13 November 2010

Casino Singapore 3: Who's the idiot??? Smoking gun with spent bullets

I continue my bleating ...

In "Casino Singapore 1: Who's the idiot? Citizens/Gahmen lost Big Time", you would have heard my bleats on the exponential increases in developers' net profits of 666%, 417.9%, 262%, 188%, etc, for FY 2009/10:

In "Casino Singapore 2: Who's the idiot?? No to gang robbery-cum-rape", you would have gotten an insight as to why MinLaw targetted private condos instead of HDB public housing as part of national agenda of urban rejuvenation and higher land-use intensity despite miniscule proportion of land used for condos relative to HDB and how/why MinLaw consequently abetted enbloc gang robbery-cum-rape. You would have read of the alternative solutions of one-for-one (1-4-1) exchange to follow the lead of South Korea and Taiwan. Also, you would have learned of Hongkong's more sensibly calibrated en bloc law that prohibit senseless demolition of non-industrial buildings of less than 50 years old. Plus the three actionable suggestions cited during the 18 May 2010 parliamentary debate that you could adopt in your own estate's en bloc attempts:

In this concluding "Casino Singapore 3: Who's the idiot???", you would get to see the "SMOKING GUN with SPENT BULLETS" ... the incriminating evidence of such en bloc gang robbery-cum-rape. You would be reminded of MINLAW'S PROMISE made solemnly in Parliament in 1999 about the PRIMARY OBJECTIVE of the en bloc law being "FOR SINGAPOREANS", which has proven to be CHILLINGLY HOLLOW many times over in the multiple bouts of en bloc frenzies to date as we citizens morph into SQUATTERS, REFUGEES, DOWNGRADERS AND DOWNSIZERS in the aftermath in deference, of course, to the housing needs of the rich and/or smart Foreign Talent (whether as owners, investors or tenants).

1. Before and After. These are but a few examples of: "Before" and "After" en bloc sales with the same choral verse of:
For Owners: "Twice the price OR Half the size"
For Developers: "Twice the price AND Twice the size".
So is it any surprise how Developers ramped up triple-digit percentage increases in net profit for FY2009-10 (eg, 666%, 417.9%, 262%, 188%, etc) especially when it coincided with 2009/10 Resilience Package BONUS hand-out from Gahmen???


District 9, Central Core Region (Hilton Towers en bloc; The Lumos redevelopment)

Before: Average en bloc purchase price: S$1088 psf
After: Average redevelopment sales price: S$3298 psf as of 12 Nov 2010
Developer sale price is 203% HIGHER than purchase price

Before: Aggregate area demolished: 72,800 sq ft
After: Aggregate area available for sale: 128,914 sq ft
Developer's new stock level is 77% HIGHER than demolished stock level

Before: Aggregate en bloc purchase price: S$79.2mn
After: Aggregate sales proceeds to date: S$115mn
[As of 12 Nov 2010: Caveats lodged for 17 units (19 sold; 44 launched, 9 to be launched)]
Developer needs to sell ONLY 19% of new stock (ie, area available for sale) to recoup entire en bloc price. [NOTE: As en bloc purchase price (land cost) is the most chunky component of total project cost to a Developer-buyer, once land cost is recouped, it significantly lightens the Developer's holding cost (financing/interest expense) as a business risk. Hence, one could make an educated guess that project breakeven point is likely a low hurdle unless gold is used lavishly as a construction material, or interest rate hikes are steep spikes, eh? In other words, it would be the Developers' equivalent of "pau chiak" in durian sellers' vernacular (Hokkien for "sure-win guarantee").]

