27 March 2010

Foxes outfoxed ... then the Chief Cockerel crowed




In true Darwinian spirit, it is survival of the fittest.
Big fish eat small fish. Small fish eat shrimps.

So we shrimps (viz, we the "lesser mortals" as Singapore citizens) should heed the wise words of Greek historian, Polybius, who said: “There are two roads to the reformation for mankind — one through misfortunes of their own, the other through the misfortunes of others; the former is the most unmistakable, the latter the less painful … the knowledge gained from the study of true history is the best of all educations for practical life.”

1. Historial trace-back. Let's do a short historical trace-back: Once upon a time, not so very long ago ......

19 Feb 2010: Gahmen announced Seller's Stamp Duty (SSD) for residential properties sold within one year of purchase and mandated reduction in Loan-to-Value (LTV) limit from 90% to 80%.

25 Feb 2010 (a week later): The Real Estate Developers' Association of Singapore (REDAS) hosted "Lo Hei" celebrations (a Chinese New Year festive meal where "Yu Sheng" raw fish salad (homonymic pun to denote "vitality in abundance") is tossed sky-high to signify the diners' wishes for success in business ventures in the new year). Media coverage showed the guest-of-honour Finance Minister, REDAS President (Mr Simon Cheong) and URA's elegant CEO in merry "Lo Hei" ritual.

During the dinner, by way of REDAS' response to 2010 Budget, Mr Cheong said: “REDAS was hoping for more cash in our ‘ang pows’ (red packets) from you, Minister. But when we opened the ‘ang pow’, we were disappointed there was not much inside for developers, ... Nonetheless, we are happy with your long-term productivity ‘ang pow’, as what is good for Singapore's economy in the long run must also be good for the Singapore property market. It is what REDAS calls a deferred payment ‘ang pow’.”

In covering the "Lo Hei" event, Channel News Asia (25 Feb 2010) reported: "... in the interest of a stable property market, REDAS said its members are committed to a fast-track supply to satisfy demand. This would also minimise excessive speculation in the property market". The Straits Times (25 Feb 2010) went on to elaborate that Mr Cheong also said: "Hopefully when demand is satisfied, there will be less pressure for future anti-speculative measures".

[... Reading the media coverage at the time, I wondered if REDAS members had indigestion pangs even before they stepped into the dining hall given the mild anti-speculation SSD and LTV jabs injected by the Gahmen just a week earlier.]

[... When I read on about REDAS' commitment to fast-track supply, I wondered how the board of directors of public-listed developers would account to shareholders for not maximizing profits but I reckoned that public interest would rightly prevail with shareholders' sacrifice.]

[... I also thought it was inappropriate to apply the not-so-thinly veiled commercial pressure on Gahmen. Worse still, a fortnight later, when Gahmen seemingly capitulated to such pressure based on CNA report (9 Mar 2010): "National Development Minister Mah Bow Tan ... said the government will not be introducing more measures to cool the market for now" although it had the usual qualifications but that ministerial assurance made headline news!]

24 Mar 2010 (a month later): At the launch of Singapore Residential Price Index (SRPI), Mr Simon Cheong said: "If REDAS members who are fighting in the foxhole everyday for the interest of a healthier property market do not speak up, then who will?".

Business Times (25 Mar 2010) reported that Mr Cheong urged the government to "allow the property market here to operate fully as a free market ... also asked if the state should be so concerned with private housing prices when the segment serves only 16.5 per cent of the overall population". To support his claims, Mr Cheong cited two examples of land sales at Ten Mile Junction and Tampines.

[... When I read this, I suppressed my mumbling rumble that indigestion from the "Lo Hei" dinner a month ago must have chocked-up such constipation so badly that diarrhea (verbal or otherwise) would be the only form of relief. I don't know about the "Hei" part of the ascendancy but I was pretty sure that it'd hit the "Lo" or low point of the downward slide - and that came fast and furious in the form of MND's next-day press statement.]

