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Thread: Collective property sales: Check the frenzy

  1. #1
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    Default Collective property sales: Check the frenzy

    May 19, 2007

    Collective property sales: Check the frenzy


    I AM all in favour of collective property sales in land-scarce Singapore, but measures should be put in place to check the frenzy we are witnessing now. This, in my opinion, is not healthy for the economy and not healthy for the fabric of Singapore.

    When we buy an apartment, the price we negotiate reflects the view, layout, floor level and prestige factors such as in the case of a penthouse. But we are not able to negotiate the share value allocated to the apartment, which is set by the developer and approved by the Commissioner of the Buildings Management Unit.

    Share values were established purely for the apportionment of running costs in a development. They may be fair for the apportionment of running costs, but it in no way follows that they are a fair reflection of the respective stake owners have made in a development. Therefore, they should not be taken into consideration in the calculation of price or in important collective-sale decisions.

    When it comes to valuing apartments, marketing agents do not take into consideration floor levels or prestige factors. This means the apartment on the second level will get the same price as one on the 20th level. This is not the practice in the real world. Is this fair?

    Hopefully, amendments to legislation will incorporate the following:

    # Valuations must give due recognition to different floors;

    # Voting rights in collective-sale decisions should be weighted according to the size of the flat, not the share value allocated to it as is currently the case. This is because we have no say in the allocation of share value but we have a say in the size of our apartment.

    # A bigger say must be given to owner-occupiers as they will need to acquire a replacement property and may suffer a loss; and

    # The bar should be raised from the current 80 to 85 per cent. This will still allow steady growth in prices - which we all desire - but will moderate the current feverish pace of collective sales.

    Collective sales can be a useful engine of growth in the key property sector of our economy. But now that they have become so important and so frequent, it is vital that the upcoming review of legislation corrects certain imbalances which have become apparent.

    Magdeline Goei (Ms)

  2. #2
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    Default Let the market find its equilibrium for collective property sales

    May 22, 2007

    Let the market find its equilibrium for collective property sales


    I REFER to the letter, 'Collective property sales: Check the frenzy' (ST, May 19), by Ms Magdeline Goei.

    In any asset valuation, the asset's terminal valuation is a key consideration. In collective property sales, the terminal value of a private estate is merely its land value.

    The potential yield of a piece of land on redevelopment depends on its locality, prevailing plot ratio, land size and legislations on development control.

    Considerations such as higher floors, layout, good views and prestige such as that of a penthouse do not affect the potential yield of a piece of land.

    In an efficient market, prices reflect these considerations. I am fully confident that the current legislation on collective property sales is still relevant and that the Singapore property market is efficient.

    The issue at hand is thus not with flaws in our legislations but how well informed buyers of Singapore properties are.

    Overly legislative controls and frequent reviews will disrupt what is already an efficient market.

    We should let the market find its equilibrium for collective property sales.

    Tay Sing Poo

  3. #3
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    Default Re: Let the market find its equilibrium for collective property sales

    Quote Originally Posted by mr funny
    In any asset valuation, the asset's terminal valuation is a key consideration. In collective property sales, the terminal value of a private estate is merely its land value.

    The potential yield of a piece of land on redevelopment depends on its locality, prevailing plot ratio, land size and legislations on development control.

    Considerations such as higher floors, layout, good views and prestige such as that of a penthouse do not affect the potential yield of a piece of land.
    Correct. Developer doesn't care about your high floor or sea view. And neither should they.

  4. #4
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    Default Re: Collective property sales: Check the frenzy

    But we're not talking about the final value that the land can 'yield' but the method of apportionment here. The most popular method is 50/50 or 50% unit size and 50% share values.

    Therefore, by the same logic, all methods of apportionment should exclude unit size, and purely take into account share values only, since a unit's size does not affect the potential yield of the land either. In fact, taken to its logical extreme, a developer pays one lump sum and the owners should just divide it equally among themselves, without consideration of floor, view, unit size or even share values etc.

  5. #5
    carol chua
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    Default Re: Let the market find its equilibrium for collective property sales

    Quote Originally Posted by Unregistered
    Correct. Developer doesn't care about your high floor or sea view. And neither should they.
    Whilst it is true that values of high floors or sea view etc. are irrelevant to developers, the methodology of reimbursement to individual home owners should take into account their initial investments and that include the premiums they pay for these additional features. i.e if the value of the block of apartments are based on proper and accurate valuations given to each unit , the gains from the sales proceeds can then be distributed on same percentage basis. The key to compensation in enbloc sales is to enable restitution as fairly as it is possible.

