En bloc blues

En bloc blues are not a new phenomenon, property players say. But they are being sung louder now simply because they are being played on more channels.

Overnight millionaires. That is what the owners of Leedon Heights became when they sold their estate en bloc in April for at least $2.4 million each.

But while most of their neighbours are celebrating their windfalls, some 30 owners of the 341-unit estate in Farrer Road are pocketing their bumper payouts with mixed feelings.

Among the discontented is Mrs Margaret Ng, a former teacher in her fifties, who bought her apartment more than 20 years ago.

‘When you look at it, we made a lot of money,’ she said. ‘But it’s a roof over your head. You can’t just look at it in terms of profit.’

Her words are being echoed by a small but growing group of home owners whose estates have gone en bloc against their wishes.

And even as Singapore goes through the strongest wave of collective sales in history, an unprecedented groundswell of dissatisfaction is rising up around these deals.

The Strata Titles Board (STB), which governs collective sales, received 68 objections for 60 collective sale applications in the whole of last year.

This number has nearly doubled for this year even though it is only June. It has already jumped to 122 for only 47 approved sales so far this year.

For many of these unhappy en bloc sellers, property experts say, it is all about the money.

Even a million-dollar payout may not be enough at the rate property prices are rising in some areas.

A comparable replacement home costs more. And $1.5 million doesn’t seem right when the guy next door is getting $2 million just a couple of months later.

Then there are the cases where sellers do not even recover their original investment on the home, much less become instant millionaires.

Mr Bobby Ng and his parents, for instance, reaped $685,000 from their unit at Hong Leong Garden when the estate was sold in March.

But the 35-year-old sales manager says the unit cost them $690,000 to begin with.

‘If I can get at least $900,000 for my place, then it can be called en bloc,’ he said. ‘Now, it’s not en bloc at all.’

Mr Ng also worries that by the time he actually gets the cash in hand - a process that could take up to a year - home prices in this quickly rising market would have soared beyond his reach.

Overshadowing all this is his unhappiness about the way in which his parents were badgered into signing up for the collective sale.

‘Both my parents are hawkers and don’t have much education. The sales committee came down to talk to them when they were working at the busiest time and chased them to sign,’ he said.

‘We were not even given the full details until after we signed.’

Money no enough

Only 80 per cent of owners need to agree to an estate’s sale if it is aged 10 years or older - down from unanimous consent before 1999, when new rules were put in place to make it easier to go en bloc.

This means that, just in terms of numbers, more owners who do not want to sell their homes find they have no choice in the matter.

But why don’t they want to sell in the first place?

Property experts say that in the past, almost all owners were happy to go along with a collective sale.

But now, the main reason why they are objecting is because the property market is rising like there is no tomorrow - for the first time in a decade.

‘This time round, the market is taking a really steep uptrend, something that’s unprecedented in the history of the local property market,’ said Mr Steven Ming, director of investment sales at Savills Singapore.

Ironically, it is this very same property boom that is driving the current en bloc frenzy in the first place.

Since January, developers riding on the property upswing have forked out $7.59 billion for 57 estates, according to the latest figures by CB Richard Ellis.

This is only 5 per cent shy of the record $8 billion done in the whole of last year.

There are two key reasons why fast-rising prices are becoming a problem for sellers.

First, as more estates are snapped up at ever-rising prices, selling your home too early may mean a lower payout, as the owners of Horizon Tower discovered to their chagrin.

When they sold their development in January for $500 million, it was the biggest en bloc deal ever, netting most owners $2.3 million each.

But barely three months later, Grangeford Apartments next door - with mainly smaller units - went on the market at a price that would yield each unit owner at least $3 million.

Feeling shortchanged, a group of Horizon Towers owners tried to back out of their sale agreement, making headlines in the process.

‘Deep down, we…believe many owners may now be regretting this en bloc,’ they said in a letter to fellow residents.

‘We strongly feel that if we sell our units individually, we would achieve prices far better than what this en bloc has fetched us.’

The second problem with the property price hikes is that they have made it almost impossible for en bloc sellers to get a replacement home of the same size, in the same location, at the same price.

In fact, by the time a new development has replaced their old estate, almost none of the original sellers can afford to buy a unit in it.

Owners of Paterson Tower, for instance, received a cool $3.7 million each when the estate was sold last March.

But the new project that will replace it, The Marq, is likely to be priced so high that the smallest unit will reportedly cost at least $8.4 million.

And recent launches in the Paterson area, such as Paterson Residences, cost at least $3.2 million for apartments that are smaller.

This has forced some Paterson Tower owners to move to ‘more affordable’ areas like Thomson and the East Coast, said Dr Phang Sin Kat of law firm Phang & Co, which brokered the estate’s sale.

Home owners most likely to be affected by this problem live in developments that are fairly new, say under 15 years old, or with large units that are increasingly harder to find as old projects get torn down, added Mr Karamjit Singh, managing director of Credo Real Estate.

Sense of urgency

In this type of market, speed is everything and at a year to completion, the typical en bloc sale seems to plod along at snail’s pace.

At the ex-HUDC estate Gillman Heights in Alexandra Road, a reserve price for the project was fixed last February. But it took a whole year for the estate to be sold, at some 3 per cent above the reserve price.