25 Mar 2010 (next day): The Ministry of National Development ("MND") issued a press statement to rebut Mr Cheong's assertions. http://www.mnd.gov.sg/newsroom/newsreleases/2010/news25032010.htm

MND stated that: "The Government's objective is to maintain a steady and healthy property market where price movements are supported by economic fundamentals. This is important as a stable market matters to the well-being of Singaporeans and the economy. ... In carrying out its role, the Government has to take into account the interests of all stakeholders, especially home seekers and owners and the economy at large. ... for the two sites cited by Mr Cheong, the Government was not convinced that the bids represented fair market value rather than opportunistic bids, as there were very few bids for the sites, and the bids were exceptionally low."

2. Foxes and horses. Whoa ... were the foxes outfoxed and that triggered them to cry foul? Who outfoxed the foxes?

The horse perhaps?

Sheesh, how did that come about???
Foxes (characterized by their legendary cunning) have a higher Encephalization Quotient (EQ) of 1.6 compared to the horses' 0.86, as stated in Part A of my 18 Mar 2010 Trilogy at http://singaporeenbloc.blogspot.com/2010/03/trilogy-part-president-said-i-said.html

Now, now, I know ... we live in a polite society and name-calling is not very polite. But who was the first to admit that they were in "fox holes"? Who would live in "fox holes" if not foxes? Please excuse me for I have a simple mind.

3. Simple Simon Says. Talking about my simple mind ... that in turn calls to mind a game that we kids played in the good old days called "Simple Simon Says" (kids these days don't know what they have missed but I reckon Mr Simon Cheong is old enough to have played this game).

In this game, one player (let's refer to this player as the "leader") would stand in front of everybody (ie, the "followers"). The leader would shout "Simple Simon Says" + "Do This" as the leader simultaneously makes a gesture (eg, point at own nose, or stand on left foot, or some silly contortion) and freezes. The followers have to immediately mimic that gesture and similarly freeze until the next call. This would go on with new gestures being made for each call at rapid-fire pace. But when the leader shouts "Simple Simon Says" + "Do That", then the followers must NOT mimic that gesture; otherwise, the slow-wit(s) would have to drop-out from the game. Hence, the last kid left standing at the end of the game is lauded as the quickest wit of them all and gets a lollipop or something. If the last kid left standing is a boy, then as he licks his lollilop, he would bask in the open admiration from all the sweet little girls in their frilly frocks and dainty hair clips. If the last kid left standing is a girl, the boys would probably be tortuously mystified for the rest of the day as to "what the hell went wrong back there"?

Hmmm ... with the swift rebuttal from Gahmen, Simon Cheong may be tortuously mystified as to "what the hell went wrong back there" because all he did was to shout "Simple Simon Says" + "Do This" but the Gahmen "Did That". It is all the more mystifying because the Gahmen are not new to this game as they have played it many times over in the Re-making of Singapore. Wicked, ain't I?

4. Foxy sub-conscience. The fox analogy by no less than the President of REDAS made me wonder if it merely affirms the sub-conscience of cunning and natural predation legendary in the conventional characterization of foxes. Ahhhh ... the sub-conscience runs very deep indeed as proven by the science of hynopsis!

PROPERTY is all about LOCATION and TIMING.

In each en bloc frenzy, developer-buyers went round, snapping up prime/choice sites at so-called "en bloc premium" resulting in purported "en bloc windfalls" for extant owners. However, POST-en bloc, owners would almost invariably face the dire predicament of “double the price; half the size” for a replacement unit in the same site/area (ie, LOCATION) upon collection of en bloc sale proceeds (ie, TIMING).

That just shows how these developer-buyers have so successfully AND successively predated upon en bloc owners and out-foxed us. Most owners are clueless about Residual Land Value and that is how we typically end up underselling the crown jewel in our asset portfolio based on a twisted definition of "windfall". Based on the post-en bloc reality of "double the price, half the size", owners would end up with a sub-prime/half-size asset that would not last them very long if they should need to eventually monetize such sub-prime/half-size asset for daily living expenses and/or healthcare costs in their twilight years.

5. Foxes out-foxed. It was interesting to note REDAS' examples of Government Land Sales (GLS) as they griped that whilst Ten Mile Junction and Tampines bids at $162 and $118 psf ppr failed in Apr and Jun 2008, they were sold by the Gahmen at $437 and $421 psf ppr in Feb and Mar 2010 at 2.7 and 3.6 times higher, respectively.

