Often, one or two common reasons are main drivers of the ownership of the property. One possibility is that the property is for residing, and it should more appropriately be called a home. Another likely purpose is for income or to grow one’s personal net worth; the property is then an investment. Of course many owner-occupiers also reside while waiting for capital appreciation. For this article, I will put forth that an owner-occupier who is attached to his / her home is beneficial to an en-bloc.

It has been a tenet of civil society that, as far as possible,the wishes and priorities of individual parties do not encroach upon one another. At least until the early 1990s, when we first witnessed the en-bloc sales phenomenon. Suddenly, an owner-occupier is faced with the prospect of losing his strata-title home, against his wishes, and to the not particularly noble purpose of enriching his neighbours.

Home owners wish to stay for a multitude of reasons. Sentimental reasons such as familiarity, convenience, friends and neighbours are irreplaceable and priceless. Most of us likely know someone who will not move out of their homes unless left with no other choice. Even if you do not have such attachment to your home, like myself, but know someone like that, you can quite easily empathise with their grief at losing their home. For those who do not, all you need is to just take a moment and I am sure you can too.

En Bloc examples at different stages

The Adria is an almost-complete En-Bloc; Lion Towers has just qualified for En-Bloc

Also observed since the 1990s, real property valuation has changed distinctly. Some properties that are clearly “run-down”, old and dated, or in some way not desirable as a home, can still be valued highly. Why? Because the valuation has not only taken on its home value, but also its potential redeveloped value. This premium is often decided by plot utilisation shortfall or even non-maximisation of the allotted, or recently increased, plot ratio.

This situation brings 2 concerns for owner-occupiers. They:

  1. run the new risk of losing their beloved home
  2. might have to pay significantly more for a property that possesses the qualities they desire, as they will also have to pay for the redevelopment potential which, ironically, is the exact opposite of the intentions of such home buyers.

There is still at least one more extra agony for the long-term owner-occupier, which I will elaborate on later.

Most investors are benign and go about their business without interfering with others, hence not adding to the concerns of other owners, especially the owner-occupiers. However, with the onslaught of en-bloc fever, we have a new breed of active en-blockers, an aggressive go-getting group of speculators who, technically speaking, are not even investors. They seek an arbitrage opportunity by buying in the “home” market and selling in a “for redevelopment” or more commonly known “en-bloc” market. Some investors buy in hope of an en-bloc, while this group buys and MAKES IT HAPPEN. Often, these groups make the most money in projects where the take-up rate of en-bloc sales is low, leading to a lower premium recognising the redevelopment value, as it will be more difficult to realise.

Often, we hear of the strong-arm tactics that such sellers adopt. Some of these people are not even the investors, but long time owner or owner-occupiers, who succumb to the extra money for the taking, by betraying their conscience. So now, their fellow long-term owner-occupiers have to put up with such possible disturbances as well.

But the actions and methods of this group of people may be fundamentally flawed. Ultimately, their end goal is profit; but in many a case where such strong arms tactics were apparent, the selling price was not even highest and the ultimate replacement costs turned out higher than anticipated, as is the cases in the recent run up.

Why? I would like to hypothesise that there are a few reasons:

  1. When the price is right, there will naturally be support for en-bloc.
  2. Time is required for the market to reach the right price in each property cycle’s run-up, hence if unconventional motivation is needed, in all probability, the timing is just not right for it yet.
  3. In the early stages of the run-up, property prices will continue to climb at an accelerated pace, so by time the en-bloc payout is received, a replacement property may be unachievable.

In en-bloc cases that correspond to point 3 above, it will usually be the developer who laughs all the way to the bank.

With this in mind, we should all get in touch with our conscience now. Think about the feeling of owner-occupiers who have a strong attachment to their property and spare a thought for them. Do this before we find ourselves in a situation where a potential “wind-fall” from an en-bloc potentially clouds our judgement.

We will likely move into another property price cycle soon. So, to the people who again feel the need to give en-bloc motivation an aggressive boost, I am proposing that you should not, as you might actually be selling yourselves short.

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  One Response to “The Owner-Occupier and the En-Bloc Phenomenon”

  1.  

    The evils of Capitalism and its greed are being addressed as long as we carry on the fight. Wall Street is geinttg nervous, and that scares politicians, because on the one hand, corporations have the power to endorse or not endorse American jobs, and they do not want business to leave, the other hand, the nation will not stand for the government to limit wealth accumulation. Politicians do not know how to react politically. We as a people must endorse wealth caps outside of taxes to truly fix capitalism, and it has to be done within worldwide agreements or the markets or companies will set up shop elsewhere and the ensuing transfers of wealth could create wars. It’s a very delicate situation. We must continue to protest, because we do not want more welfare. We do not want more exploding prisons or fines as state and local governments force us to be criminally charged to tax us citizens without calling it a tax. The only fix is for big money to pay more wages, and hire more people so we Americans have jobs, and are not worked tons of hours to the point of breaking for a small wage.The only true way to fix that is going to be limiting wealth. So that has to be a discussion of the movement. And it is going to be heated.

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