In that time, home prices in the area had risen by up to 13 per cent for some properties, according to a group of unhappy minority owners who are now objecting to the sale.

Even after an estate is sold, it takes eight to 12 months before owners receive the payouts, said Mr Ming. In this time, the market ‘can leap by 15 to 20 per cent’.

‘The extra dollars they are getting are looking smaller and smaller by the day,’ he said. ‘That’s the main stinging reason owners are unhappy.’

Worsening the situation is a sense of urgency among home owners who suspect that the en bloc fever could be cooling.

This means that more estates are putting themselves up for sale ad being torn down.

With hundreds of units being pulled from the market each month, homes are in short supply in prime areas.

This leads to even higher rentals and home prices and further desperation among home owners to sell, sending the market into a upward spiral of sorts.

‘It’s a double whammy,’ said Credo’s Mr Singh. ‘New projects are not coming onstream as fast as needed to replace the supply.’

On the ground, the rush to go en bloc has led to more aggression in bringing about a sale, said Mr Phang.

‘In some cases, it has got to the point of harassment,’ he said.

‘Owners are getting a few calls a day and knocks on their doors even during Chinese New Year, asking them to sell. Of course this makes them unhappy.’

With two segments potentially objecting - those finding it hard to find replacement homes and greedy investors holding out for an even higher price - property experts say that more owners are likely to resist the entire collective sale proposition over the next one to two years.

‘In view of the increasing sale prices in the primary and secondary market, the number of dissenters would invariably increase,’ said Mr Ho Eng Joo, director of investment sales at property firm Colliers International.

More awareness

En bloc blues are not a new phenomenon, property players say. But they are being sung louder now simply because they are being played on more channels.

The discontented, more savvy than ever before, are taking their protests online, to the media, to property experts and even to their MPs.

Mr Jeremy Lake, executive director of investment properties at CB Richard Ellis, said: ‘The dissenters are just more vocal now and they are getting more media coverage which makes it seem like there are more of them.’

More minority owners are also hiring lawyers to protect their interests - despite the sometimes steep legal fees.

Dr Phang said he now receives ‘twice, three times more inquiries’ from owners objecting to an en bloc sale.

‘People are more aware of their rights now,’ he said. ‘They look up the procedures and statutes. Some even create blogs about en blocs.’

An extreme example is that of Mr Yeo Loo Keng and his wife, whose $660,000 proceeds from the sale of their Waterfront View home was not enough to top up their CPF accounts.

Although developer Frasers Centrepoint offered them a $200,000 settlement, they took their case to the High Court to ‘test the legal system’ and how it treated minority owners, said Mr Yeo’s brother Loo San.

They lost the case and now have to foot the legal costs, which could come up to $100,000, he added. But he said there are ‘no regrets about the decision’ because they learnt valuable lessons.

Another way in which the public is making its unhappiness felt is through feedback to the Government.

More than 100 people responded to a public consultation on changes to en bloc legislation held by the Ministry of Law in April and last month.

A ministry spokesman said: ‘The vast majority of the suggestions concerned matters on making the process more fair and transparent.’

The proposed changes include the addition of a second requirement for getting majority consent.

This means that approval has to come from owners controlling at least 80 per cent of the share values as well as the number of units in their estates.

Another change requires the collective sale committee to be formed only at an extraordinary general meeting arranged by the estate’s management corporation.

Now, such a committee can be formed ad hoc, something that unwilling sellers have complained about.

Some of them also want other issues addressed such as the conflict of interests between the management council and the sales committee.

Often, the members in both groupings are the same. When that happens, the possibility of intentionally allowing an estate to rot is very high as the sales committee’s priority is to sell it rather than to maintain it, said some home owners.

It is not known if this issue will be addressed, though the the ministry spokesman said: ‘We expect that many useful points will be incorporated into the final amendment Bill. We hope to finalise the changes by August or September.’

But what is clear is that the public debate over en bloc issues will continue to rage for a while.

And the time it takes the controversy to settle is starting to frustrate once-happy en bloc sellers.

Mr Ajay Kumar, 40, got a $2.3 million payout from the sale of his Horizon Towers home. Even though he is not happy that residents of the Grangeford Apartments next door got more for their collective sale, he is hoping the objecting home owners in his estate will come to an agreement soon.

‘There’s nothing more they can do at this point since the majority of owners have signed the sale agreement,’ he said.

‘Property prices are rising drastically, and we should just expedite the payments so at least residents don’t lose any further.’

Fast winding down

How, and when, will this madness all end?

Property experts say that en bloc fever may actually take a breather soon, within the next year.

‘I don’t see it as a continuous buying spree,’ said Mr Ming of Savills.

He explained that developers have already filled up their land banks and may want to launch some of these new projects first before acquiring more sites.

This means they may become more choosy about which sites to buy.

Another factor that may kick off the cooling-off process are the upcoming changes in en bloc legislation, which will tighten some of the rules in a sale.

Marketing agents also say it has become harder to push through a collective sale because owners’ expectations have gone up.

Mr Ming said: ‘The fact that we’re on the longest run in history means we may be already close to the end.’

Source: The Straits Times, 16 June 2007