  6. #6
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    Default Re: Collective property sales: Check the frenzy

    Quote Originally Posted by Unregistered
    But we're not talking about the final value that the land can 'yield' but the method of apportionment here. The most popular method is 50/50 or 50% unit size and 50% share values.

    Therefore, by the same logic, all methods of apportionment should exclude unit size, and purely take into account share values only, since a unit's size does not affect the potential yield of the land either. In fact, taken to its logical extreme, a developer pays one lump sum and the owners should just divide it equally among themselves, without consideration of floor, view, unit size or even share values etc.
    I am staying in a unit sized 1800sq ft and most units in my condo are 1200sq ft. The share value for types is the same. In my case I will lose big time if the 50/50 rule is applied.
    Values should be based purely on unit size leaving out share values completely. It is very complicated and contentious if other issues like floor, view, etc are included.

  7. #7
    you call that fair?
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    Default Re: Collective property sales: Check the frenzy

    Quote Originally Posted by nav14
    I am staying in a unit sized 1800sq ft and most units in my condo are 1200sq ft. The share value for types is the same. In my case I will lose big time if the 50/50 rule is applied.
    Values should be based purely on unit size leaving out share values completely. It is very complicated and contentious if other issues like floor, view, etc are included.
    Let me guess why your unit size is bigger than the rest and yet you still have the same share value.

    Your unit has a ceiling-less patio. This patio area is NOT included in the GFA. Developer will not benefit from buying your patio area. Therefore I see no reason why you ought to get a bigger share of the proceeds.

    Share value is also used to calculate the maintenance payment every month. If en blocs are calculated by unit size alone, then all those who paid same maintenance as you did will lose out, obviously, to you.

    Don't smoke us ok?

  8. #8
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    Default Re: Collective property sales: Check the frenzy

    Quote Originally Posted by you call that fair?
    Let me guess why your unit size is bigger than the rest and yet you still have the same share value.

    Your unit has a ceiling-less patio. This patio area is NOT included in the GFA. Developer will not benefit from buying your patio area. Therefore I see no reason why you ought to get a bigger share of the proceeds.

    Share value is also used to calculate the maintenance payment every month. If en blocs are calculated by unit size alone, then all those who paid same maintenance as you did will lose out, obviously, to you.

    Don't smoke us ok?
    Mine is pure 1800sq ft built in without patio or balcony. In fact the smaller units have balconies. Regardless of maintenance or whatever,my unit's present market price is 50% higher than the smaller units and you think I will accept same en-bloc price as other smaller units? Will you accept it yourself? You must be kidding. Anyway more than 10% of condos in my development fall in my category and I am sure no en-bloc will go through if they have an arrangement like 50/50. It has to be at the most 20/80 or purely based on built in area.

  9. #9
    Dr Minority
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    Default Re: Collective property sales: Check the frenzy

    Quote Originally Posted by nav14
    Anyway more than 10% of condos in my development fall in my category and I am sure no en-bloc will go through if they have an arrangement like 50/50. It has to be at the most 20/80 or purely based on built in area.
    That's where apathy or a naive sense of security will land you homeless. If you have only 10% or so which fall into your category, the SC or agents will not target your group; rather they'll aim for those with smaller unit sizes which in many other enblocs will be the first to sign on the CSA for many reasons (they reap bigger profits from the 50/50 rule, they typically have greater difficulty getting rental for their smaller units relative to the bigger ones, which expats prefer etc).

    Furthermore, 9 times out of 10, a SC will pick the method of apportionment that favours themselves the most first. And again, you'll see a larger representation of the smaller unit owners in SCs ie those who will benefit the most from the most common 50/50 method. I've seen the more equitable valuation method (based on a calculation that factors in unit size, share values, height and view) rejected time and time again, even when offered during the agent selection phase, simply because SC members will lose out using this method.

    You can refuse to sign. But once it hits 80%, it'll matter little.

  10. #10
    Dr Minority
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    Default Re: Collective property sales: Check the frenzy

    Oh, by the way, the 20/80 method or one based purely on unit area, are methods that would be rejected by the STB. So you can forget those. They favour one cluster of owners (those with larger unit sizes) over all others and is deemed by the STB to be unfair to the collective whole (ie 80%).

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