows do not threaten financial stability or cause a property market bubble" and that "by and large, Singapore's financial system has a way of intermediating the inflows, so what is not needed domestically tends to get recycled overseas".

Let's pray that William A Fleckenstein will not see it fit to write about "Singapore's Bumbles" in the same way that he wrote about “Greenspan’s Bubbles”.

Ah Beng a la Forrest Gump noted as he sauntered off: "No need to si-mi 'brake'. Just make very the sure from beginning no bubber hor. Buay tahan ok!" Ah Beng, Ah Beng, you can't stand it? Do you think the rest of us can stand it?

13 November 2010

Casino Singapore 1: Who's the idiot? Citizens/Gahmen lost Big Time

Who turned this little red dot into Casino Singapore?

1. Who is the idiot? On 4 Nov 2010, after giving a speech at the inaugural forum, "A Free Press for a Global Society" at the Columbia University, Minister for Law, Mr K Shangumam, said the following during the Q and A session:

"The point is this, if you actually sit down and look at what is it that is needed for a healthy, robust debate in public life. You want to talk about issues, you want to talk about what the government is doing right or wrong. How people can offer a different perspective, what are the different viewpoints there are, ALL OF THAT IS FAIR GAME. The point about the classic common law defamation theory is that when you descend into a personal attack against someone and it’s not comment. YOU CAN CALL SOMEONE AN IDIOT, HE CAN'T SUE YOU FOR THAT. YOU CAN MAKE A WHOLE LOT OF COMMENTS ABOUT A PERSON, YOU CAN CALL HIM INCOMPETENT, HE CAN'T SUE YOU FOR THAT, but if you make a personal factual allegation, “he stole”, or “he is corrupt” then the real issue is, should the press be given any greater privilege to make those allegations compared with an individual? [Capitalization emphasis is by The Pariah.]

After you read this blog posting about corporate disclosures, I wonder who will you call "an idiot" ... could it be me? It's OK - I won't sue. I can't sue anyway - so my Law Minister tells me.

2. Who increased net profit by 666% in FY2009/10? Yes - 666% increase in NET profit! I'm not kidding (and let me assure you that I am not even into biblical revelations of any genre). Before reading on, you may want to slip on your sunshades (and whatever else that can be slipped on) and lug along your binoculars because the figures are bedazzling eye-poppers in this financial striptease:

Awwwww ..... Shock and Awe:
Who makes this kind of profits in this little red dot?

(a) "profit before taxation for 3Q 2009 improved significantly by 126%"
Allgreen, 2 Nov 2009

(b) "profit after tax and minority interests (PATMI) increased by 76.7% ... in Q4 2009"
City Developments Ltd, 25 Feb 2010, who also described it a week later as: "... the year was also a record one of sorts, as it achieved its highest-ever full-year revenue ... and the second-highest-ever net profit".

(c) "144% surge in net profit ... for the financial year ended 31 December 2009"
Heeton Holdings, 24 Feb 2010

(d) "net profit after tax and minority interests ... for nine months ended 30 Sep 2009, up 259%" and "net profit after tax and minority interest ...for the full year ended Dec 31 2009, up 262%"
Ho Bee Group, 12 Nov 2009 and 12 Feb 2010, respectively

(e) "417.9% y-o-y surge in net profit for 2Q"
SC Global, 23 Aug 2010

(f) "net profit for 2Q2010 ended Dec 31, 2009 surged 220% y-o-y" and "posted a 173% y-o-y jump in net profit ... for FY2010"
Sim Lian Group, 15 Feb 2010 and 30 Aug 2010, respectively

(g) "net profit attributable for the six months ended Nov 30, 2009 (HY2010), rose 129.2%"
Tee International, 8 Jan 2010

(h) "188% rise in net attributable profit ... for the financial year ended 31 December 2009 with revenue crossing $1 billion for the first time"
UOL, 23 Feb 2010

(i) "for the half year ended Dec 31, 2009 ... group’s operating profit ... an increase of 123%",
"in the nine months ended 31 March 2009 ... operating profit ... an increase of 81%" and
"net profit for the full year ended June 30 (FY2010) rose to $160.75 million from $20.98 million a year ago"
Wing Tai Group, 5 Feb 2010, 13 May 2010 and 23 Aug 2010, respectively

The above examples are based on my random extractions of 9 public listed Singapore companies from The Edge, a business weekly. They span a spectrum of new and entrenched en bloc buyers over past year, high-end and mass market players, small and big developers, some more diversified than others in business focus.

Do read The Edge articles in full and you may immediately recognize the en bloc redevelopments cited therein:

Soooooooo .....
Mirror, mirror on the wall
Who is the fairest of them all?

Answer: Whoever made 666% increase in net profit for the full year. Tsk, tsk ... if you were reading carefully, you would have found the answer above. [Hint: Please re-read item (i).]

