For those living in older estates where en bloc is probably an eventuality, but have hesitations about an en-block (familiarity with e vicinity, want to return to old location, afraid of escalating ppty price that had resulted in "I had to downgrade to smaller flat with lower quality of life" (6Feb2011)[alt link]), I've 2 suggestions:
1) Clarify your queries/ Veto the en-bloc it if you're not convinced that the procedure and proceedings are equitable and fair.
2) Request a unit exchange/ tiered compensation scheme (gd idea but currently rarely done), described as follows:
(a) New Units are priced based on view, facing, floor etc. Based upon psf pricing, the most expensive units may be 150% the psf price of the cheapest. If the reason for the condo being en-blocked is mainly just for financial gain, then those who stay in better facing/ floor units should demand a compensation premium above the average psf compensation value; (i.e. +/- 5% for facing/ view, +/-10% for floor), such that if the value distribution were a bell curve, then there might be up to 30% difference in the psf compensation between extremes. This would, besides deterring en bloc speculators from exploiting cheaper units in anticipation for a windfall due to equal compensation during an en bloc, but also allow for a stable and equitable platform by which equitable unit replacement may be conducted, the next paragraph explains this procedure:
(b) If U are worried about ever increasing property prices and deem en bloc 'inevitable', then ask about an exchange scheme wherein the compensation for your current home is pegged to the psf price of the new one. E.g. based upon the a/m facts, the average psf compensation of a unit in your estate might be $1400psf with a variation of 10%. Your unit, your only property and of 1600sqft happens to have the best of specs (highest floor, best view/ facing etc).
In this situation, you should be given 2 options to decide upon.
- (i) to collect upon the successful en-bloc sale of your unit:
Full cash proceeds equal to 1600sft X $1400psf X1.10 = S$2.464M (NB: U would only receive $2.016M for the most unfavorable unit) - this wide variance would apply especially newer properties (<50yrs old) where but for financial gain, there is no structural need for building reconstruction; those who originally paid for more favorable units shouldn't be shortchanged by rash and hasty en-bloc proceedings.
- (ii) to receive in lieu of cash compensation, for the purpose of 'hedge and exchange' towards unit(s) in the new development, credit of equivalent value pegged to the new psf price and price variance of the new development.
This would benefit primarily long time residents and neighbors who would like to remain neighbors in the new development and owners who are disinclined towards property price fluctuations, (especially price rises as the aforementioned report 'I had to downgrade to smaller flat with lower quality of life' remains a grim reminder).
I follow with an example of 'exchange' calculations in the event that property prices fell by 50% at the point of the new development being launched (it could go either way).
The new development is launched 3 yrs later at an average psf price of $700psf with a psf price variance of 15%. The aforementioned favorable old development unit would now yield a credit for purchase of a unit in the new development valued at 1600sft X $700psf X 110% = $1.232M.
- The most expensive 1600sft unit in the new devp would now cost [1600sft X $700psf X 115%]= $1.288M, for which the old unit owner may purchase by topping up the difference of $56K or whatever the difference as the case may be. If the rules allow, the old owner might even be able to convert his current credits into cash, though hedged to current market prices, the same owner would now get only $1.232M (as opposed to twice immediately post en-bloc)
- The benefit of this to the developer would be the reduce financing costs as the amount payable for the entire en-bloc would be reduced in lieu of credit-exchange/ delayed compensation system.
- Though the negative property market example just cited 'disadvantaged' the exchange owner and 'benefited' the developer, it could quite easily have worked to the opposite result had property priced climbed- whichever the case, it gave the old property owners, not withstanding the issue of credit worthiness of the developer, some form of defense against misfortunes such as "I had to downgrade to smaller flat with lower quality of life" . All that is perhaps necessary is that owners are willing to go the distance to work with and along side all parties involved towards a fair and equitable resolution- one yielding the good and interest of all).
"Those who would give up Essential Liberty to purchase a little Temporary Safety, deserve neither Liberty nor Safety."-- Benjamin Franklin.
"The King will reply, 'I tell you the truth, whatever you did for one of the least of these brothers of mine, you did for me.'"- Matthew 25:40 (NIV)
"If you want a love message to be heard, it has got to be sent out. To keep a lamp burning, we have to keep putting oil in it." - Mother Teresa
PS: A 1:1 psf ratio of old to new development exchange is used because it is known that en-blocs are primarily for the purpose of intensifying land use through increased building plot-floor-ratios: 1.4, 2.8, 3.2 etc. As such whilst existing owners mightn't have to downgrade to a smaller unit, all living environments are expected to be more 'cramped' as average units sizes are reduced, buildings taller and units more numerous too.
- 'Tax en bloc speculators too': " I ask the authorities to also look into curbing the "condo raiders" who buy into old condominiums such as mine which have en bloc potential. " [TDY, 21Jan2011]
12Feb2011: Edited response to: 'Tax en bloc speculators too' [tinyurl link]
12Feb2011: En bloc roadblocks
12Feb2011: the other side of enbloc...