Was REDAS sore because their developer-members were outfoxed? In other words, they have failed to predate upon Gahmen in the same way that they have been predating on en bloc owners? Insofar as developers are concerned, GLS and en bloc sales both constitute their ONLY sources of land-supply in Singapore.

The Gahmen have at their disposal a whole array of expert resources - unlike clueless en bloc owners. Surely, REDAS didn't think that the Gahmen (especially this PAP Gahmen) would be easy prey and could be as easily out-foxed as en bloc owners? Perhaps, it was a momentary lapse into the "Familiarity Breeds Contempt" mode, as an old Latin proverb goes, eh?
As asserted in Part A of my 18 Mar 2010 Trilogy: How the stats are sliced and diced often result in different kaleidoscopic formations. As Lady Irony would play her hand, Mr Cheong made his spiel about GLS at the launch of SRPI. Hence, it was interesting to read about how SRPI show vastly different trends from URA Property Price Index (PPI). Eg, non-landed private homes up 22.2% Dec 2008-Dec 2009 under SRPI but up 0.5% under PPI for 2009. The huge variance was apparently attributed to lag effect under high-volatility conditions which PPI is not calibrated to reflect as accurately as SRPI.

Hence, if I may humbly extrapolate from the above, the substantive hike in successful bids under GLS affirmed one fact: Gahmen did NOT undersell state land and public coffers took precedence - as they rightly should!

The dark horse came streaking past in the home run! Yeh! I roundly applaud Minister Mah's robust rebuttal of Mr Cheong's examples of the GLS bidding for the two sites. As asserted by Minister Mah, the Gahmen "was not convinced that the bids represented fair market value rather than opportunistic bids ..."

6. Opportunity and opportunism. What's the essential key word in Minister Mah's above assertion, my dear readers?
O-P-P-O-R-T-U-N-I-S-T-I-C

Indeed, "opportunistic" is how the developer-buyers have been mis-behaving at every opportunity throughout each en bloc frenzy.

The developer-buyers' crass opportunism - I continue to maintain - was unfortunately facilitated and given free rein by the force of law by courtesy of the Land Titles (Strata) Act with its underpinning structural flaws, ... with unsuspecting cracks and gaping chasms here and there, ... with startling room for wiggles and wriggles, ... and by the Gahmen's convenient silence and inaction (which could even be perceived as almost connivance at worst or inexplicable amnesia at best - wittingly or unwittingly so)! Whew ... that was a mouthful to spew!

7. The fox has shown its tail. Despite (i) the authorities bending backwards with a slew of accommodations in 2009 Budget and (ii) the provision of a generous S$250mn National Productivity Fund for the construction industry announced not long after 2010 Budget, REDAS wanted even more. To wit: Mr Cheong said at the "Lo Hei" dinner: "... REDAS was hoping for more cash in our ‘ang pows’ (red packets) ...". Greed knows no bounds - what else is new, eh?

[... Just to cite one example of how the Gahmen can do jaw-dropping acrobatic back-flips: Deferred Payment Scheme (DPS) was withdrawn in Oct 2007. Two-and-a-half years later, projects are still being launched in Mar 2010 by developers, brazenly touting the availability of DPS.]

[... Another example of the Gahmen's acrobatic stunts: I don't want to split hairs but this kind of official leg split is stunningly mind-boggling - URA issued a circular on 7 Jul 2008 rescinding Gross Floor Area (GFA) exemption for planters and bay windows with an effective date of Oct 2008 (ie, giving 3 months’ notice to the industry). However, on 22 Sep 2008, URA extended this grace period to 1 Jan 2009 (ie, effectively giving almost 6 months’ notice) where 31 Dec 2008 would be the last cut-off date to make a submission to URA which would result in a Provisional Permission.
Know what? Holy cow!!!  Holy goat!!! If you pop round to the showflats for projects launched in 2010, these features still dominate ... you won't be able to walk into the bedroom if you don't rest one-third of your mattress on the bay window! 2+2=5. Why would a developer make a submission by 31 Dec 2008 and soft-launch the project only in 2010 unless the old rules allow them to be O-so-OPPORTUNISTIC. Ahhh ... but one can't be O-so-OPPORTUNISTIC unless rule enforcement is correspondingly Eeee-so-ELASTIC, eh? Layee-odl-layee-odl-layee-o ... as the goatherd yodels lustily-O!  It takes two hands to clap, eh? At this point, it may be opportune for you to re-read Para 3 above about who has been playing this game of "Simple Simon Says" - that would put things into proper context!!!]