District 15, Outside Central Region (Flamingo Valley en bloc/redevelopment)

Before: Average en bloc purchase price: S$640 psf
After: Average redevelopment sales price: S$1298 psf as of 12 Nov 2010
Developer sale price is 103% HIGHER than purchase price

Before: Aggregate area demolished: 323,300 sq ft (estimated)
After: Aggregate area available for sale: 494,518 sq ft
Developer's new stock level is 53% HIGHER than demolished stock level

Before: Aggregate en bloc purchase price: S$194mn
After: Aggregate sales proceeds to date: S$90.7mn
[As of 12 Nov 2010: Caveats lodged for 58 units (74 sold; 120 launched; 273 to be launched)]
Developer needs to sell ONLY 30% of new stock (ie, area available for sale) to recoup entire en bloc price. [NOTE: Same as Case 1 above]

(II) For DETAILS of above Case 1 and Case 2 -
Please click on the following link:

Would you agree that the above evidence of one-for-four (1-4-4) winnings by Developers post-en bloc would effectively DEBUNK the assertions by the previous Minister for Law, Prof S Jayakumar, who was likely misguided in his belief that any legislative provision for one-for-one (1-4-1) exchange would result in lower en bloc sale price?

This is NOT a matter of hindsight being a precise science. The Straits Times poll published as far back as 16 Jun 2007 already made this pitch of "Double the price OR Half the size" for Owners post-en bloc. The poll results are now increasingly substantiated and factually affirmed two-three years after the 2006-07 en bloc frenzy as redevelopment projects get completed and developers' incomes/profits are progressively recognized under the accounting conventions applicable to this industry. My hypothecation of 1-4-4 for Developers have panned-out (viz, "Double the price AND Double the size" for Developers post-en bloc). Allow me the dubious honour of gloating "I told you so" as you re-read this old Aug 2008 blog posting: http://singaporeenbloc.blogspot.com/2008/08/en-bloc-why-it-is-not-right-for.html

Going forward, the 2006-07 en bloc pattern may NOT hold true anymore BECAUSE the Developers' game rules have since changed AFTER their 2009-10 triple-digit percentage increases in net profits, ... where the over-satiated Developer-buyers have developed an appetite to time the market by landbanking and "manage" even land supply beyond the hapless reach of Government Land Sales in CCR, RCR and popular pockets of OCR (viz, Core Central Region, Rest of Central Region and Outside Central Region). Such may be the new-found capacity and power of Developers these days!

When Developer-buyers choose to landbank from en bloc purchases, that's when they are "betting" with a pre-loaded dice ... viz, en blocs immediately spike demand for their yet unsold/unlaunched units and shrink supply because of inherent lag time in redevelopment (double bonus for Developers). On the one hand, global/regional factors could overturn the gambling tables on these Developers, even with their pre-loaded dice! On the other hand, there are predatory lions, tigers and leopards out on the loose who have already been fattened from 2006-07 en bloc feeding binge and 2009-10 Resilience Package bumper hand-outs. These Developers now have a treasure hoard of winnings in hand to further outwit, outclass and outlast any future Gahmen initiatives IF Gahmen can only come out with more-of-the-same or behind-the-curve measures (instead of something fresh and innovative, eg, en bloc quota, 1-4-1 exchange, etc).

Surely, law/policy makers should NOT buy it hook, line and sinker when Developers recant their historical mantra of past market crashes to hoodwink them into believing that en bloc gang robbery-cum-rape must continue to be allowed under artful LTSA legislative framework. http://singaporeenbloc.blogspot.com/2008/08/en-bloc-why-it-is-not-right-for.html

Yet all these super-smart civil servants in MinLaw (most of whom were likely funded by the public for their dual-degree education) failed to be PROACTIVE and continue to fail in being TIMELY and REACTIVE.

2. My word is NOT my bond. To add salt to wound - In calibrating the law to unlock land value for corporate Developer-buyers (NOT extant Owners) whilst being paid by
taxpayers, MinLaw manifest SELECTIVE AMNESIA in DIShonouring their parliamentary promise made 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".

3. PhDs amongst our crème de la crème? You don't need a PhD (yeh, definitely NOT the "Press here Dummy" types amongst the ranks of our crème de la crème), because any idiot can see for himself/herself ...

