En-bloc sales: Beware the great fallacy
The recent en-bloc fever that has swept Singapore by storm has affected both supporters of en-bloc sales and those who are against in a rather significant manner.
On paper, it seems that any person who disposes of his older property in an en-bloc sale gets a significant amount of cash which is able to tide them through the years to come.
These packages seem attractive but, on a deeper analysis of the wonderful gift that this en-bloc fervour brings, it turns out to look more like a Trojan horse.
Firstly, many of these properties that are involved in an en-bloc sale are 20-30 years old. For an average Singaporean to buy his first private property, he may need to work for an average of 10 years before he is able to afford the first downpayment of his property, his dream home.
Considering the time in which an average Singaporean takes to pay for his housing, it takes around 20 years to achieve that aim. By then, this average Singaporean will be close to retirement and waiting to enjoy life. However, if his property undergoes the en-bloc process, he loses his roof and he does not have the means to earn the cash needed to get a new property of substantial size.
But wait, some people will say, we are getting millions from the en-bloc sale. Surely we can make use of this cash to get a better property.
Once again, this is great fallacy.
Firstly, the cash does not come immediately, so you will not get the property that you have been eyeing for at the current price.
Based on the rising trend of property prices, chances of you getting a similar property to that you have lost is slim.
Furthermore, if a developer is willing to part with billions to purchase your property, wouldn’t he charge you more when he rebuilds a new one over your old area?
How can we then purchase a property that is in the same area or of equal standing to that we have lost? This is basic common sense which does not require an economics degree to arrive at.
As the Minister Mentor stated, property and rental prices have to stay competitive in order to attract foreign investments. Collective sales totally contradicts this notion. Furthermore, it has been reported that Singapore’s housing prices are among the highest in the world. How is this contributing to our competitiveness?
Well, some people will say, you can downgrade to a HDB flat and enjoy the extra liquidity that comes with an en-bloc sale. True, but how much liquidity do we really get? With the rising prices of HDB flats and hidden costs in the en-bloc package, do we really get what we perceived we could? Furthermore, if one is staying at a good location now, does it warrant to uproot oneself to the suburbs for pittance? I am not so sure.
Lastly, we are talking about going green and conserving the environment nowadays. Does the tearing down of buildings and rebuilding of new ones so frequently serve to protect the land we love and the air we breathe? I am not so sure.
Let not our short-term greed ruin the future of our children. The world is tough enough for them as it is. We need not make it harder.
Lau Cher Chye
Source : Straits Times - 1 Aug 2007
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