[... The list goes on - Is there a definition as to what constitutes a "room"? What is CASE (Consumer Association of Singapore) doing about all these billboards, full-page newspaper advertisements and sales brochures that feature these skyscraper projects with all-clear 360-degree vista (if you squint hard enough at these ads, you may even make out Batam to the south-facing or Johor Bahru to the north-facing)? Surely CASE President, Mr Yeo Guat Kwang being part of M-I-W (Men-In-White) and an honourable Member of Parliament, reads daily newspapers with such full-page ads? What is "Net Saleable Area"? Is the home-buyer being quietly charged $3000 psf for the air-space where the Egytian-crystal chandelier is dangling over the showflat living/dining room? I only know that your wallet will be much less jangling with that tinkling Egyptian-crystal chandelier (it's not even Swarovski!) - I can get snotty, eh? Although it is a "Showflat", it is NOT Show-and-Tell. If you don't ask, you are simply not told. Nothing irregular, eh? Life goes on.]

Anyway, I digress. Let's get back to the bushy fox tail. The culture, the tone and the flavour of an organization is set by the No 1. But when the organization is an association of industry players, then the No 1 reflects not just that organization's flavour but the entire industry in this instance, eh? Such is the power of magnification under an association umbrella!

Perhaps, now that "the fox has shown its tail" (as one Chinese saying goes), the Gahmen may be better placed to correlate the typical developer-buyers' unseemly opportunism suffered by largely clueless home owners in en bloc sales. Maybe, the Gahmen will finally empathize with our en bloc plight.

Well, we shall cross our fingers (and toes) that the Gahmen won't sit on their hands much longer. Reading the following sentence in MND's press statement, it sure sounds as if the giant has stirred from its deep slumber: "In carrying out its role, the Government has to take into account the interests of all stakeholders, especially home seekers and owners and the economy at large."

Wah Lau, "home seekers"! Wah Piang, "owners"? [For non-Chinese blog readers, I don't know how best to translate these Fujian (Hokkien) dialectic exclamations of "Wah Lau" and "Wah Piang" - it is close enough to "Oh Gosh" - so just think of it as a babble of OshKosh B'Gosh.]

There is Hope yet, eh? Maybe, Gahmen will finally "do right" by en bloc owners and mandate one-for-one (1-4-1) exchange in order to unlock land value for extant home owners (and not these opportunistic developer-buyers). I hope it will be soon as it is long overdue after two orgiastic en bloc frenzies in 1999 and 2006-07!  I can keep my fingers (and toes) crossed for longer than I can hold my breath but - for the next orgy (of en blocs, of course) - you are supposed to get breathless (... I think), and not out of breath (ie, dead)!  

But "Talk is Cheap". At day's end, Action speaks louder than Words. So let's see ... if the piper doesn't change his tune, what do we do with the piper, I wonder? I think Nightclub Owners (sorry, we have gone upmarket these days, Integrated Resort Owners) know the answer to this question.

8. The chief cockerel crows. When I read Mr Cheong's query as to whether Gahmen should be concerned with private housing prices that impact only 16.5% of our population, it pried open a little slit for us "lesser mortals" to get an insight into the "strategic" vision of "helicopter" perspective as one would expect at the level of REDAS presidency who get to play with their food in "Lo Hei" with ministers, CEOs and such like.

Additionally, Business Times (25 Mar 2010) reported: "Mr Cheong also questioned recent government measures designed to keep private housing affordable, such as the introduction of a stamp duty for sellers and the removal of the deferred payment and interest absorption schemes. ... Mr Cheong also said that a certain level of speculative activity in the marketplace can, in theory, improve the liquidity of real estate assets and catalyse the sales of new developments. When demand exceeds supply by a large margin, speculators provide investors with another source of a scarce commodity at a price premium. And encouraged by the higher prices, developers respond by launching more developments for sale and, in so doing, narrow the gap with demand, Mr Cheong added."