3. Casino Singapore. With property prices racheting up at such rates to yield net profit of triple-digit percentage gains for developers, ... when Owners sell at so-called "en bloc premium" to earn so-called "en bloc windfall" at $xxx psf only to see Developer-buyers soft-launch the redevelopment at three times (!!!) $xxx psf a few months after collecting en bloc sale proceeds, ... when the super Majority Consenters realise that the pre-en bloc promise of Utopia has landed them in Ethiopia post-en bloc, ... when the law has MAJOR structural flaws, viz, (i) locks-in Reserve Price for up to 12+12=24 months in a likely upward-moving volatile market, (ii) opens side gate when public tender fails to allow NON-expert Sale Committee volunteers to sign private treaty with expert Developer-buyer in the back-room and tell Owners only AFTER the deal has been signed, sealed and delivered and (iii) prohibits the super Majority from filing any objection to Strata Titles Boards/the courts, ... when the super Majority therefore have no choice but to keep mum and lump the "en bloc shortfall" as they are already cooked, ... when such "en bloc shortfall" will continue to haunt the super Majority Consenters 15-20 years later into their twilight years because of too-early monetization of their only crown jewel, ... and when my pet camel mutated into a 3.5-hump monster within a mere 1.5 decade (from 1995-2010), another question arises:

Do we just have two casinos? Or have we willy-nilly morphed into "The Biggest Casino in the World" at 710.3 sq km (Singapore's area size as of 2009 - Department of Statistics)?

It was reported in the Straits Times (12 Nov 2010) that for 3Q2010:

- Resorts World Sentosa: S$732mn revenue; S$346.5mn pre-tax profit; 47% profit margin
- Marina Bay Sands: S$631mn revenue; S$315mn pre-tax profit; 49.7% profit margin

Yawn ... the figures in casinos are just not as sexy and seductive compared to developers!

4. Contextualized against a time-scale. 666% increase in net profit, or 417.9% surge, or up 262%, or 188% rise ... are they obscene or what? Especially when you CONTEXTUALIZE these developers' net profits of such epic proportions to the timescale below. Now, now ... please bear in mind this question as we put things into context: "What were the two factors that likely contributed towards such obscene profits by the developers?" ... and let's see if your answer matches mine.


- Many of these developer companies pre-existed LTSA inception of Oct 1999 but they achieved such record highs only in FY2009-10 - SO WHAT CHANGED?

- Published articles span a near-year of 2009/10 to give a more representative perspective

- Second bout of en bloc frenzy started in earnest in 2006 and peaked in 2Q2007

- Typical two-three year lag time for construction/redevelopment

- Accounting conventions for developers with inherent lag time in income/profit recognition

- Private Residential Property Index first surpassed the last peak only in 2Q2010

- 2008/09 Great Recession triggered by Wall Street meltdown

- 2009/10 Resilence Package of S$20.5bn for FY 1 Apr 2009-31 Mar 2010 with advance roll-out from 22 Jan 2009 and step-down Job Credit Scheme until 30 Jun 2010 where the Gahmen dipped into past reserves for the first time in history for S$4.9bn to fund the Job Credit Scheme and Special Risk-Sharing Initiative

- Corollary to 2009 Resilence Package were (a) corporate income tax rate cut from 18% to 17% for YA2010, (b) tax exemption on foreign-sourced income earned before 21 Jan 2009 and remitted between 22 Jan 2009-21 Jan 2010 and (c) special accommodations for developers, viz:

(i) deferred property tax starting from the later of 22 Jan 2009 or Provisional/Written Permission date,

(ii) one-year extension of Project Completion Period for private residential projects,

(iii) another two-year extension for developers' disposal of residential units, aggregating to a four-year leeway, etc,

all of such special accommodations for developers (together with other mind-boggling and backbending accommodations by MND/URA/BCA in DELAYING THE POLICY IMPACT of withdrawn Deferred Payment/Interest Absorption Schemes (DPS/IAS), withdrawal of Gross Floor Area bonuses, etc) and the "voluntary caveat" loopholes of Singapore Land Authority (SLA) likely contributed to the 3 Nov 2010 STARK EXPOSÉ when URA were caught with their pants down because the figures for expected supply of housing units even within the near future were seriously out-of-whack.