- Compare the strata title area demolished from the en bloc estate with the net saleable area harvested from the redevelopment:
The "inventory" for the developer typically doubled or more! [During the 18 May 2010 parliamentary debate, the Minister for Law, Mr K Shanmugam, used a misleading indicator of higher land-use intensity by comparing the number of units pre- and post-en bloc. That was naughty and even mischievious because with the current fad of Mickey Mouse (shoebox) units, it would make the senseless comparison even more meaningless!]

- Compare the average en bloc price received by previous estate owners with the average sales price paid by new estate owners:
The price likely doubled or more!

Sure, there may be Development Charge (DC) to be paid by the Developer-buyer but relative to total redevelopment cost, DC is an inconsequential component in the whole scheme of things to the Developer-buyer.

Yes, there is substantive Construction Cost but these typically range from 25%-40%, depending on (i) whether the redevelopment is in the mass-market or super-deluxe range and (ii) the extent of yo-yo gyrations in supply-and-demand aberrations (eg, sand ban by Indonesia, controlled granite chip export, intense labour competition arising from concentrated
construction activities post-en bloc frenzy, or some other regional or global factors). These yo-yo gyrations are likely exacerbated by Gahmen's spasmodic rah-rah PRO-cyclical policies and regulations (instead of striving for a measured tempo under the COUNTER-cyclical approach) because – being human – the powers-that-be are naturally driven by the Key Performance Indicator (KPI) of GDP Growth which is 27% of their total pay (another 20% is based on Job Performance Related KPIs which adds up to 47% under Variable Wage Component for these high-fliers).

Of course, there is Financing Cost where the developers pay interest/fees for bank loans that add up to quite a bit even in a low interest rate environment because of the sizeable quantum involved in paying off all en bloc Owners upon legal completion. But IF the other option of 1-4-1 exchange is taken up by enough en bloc Owners, it would significantly reduce the financing cost burden for Developer-buyers - An Inconvenient Truth that is conveniently unheeded.

4. Rocket Dockets. It does NOT take rocket science to figure out that - under the 2010 amendments of the Land Titles (Strata) Act ("LTSA") - MinLaw will probably succeed in turning the Strata Titles Boards and the courts into Rocket Dockets. This was probably in direct response to developers' complaints to MinLaw of their business risks when protracted en bloc battles could potentially drag on for another 1-2 years from the date when these developers commit to the Sale and Purchase Agreement.

Sauce for the gander is clearly NOT sauce for the goose because the law provides for up to 12+12=24 months to commit Majority Consenters to a Reserve Price in the Collective Sale Agreement! So going forward, justice will likely be hurried. Never mind that justice is buried. Go, Go, Go ... Cheaper, Better, Faster. [Sheesh, how many idiots are running around out there???]

5. Trust, but verify - Windfall or Wind (aka Fart)? As Ronald Reagan famously said to Mikhail Gorbachev: "Trust, but verify". I do NOT make frivolous assertions about MinLaw getting the RIGHT ANSWER to the WRONG QUESTION (viz, how to balance the en bloc law between Majority Consenters and Minority Dissenters). As part of a healthy cross-check, the authorities just need to ask themselves: Why else would en bloc sales continue to be so alluring for Developer-buyers even AFTER the 2010 LTSA amendments? Especially when sites from Government Land Sales are readily available with certainty/speed and therefore reduced business risks for developers, especially with the relaxation in Mar 2010 where developers could "tikam-tikam" (repeated attempts at "hit-and-see") in order to trigger sale of sites on the Reserve List:

Q1: So what's in it for Developer-buyers when it comes to en bloc purchases?

A1: "En bloc windfall", dummy!
[Now, you see why increases in net profit of 666%, 417.9%, 262%, 188%, etc, for FY 2009/10 are a breeze for developers, especially with the bonus of a 2009 Resilience Package handed to these developers on a silver platter by the Gahmen.]

Q2: If Developer-buyer gets "windfall", what do en bloc Owners as sellers get?

A2: Four-letter word: "Wind" (aka "Fart")!
[Now, who's the idiot??? Or should it be plural?]