As the chopper whirs above with such "strategic vision" and "helicopter perspectives", I would likewise synchronize with my chop-chop-chop (be it karate chop or minced pork chop - anyone for minced-fox patties, perhaps?):

- First, 16.5% population: With such huge price differential between HDB and private housing coupled with the multiplier effects of CPF and private savings long invested in condos, isn't Mr Cheong trivializing the issue out of context by chanting the "16.5%" mantra?

- Second: DPS/IAS and IOLs: Withdrawal of Deferred Payment/Interest Absorption Schemes and Interest-Only-Loans are U-turns of speculation-facilitation, NOT anti-speculation, man! The only anti-speculative measure taken of late is the imposition of Seller’s Stamp Duty (SSD) for disposals within one year of purchase. However, SSD is a mere ant bite as it is disproportionate relative to (i) the legislated 24-month window for en bloc sale and (ii) the typical 30-month construction period for new projects - as stated in Part C, Para 3.6, of my 18 Mar 2010 Trilogy: http://singaporeenbloc.blogspot.com/2010/03/trilogy-part-c-pm-said-i-am-saying.html Perhaps, Mr Cheong is miffed that the Gahmen is no longer "facilitating" speculation in their "masak-masak" (Malay word for children's game of "play-house"), you think?

- Third: Good/bad Speculation: Singapore surpassed Hongkong as most densely populated at 7,022 persons/sq km based on 4.9mn population today versus 6.5mn target in future. In view of such pressures, land supply/demand in Singapore is equivalent to a constant state of drought in an agri-economy. Blog readers may recall what Vietnam, Thailand, India and other rice-producing countries did for their rice exports in Mar-Apr 2008. Under such conditions, property speculation even at minimal level is irresponsible, to say the least. Could it be that Mr Cheong does NOT need to stake his CPF (Central Provident Fund) retirement savings for his residential purchases although such CPF usage is sanctioned by the Gahmen?

Oh dear, I suppose we must be more understanding towards Mr Simon Cheong. (Disclaimer: the clipart caricature depicted here is purely fictional and any resemblance with any real life person is wholly unintended and entirely coincidental ... giggle, giggle ... but quite cutie, ain't he?) Being No 23 in 2009 Forbes' List of Singapore's Top 40 Billionnaires (the poor chap slid down one notch from 2008 Forbes' List), Mr Cheong perhaps is NOT cognizant of the predicament faced by us "lesser mortals". When UHNW clients transact, they just need to make a call and everything is considered "done" (no need to fuss about CPF balances, CPF rules for withdrawal, Loan-To-Value calculations, and such nitty-gritties). Hey, if you have to ask what does UHNW stand for, then obviously you are not in their league lol! High New Worth is so, so, so pass√©. These days, one has to be Ultra High Net Worth for your words to carry some weight - even then, maybe not, eh? Sigh ... no wonder, the Gahmen is not listening to me as USLNW (Ultra Super Low Net Worth)!

Incidentally, now that you have heard such loud crowing from no less than the President of REDAS, you should note that Mr Simon Cheong is born in 1957, the Year of the Rooster according to the Chinese Zodiac. That sure puts a new spin on Chief Cockerel Talking Cock, eh?  In the realm of cockerels, that's their lingo, yes? Certainly, I am NOT being rude. That's just how everything fits in the Jig-Saw Puzzle of Life, eh???

As in any melodramatic Greek Tragedy of En Bloc Sales, Polybius eventually exits the stage ...

- For those who have already been en bloc'ced: Do remember ... “There are two roads to the reformation for mankind — one through misfortunes of their own, ...[this road] is the most unmistakable … the knowledge gained from the study of true history is the best of all educations for practical life.”

- For those who are facing or may face en bloc in future: Do remember ... “There are two roads to the reformation for mankind — ...the other through the misfortunes of others; ...[this road] the less painful … the knowledge gained from the study of true history is the best of all educations for practical life.”

Let us not forget History, whatever the Chief Cockerel Crows! The Cockerel may be bird-brained. But the Fox is smarter than the Horse. Let us have memories that match the Elephants who are smarter than the Foxes. The Encephalization Quotients (EQs) of Animals are facts of science - they don't lie, unlike statistics!

May Mankind ... and the Cockerels, Foxes, Horses and Elephants ... in the World of Glass-and-Steel Jungles out there be reformed - for the better!