Instead of reaping policy results upon announcement, these super business-friendly civil servants allow developers to piggy-back on building plans long approved by BCA for, say, 100 fancy duplexes even when they revamp the entire project into, say, 700 shoe-box units, but retaining the old GFA bonus for planters/bay windows with consequent startling incongruence. Likewise, developers can significantly delay sales/phased releases under URA extensions and yet hang on to the DPS/IAS competitive advantage under old BCA building plan approval. Flippers and property agents join developers in merrily exploiting SLA's "laxity" by not filing caveats, delaying/timing the filing or even aggregating/misfiling in order to paint a distorted picture about last-done prices, speculative profitability, flipping dominance, etc. Well, the "joke" has backfired on the Gahmen as these super business-friendly civil servants have crossed sides either to sit on the boards of corporate developers or to be on their payroll whilst the rest of us are still scratching our heads as to how deeply and how widely the GIGO-based systems (Garbage In, Garbage Out) of URA/SLA/BCA have skewed statistics and indices. Your guess is as good as mine!

No doubt, there are other multi-factorial justifications for profit hikes of 666%, 417.9%, 262%, 188%, etc (eg, accounting treatment of fair value gains by different companies, contributions from non-en bloc redevelopment, hot money inflows, pre-dominance of Mickey Mouse (shoebox) units sold at astronomical psf price, etc).

That was why I have been advocating since late 2009 that MinLaw should invoke the amended Statistics Act and extract from MAS the data on developer project financing to affirm/debunk allegations and facilitate MinLaw's on-target policy/legislative refinement of LTSA. Alas, it remains a classic Rumsfeldian case of Unknown Unknowns except that the unknowing (whoever that idiot is) doesn't want to know.

5. En bloc gang robbery-cum-rape and looting of public coffers. As for the question posed in Point 4:

"What were the two factors that likely contributed towards such obscene profits by the developers?"

My answer: Developers made obscene profit at the expense of (i) CITIZENS (especially from their en bloc purchases) and (ii) GAHMEN (milking the 2009 Resilience Package).
And what's your answer?

I can't help but wonder how the en bloc gang robbery-cum-rape could have escaped radar detection by our world-class PAP Gahmen who even opened wide the treasury doors, ostensibly WITHOUT conditions, WITHOUT tracking and WITHOUT provision for any clawbacks or nimble re-adjustment. And Finance Minister Tharman wasn't even under the same pressures as Paulson or Geithner at the time! Well, well ... the 75% (or lower?) syndrome inflicts even our very best, eh?

Bottomline: In the sparring practice round in Feb 2010, REDAS (Real Estate Developers Association of Singapore) were slightly outfoxed by the Gahmen when REDAS' pressure tactics to get the Gahmen to disclose Reserve Price for Government Land Sales backfired. But for this major championship fight, it appears that the PAP Gahmen lost Big Time - they have been summarily outclassed by the corporate developers who achieved such sparkling results within the above contextualized time-scale! Developers, being inherently astute, likely merrily milked the maximum out from 2009 Resilience Package even whilst they "cry-father-cry-mother" (literally translated from the visceral "kow bei, kow boo" Hokkien-dialectic expression for "plaintive whining and whinging") about the Great Recession!

Sigh ... that's what happens when the fine line is crossed ... when Gahmen not only got incestuous with Big Biz but also when increasing one-upmanship and internal competition further calcified the already entrenched silo mentality within each ministry, statutory board and government agency. DOUBLE JEOPARDY, DOUBLE WHAMMY!
6. Preview summary of Parts 2 and 3. In "Casino Singapore 2: Who's the idiot?? No to gang robbery-cum-rape", I will set out:
– How and why the en bloc gang robbery-cum-rape was allowed to happen.
– How to counter the gang robber-cum-rapist.


In a way, it's calling their bluff when the Gahmen used national needs for urban rejuvenation and higher land-use intensity to justify passing a law that is calibrated towards such gang robbery-cum-rape. It will give an insight as to why private condos were targetted instead of HDB public housing when land area used for private condos is miniscule relative to that used for HDB public housing and the lessons that Singapore could draw from South Korea, Taiwan and Hongkong in en bloc redevelopment.

In "Casino Singapore 3: Who's the idiot??? Smoking gun with spent bullets", I will attempt to gather the incriminating evidence of such gang robbery-cum-rape although the gang rapist is still virulent and not quite "spent" and is on the prowl again! It will remind us of the hollow parliamentary promise made by MinLaw in 1999 during en bloc law inception that the primary objective of this law was to create "many more housing units in PRIME 999-year leasehold or freehold AREAS FOR SINGAPOREANS".

There are also observations and reflections of “too little, too late, too diffident” approach in formulating and effecting laws, regulations and policies without sufficient checks-and-balances within a holistic framework (eg, tax man consulting tax-payers on a proposed clarification and then withdrawing such proposal). Then you evaluate and decide for yourself whether the former Minister for Law, Prof S Jayakumar, had any basis for his ministerial allegations and fear-mongering attempts, especially when the facts in this 3-part Casino Singapore blog posting affirmed how en bloc law effectively unlocked land value for Developer-buyers, NOT extant Owners who instead face the Hobson’s Choice of being Squatters, Refugees, Downgraders and Downsizers: