Wednesday, November 19, 2014

Musing about en bloc rules in the Straits Times - here we go again

An opinion piece by Chia Yan Min in the Straits Times on Tuesday, November 12, 2014 (As old buildings age, rethink rules on en bloc sales) muses that new rules are needed to force easier sales of aging properties.  

I have written before about the slippery slope created by allowing private property rights to be tampered with by the State (eminent domain) or by rules (en bloc sales).  There must be a very limited and extraordinary case for abrogating a person's property rights.  Commercial considerations and aesthetics do not pass that test.

The argument made in the editorial is that the benefits of urban renewal must be balanced against the "interests" of owners of older buildings.  The evidence is that a number of buildings have been allowed to decay due to lack of maintenance, and therefore present an affront to the writer.

One has to ask why buildings are falling apart so quickly.  Are they being built poorly?  Are they designed poorly?  Are they designed intentionally to have a short life?  Cities elsewhere in the world seem to be able to sustain their building stock over much longer periods than in Singapore.  It seems to be our culture that "replace" is preferred to "repair". 

There are a couple of contributing factors to the perceived problem of aging buildings.  The good news is that they are all curable with building and governance standards, without the need to interfere with property rights.

Maintenance - Anyone living in a mature Singapore condo knows that there are those on the condo boards that block any and all spending resolutions.  Motivations for this behaviour are varied - some people are just cheap, some genuinely are unable to afford higher monthly fees, some are absentee investors who have no stake in the building and look forward to realizing a profit when the land is sold.

The cure for this problem lies in establishing a governance structure for strata-titled properties that requires condo associations to maintain their premises, obtain engineering reports on the building and plant in order to plan financially for replacement and then fund their capital account appropirately.  Above all, maintenance cannot be optional.  

This is not theory.  The Province of British Columbia in Canada has excellent legislation in this regard, and none of the derelict building problems that Singapore seems to have. (Strata Propery Act)

Design - I lost my home of 9 years when Ardmore Point went en bloc.  The building that has risen to replace it has basically the same number of units, but now being sold at a multiple of 4 times more than the sellers received.  Nobody who lived in the original building could afford to buy one of the new units.  

This was not a case of an old building needing to be torn down.  This was a reinforced concrete bunker that would have lasted forever with maintenance and updating.  The condo owners were offered a financial incentive, and as most were non-resident, they took it.  A great building was destroyed for no particular reason other than to allow re-pricing of the land by the buyer.  In the process, families living in the neighbourhood were displaced, and the new building is mostly unsold and empty.  It may look prettier, but it has failed as a place to house actual humans.

The new buildings that  we are seeing now as replacements of for all those structures destroyed in the last great en bloc wave are pre-fab concrete structures with curtain wall envelopes.  Hardly the stuff of millennia.  One has to ask whether the planners at the URA prefer disposable buildings so that they can rearrange Singapore more conveniently when the mood strikes.  

Again, legislation and building standards are the solution to rapidly decaying structures.  There is no engineering reason to have this outcome, it is a function of design and maintenance.  

We don't need to change en bloc rules to allow people to be forced out of their homes more easily, we need rules to allow owners to run and maintain their buildings properly.


El Lobo Loco said...

I feel for you re: losing your home to an en bloc sale.

And yes, the paramount concern and principle should be the rights of a person over his property. Not aesthetics and commercial considerations.

Singaporeans are hypocrites. On the one hand they excoriate the government for being mercantile. For creating a money-minded society. Then they pursue the same money-minded, mercantilism.

They moan, why couldn't we save the National Theatre, the National Library, the National Stadium. Then they sell their 15 year home en bloc for a few dollars more.

I hope that Ignorance is Curable. But it may take a few generations.


The Pariah said...

Very insightful blog posting. Fully agree with your sentiments.

En bloc sales are potentially ripe for "temptation" at the highest level that even the PAP is wary enough to keep MND out of the en bloc sale market. That may explain why en bloc sales are put on MinLaw's plate even though MinLaw has no expertise/data sets in urban planning and urban rejuvenation.

On the one hand, MND has the cheek to use the tagline of "Endearing Homes" and the whole of PAP Govt is ostensibly advocating "Ageing in Place". URA in MND's stable is responsible for urban planning from Concept Plan, Master Plan and Development Guidelines to essentially unlock land value. BCA also in MND's stable is responsible for Building Management and Maintenance and is driven to be as hands-off as possible.

On the other hand, MinLaw has the gall to calibrate LTSA to be pro-sale (rather than pro-owner) so that the land value unlocked by MND (eg, through plot density increase) accrues to Developer-buyers (rather than extant property owners).

Never mind, that owners not only have lost their family homes and their community ties but also hollow-out even more their CPF retirement funds to buy a replacement home at "Double the Price or Half the Size" post-en bloc when Property is all about Location and Timing.

SLA in MinLaw's stable then allows caveat data to be fudged, aggregated and delayed - partly to be "business-friendly" and partly (I suspect) to deter in-depth comparative research pre/post-en bloc. Esp when no less than the astute Law Minister proclaim in Parliament that the number of units post-en bloc is double to quadruple that of pre-en bloc (as if he doesn't know of the proliferation of shoe-box condos - his ivory tower is likely on Planet Pluto).

Pre-GE 2011, during PM Lee's public apology, he asserted that no one could foretell the property prices rocketing post-2009. Likely MND/URA kept to their silo without realizing the extent of en bloc demolition facilitated by MinLaw/SLA in 2006-07 which created that demand spike (exacerbated by very low interest rates).

Note PAP Govt introduced TDSR (Total Debt Servicing Ratio - the most effective cooling measure in the entire series since 2007) only when the US Govt announced QE tapering-off. It is as if the PAP Govt is still haunted by the 1996 housing market crash when they were blamed for triggering the crash. So they likely timed TDSR to a global event (QE taper) so that they won't be blamed.

After leaving a royal mess in MOH, the ex-Health Minister became the new Natl Dev Minister in 2012 (post-GE 2011) and started the housing over-supply that will haunt us from 2015-17.

On top of likely interest rate hike from 2015-16, the changes arising from BEPS (Baseline Erosion and Profit Sharing) review at OECD level will be another drag in addition to the political adjustments for dormitory housing, financing rules, foreign labour, etc, that will hit both HDB and private property investors.

The only good news is that the PAP will pay the political price (hopefully) in GE2015-16 when the above hits limpid rental market, high vacancy rate, widespread mortgagee sale and hollowing-out of CPF savings, etc, esp for those who sold low for en bloc and bought high post-en bloc.