As en bloc owners suck in the fart from other people, "our land"* will continue on the relentless march towards "Progress" under the billowing banner of Progressive Corporatism flying high in the air, ... replete with our euphemistic Integrated Resorts and the Biggest Casino in the World (viz, the whole island of property speculators
and en bloc flippers), ... all that blinding Orchard Road razzmatazz as building lights flash furiously in curious mis-sync, ... so much buzz and fuzz ** and, ... yes, even funk (if you know where to look)!

* I can't bear to call it "our country" these days. In any case, we have been told categorically by Law Minister K Shanmugam in Oct 2009 that we are "not a country" ... but the good minister didn't (and likely couldn't) explain why on earth are we obliged to pay taxes and why for heaven's sake are we compelling our young men to do National Service ... but these are essential trappings of our "country" masquerade, eh?

** Don't even start me on hot money, money laundering and asset bubbles when gigantic communist China could dance even more nimbly.
Please read this Bloomberg article of 13 Nov 2010: "China to curb foreign investment in property":

In comparison to Giant China, our Teeny Singapore's MinLaw continue to do an unsteady baby cha-cha (two tiny steps forward, one big step back) for LTSA amendments despite anecdotal evidence of flippers driving most en bloc attempts as Sale Committee members. MinLaw were far behind-the-curve in finally closing the gaps in Residential Property Act in respect of foreign buyers of landed property. But MinLaw is NOT alone in this shenanigan.

The whole government machinery (eg, Ministry of National Development, Urban Redevelopment Authority, Building and Construction Authority, Singapore Land Authority, Housing Development Board, Monetary Authority of Singapore, Ministry of Finance, etc) was "too little, too late" in formulating policies and regulations.

It was probably the first time in recorded history that the taxman would consult taxpayers on a tax law! And AFTER such Public Consultation in Jun-Jul 2009, MOF BACKTRACKED on their proposed tax clarification (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):

With the Private Property Price Index (PPPI) mutating into a 3.5-hump camel with the highest pointy half-hump growing almost vertically in 2007-10 (!!!), I wonder if MOF is even feeling haunted these days for that idiotic back-tracking in 2009:
Not only that but it would appear that the various authorities didn't even dare to give immediate effect to the changes they announced. For elaboration, please click on the following blog-link and scroll down to the clipart pics of gymnasts doing back-flip and leg split:

Indeed, the regulators' trepidation was palpable as they danced around to ensure that they didn't step on the dainty toes of Big Biz ... in case such authorities unwittingly created policy risks for Big Biz that would adversely impact on Big Biz' projected ROIs and in turn likely create rippled waves to dent GDP bonuses of our entire government machinery. Singapore is probably one of the few places in the world where policy makers mitigate and remove policy risks for Big Biz. It is as if the Regulators are afraid to regulate the regulated! Have you seen a cat who is afraid of mice? Think Securities Exchange Commission and ol' Bernie who made off with US$50bn ... and the rest is history, as they say. Never mind, if the cat is black or white. Never mind too, if the mice are black or white.

So on Happy Humping Day, whilst stringing along my pet mutant 3.5 hump camel (BTW, 1.5 humps in the PPI graph above are either pure saline or silicone implanted with untimely, unfiled or misfiled caveats - so please do NOT squeeze too hard!), let's reflect upon what the Minister for National Development, Mr Mah Bow Tan, has been spewing and spouting over 2009 and 2010 whilst on his High Horse:

Reuters, 29 Jul 2009: "I wouldn't say there's excessive speculation at the moment, but there is some element of speculation involved." Ahem ... coughing a little!

Channel News Asia, 30 Jul 2009: "It’s a bit early to say whether there is a speculative bubble or property bubble building up. Obviously it is not in everybody’s interest for such a bubble to form because if it does, and when the bubble bursts, which it inevitably must, then a lot of people will get hurt." Hah??? ... Duh???

Agence France Press, 12 Aug 2009: "A little bit of speculation is inevitable in every market, but when it becomes excessive, then it is something that we should try to avoid." Aaaargh ... by now, gagging from the implant spill-out of pure saline and/or silicone - see, I told you NOT to squeeze too hard!

The Edge, 14 Sep 2009: "We are currently seeing signs of heightened speculative activity, though the level of speculation is not that extreme ... 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." Man ... is the guy really one-up over Alan Greenspan as he can burst bubbles as soon as they start to form?

Channel News Asia, 24 Nov 2009: "We want to curb erratic spikes in prices due to excessive speculation, inaccurate information or market manipulation." [Silence] ... Dumbstruck and speechless by now.

Hansard parliamentary record, 18 Oct 2010: "By taking these calibrated steps one at a time, we are able to let the air out of the bubble ... gradually, rather than to prick the bubble and then have it burst, because when the property bubble bursts, a lot of people will be hurt, not to mention the economy as a whole." Ooops ... duck that flying shoe as you pace-out the fart softly, softly!

6. After Humping Camels and Jumping from High Horses. As part of the "trust, but verify" doctrine, we should probably probe and prod if we have more of "right answers" to "wrong questions". Now, let's ask ourselves:

Is Minister Mah and Ministry of National Development also getting the right answer to the wrong question? Sheesh ... do we have an epidemic viral connection between Wrong Questions and Right Answers?

- In a little isle of 710.3 sq km with the world's highest population density of 7,022 persons/sq km (2009, Department of Statistics) where the ENTIRE WORLD POPULATION as of 2009 could be jam-packed into 1000 SINGAPORES, should we blindly adhere to the conventional wisdom shared by Minister Mah that "a little bit of speculation is inevitable in every market"?

- Under such circumstances, should we even allow a bubble to form at the outset and then let the air out? This is especially pertinent when lodgement of caveats is voluntary and URA/SLA do NOT even know when there is deliberate intent NOT to file, or to DELAY/TIME the filing or to MISFILE/AGGREGATE caveats because both URA and SLA systems have been exposed to be GIGO-based (Garbage In, Garbage Out) ... instead of ensuring data integrity by putting the statutory onus on lawyers to (i) verify caveat data accuracy, (ii) provide supporting extracts of key documentation and (iii) file within a 14-day deadline.

- When a country as big as China limit foreigners to only one property purchase with pre-qualifying employment and stay tenure criteria, what is teeny Singapore doing (IF anything - Duh?), bearing in mind our legendary land scarcity and record-breaking population density/sq km?

- Even if the air is let out over time (apparently, some idiots have mastered the art of PACING-OUT A SLOW FART as they dribble pee whilst shitting from the other end!!!), would it merely be slow death with prolonged pain (rather than quick death with sharp pain) for anybody who got the market timing wrong? There is an edifying parallel between asset bubbles and avalanches - NEVER under-estimate the intrinsic momentum once it starts to form.

- When the GIGO-based (Garbage-In, Garbage-out) systems of SLA, BCA and URA have shown data holes and compromised data integrity (eg, buyer indicators cannot be kept at a simplistic one level if the level of froth is to be reasonably sussed-out, occupancy data of HDB property is not complemented by equivalent private property data, different motivations will result in different types of flips and defining speculation by sub-sale data is naive, to say the least, raw data at en bloc source or multiple-unit purchase source cannot be open to fuzzy-wuzzy aggregation and/or averaging techniques to save business costs, etc), it will seriously undermine the credibility and reliability of these institutions at source. If these institutions continue to put their reputation at risk - all purportedly in the name of business-friendliness - does it speak of a deeper and more entrenched malaise across the Civil Service spectrum and, indeed, within the larger system? There is already a Rubik dimension to these manifestations.

- In contrast, the recent HDB measures could hardly qualify as "letting air out" but then, c'est la vie ... the HDB burst was one Big Resounding Fart because these measures did NOT impact Big Biz but they adversely hit upon heartland issues, eh?

- Are the market segments of HDB public housing, strata titled private condos and private landed properties much more fungible than the authorities would like to believe?

- One segment of the locals (especially the first-time-buyers and the no-choice-but-downgraders) lament about affordability of HDB flats sold with public subsidy. But isn't there a significant segment of HDBers who are wealthy enough to "invest" in one or more private properties, whether in or outside Singapore, ingeniously capitalizing upon a whole spectrum of ownership/occupation permutations within the policy framework beyond HDB's wildest imagination?

- Technically, even those who bought HDB flats from the resale market (eg, the foreigners) are also benefitting from the low-base effect because of the embedded public subsidy. In any case, what's "five years" as HDB's Minimum Occupancy Period to qualify for future purchases of private property relative to the whole scheme of things? Who moves house every five years? If a HDBer owner/occupant has the means to invest in one or more private condos (especially after a mere five years but even when it is longer), does it indicate undetected fudge at HDB application point? Or is there systemic exploitation of Gahmen's "housing type" yardstick as a smokescreen to milk more out of wealth redistribution schemes or other forms of benefits/subsidy entitlements arising from means-testing (typical "yau kwee" mentality of Singaporean "kiasuism" - Hokkien words for "petty gains" and "fear of losing out", respectively) - all this whilst generating (i) rental returns from HDB flats to boot and (ii) flipping multiple private properties, whether individually or as a shady consortium born from networking during "investment courses" that taught them how to invest in physical real estate with as little as $5k! And - in the midst of all this - IRAS is NOT even shy to boast that they have a LOW detection rate of tax evasion from property trading! Do we want to cultivate a nation of speculators and flippers, spinning castles in the air and going down the same sorry road as Iceland and Ireland, rather than being producers/providers of actual goods and services?

- Should CPF funds intended as retirement nest-egg savings be released for (i) purchase of second and subsequent properties for extant owners and (ii) purchase of one or more properties for extant HDB occupants? Even when such releases of CPF monies are sanctioned, shouldn't they be subject to (a) higher CPF account balance qualifying criteria and (b) even lower CPF Available Withdrawal Limit when ownership and/or occupancy status has changed upon marriage or other life events?


no deposit casino said...

Casino Singapore describes the smoking gun with spent bullets just like the incriminating evidence. This is very useful for all of us.

The Pariah said...

Dear No Deposit Casino:

1. Indeed I hope the sampling data will be useful to you.

2. I'm still collating more data.

So if you or your friends/relatives have OTHER ESTATES' EN BLOC DATA, pls e-mail me at:

3. The 2X Price and 2X Size post-en bloc bumper harvest for Developer-buyers is already determined BEFORE the Developer even bids or makes an offer.

4. There is this "Residual Land Value" methodology (RLV) used by your en bloc property agent in their business proposals given to potential interested Developer-buyers.

Developers who are seriously interested will re-crunch the en bloc agent's numbers using the same methodology to cross-validate the agent's best-case or worst-case scenarios. Some developers even have prelim building plans drawn up by architects to nail down the amount of Net Saleable Area that could be squished from the land plot size.

5. Chew upon this: All en bloc owners (whether Majority Consenters or Minority Dissenters) are paying the property agent on "no-sale-no-fee" basis.

Yet the property agent is NOT showing en bloc owners the RLV numbers, and instead hype about the so-called "en bloc windfall" using ANOTHER methodology called "Comparative Replacement" (viz, if you sell your estate en bloc and buy a unit of about same size within 2 km radius that is about the same estate age).

As the Hokkiens would say in one word: "Siaw" (crazy)!

6. To read more about RLV and other critical questions to raise at EOGMs, pls scroll down to Paragraph 8.2(b) of the following blog posting (just after the clipart of Donald Rumsfeld):

More Fan Pi said...

Man! Your Before and After examples are shocking but powerful. Can you give more examples? They are really useful and informative.

If only our Straits Times publish such facts, then more people will know what is really happening.

I checked the Law Ministry web page for en bloc sales but they don't provide any Before and After data.

The Pariah said...

Yes, More Fan Pi, I will continue to gather data for more examples.

Data access is not that readily available. So if you have friends/relatives who sold en bloc, please e-mail me at singaporeenbloc@gmail.com.

Thank you.