Real estate agencies all for clarity and transparency

Real estate agencies all for clarity and transparency

I COMMEND last Saturday’s helpful Forum Online letter by Mr Ng Kwong Yee, ‘Crux of property brokering that needs clarity’.

We agree with Mr Ng that most complaints about estate agents arise from a lack of mutual understanding, specificity and even transparency in the relationship between the consumer and the realtor.

We further concur with his suggestion to make it mandatory for the estate agent to explain the transaction process, the scope of estate agency services, commission payable and thereafter secure the consumer’s written agreement. This will surely reduce the number of complaints and disputes between consumers and estate agents acting for them.

For example, Britain’s Royal Institution of Chartered Surveyors (RICS) has published the Blue Book, which is essentially an estate agency guide for realtors and consumers to raise professional service standards and improve consumer experience in home buying and selling. Estate agents who are members of RICS are required to provide prospective clients with a copy of the Blue Book which, among other things, details the sale and purchase process as well as the role of the estate agent. Prospective sellers and buyers familiarise themselves with the Blue Book so the duties of the agent and expectations of the consumer are adequately matched.

Likewise, Singapore realtors should ensure that consumers who appoint them for their services know what the transaction entails and precise service offerings. Then there will be true meeting of minds, with satisfied consumers and agents paid promptly. The Singapore Accredited Estate Agencies’ downloadable Seller’s and Buyer’s Guides on its website can be useful resources in this.

Finally, it should be made mandatory for accredited estate agents or salesmen to co-broke with one another when necessary and not deal with ‘unlicensed middlemen or runners’ as the latter operate ‘below the radar’, are not subject to any professional code of conduct and may expose consumers to unnecessary risks.

This will avoid the emergence of an unregulated group in the industry. Alternatively, this group of ‘middlemen or runners’ should comply with accreditation requirements stipulated by the Government in the new regulatory framework and seek to be accredited.

Dr Tan Tee Khoon
Chief Executive Officer
Singapore Accredited Estate Agencies

Source : Straits Times - 26 October 2009

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MINDY YONG

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Property adviser to Calpers resigns

Property adviser to Calpers resigns

Victor MacFarlane will remain under contract with the fund through year’s end

(SACRAMENTO, California) San Francisco businessman Victor MacFarlane is ending his longtime role as a property adviser to the California Public Employees’ Retirement System (Calpers), a spokeswoman for his firm said on Saturday.

The development came after property investments by the nation’s largest pension fund lost much of their value during the global economic downturn, costing the fund hundreds of millions of dollars.

MacFarlane Partners spokeswoman Julie Chase said that Mr MacFarlane will remain under contract with the giant pension fund through year’s end. She said that Mr MacFarlane resigned within the past month, but she would not say why.

Calls to Calpers spokeswoman Pat Macht at home and work were not immediately returned.

Mr MacFarlane had advised the pension fund for years, Ms Chase said. ‘More than a decade is probably fair.’

In January 2007, his firm helped engineer a US$970 million purchase by the pension fund of a majority share of a massive Southern California residential development known as LandSource, The Wall Street Journal reported on Saturday.

Falling land prices sent LandSource Communities Development LLC into Chapter 11 protection in June 2008.

In July, a federal bankruptcy judge let one of the original owners, Lennar Corp, buy back much of the firm at a steep discount to bring it out of bankruptcy. The Miami-based home builder bought about 15 per cent of the Newhall Ranch project and other properties for about US$140 million.

Newhall Ranch is in the last major tract of undeveloped land in Los Angeles County and the site of a planned 21,000-home development.

MacFarlane Partners property investment management firm was founded in 1987 and now manages US$10 billion in assets for some of the world’s largest pension plans and institutions, the firm says on its website. — AP

Source : Business Times - 26 October 2009

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What do HDB numbers say?

What do HDB numbers say?

Success rate for being offered a flat and choosy buyers do not add up

By Jessica Cheam

THESE days, both the Housing Board (HDB) and home buyers seem to be grappling, in their different ways, with statistics.

First-time home seekers have complained in recent media reports and in letters to The Straits Times’ Forum page that it is tough to get a new HDB flat. Some said they had failed to get a home despite trying as many as 18 times.

The HDB responded recently by releasing its own records to show that some of these claims were ‘not entirely truthful’. Some buyers had offered exaggerated accounts of their failed attempts to get a new flat, it said.

As National Development Minister Mah Bow Tan put it, it was ‘not a matter of buyers getting a flat; it’s a matter of them getting it and not selecting it, for one reason or another’.

To reinforce its case, HDB issued figures to show that first-time applicants had an 80per cent chance of success at being offered a flat - and this rose to 96per cent on their second try.

The figures were derived from the number of first-time applicants who got a chance to select a flat divided by the number of first-time applications received for build-to-order (BTO) projects from March 2007 to June this year.

But what do these numbers tell us? A closer look indicates that there is more to this than meets the eye.

Consider the following hypothetical case: Say HDB launches a BTO project consisting of 200 flats. Let’s also assume these flats are all for first-time applicants and HDB receives about three times the number of applicants as flats: 600.

Now, if the flats prove to be popular, then it is likely that the 200 couples at the front of the queue will quickly snap up all the flats. The 400 left in the queue would be considered unsuccessful applicants, by HDB’s definition, since they were not offered a flat at all. So the ’success rate’ of being offered a flat in this case would be only 33per cent.

Conversely, if the flats are unpopular and the first 200 couples in the queue do not all bite, the flats will be offered to the remaining 400 in the queue until they are all taken up. In this case, the success rate of first-timers being offered a flat might be as high as 100per cent.

It seems, therefore, that the ’success rate’ figures offered by HDB may lead to some pretty counter-intuitive conclusions.

Popular BTO exercises might result in a low success rate for first-timers, particularly if the queue for these highly-prized units is long. Conversely, a high success rate may just mean HDB is offering flats that people don’t want to buy.

So, could the high success rates that HDB quotes (80 and 96per cent) simply be the result of it building a whole lot of unpopular flats that are being routinely rejected by the people to whom they are offered?

Well, no - for the overall take-up rate for BTO projects last year was a healthy 89per cent. So HDB is building flats that are generally popular.

How, then, can we make sense of HDB’s numbers? And how can we resolve the debate between the Board, which says it is meeting demand, and buyers, who say they can’t seem to get the flats they want?

What is clear to me is that these numbers show HDB is meeting demand, but only in a perfect world where flat buyers are not choosy and take any flat they are offered.

In this perfect world, the 80per cent who are offered a flat will go on to select it, while almost all (96per cent) will get a flat on the second try.

The reality, however, is that the average buyer is choosy, and not all flats are created equal.

HDB’s own figures show that even for buyers on the first day of flat selection, with the full panoply of options before them, the rejection rate can be as high as 36per cent - as was the case with Sengkang’s Fernvale Crest, launched in June.

HDB suggests that these unsuccessful flat applicants have themselves to blame, in part. But buyers who have rejected flats have counter-argued that buying a home is one of life’s biggest decisions.

Who wants to be forced to buy an unattractive second floor unit facing the rubbish dump because that is the only one on offer? Or live in a new estate that hasn’t been properly developed yet?

These buyers would claim, thus, that HDB isn’t meeting demand. Build nicer flats, they would say, and they would take them up promptly when offered.

The trouble is, HDB cannot afford to build only premium flats in prime locations. To begin with, there is a physical limit to the land available in such locations. Also, part of HDB’s mission is to develop new towns and move the population to these less popular areas.

But a more fundamental economic problem is that HDB cannot price these premium flats at prices anywhere close to their private sector equivalents.

An implicit limit on the price of public housing means that successful applicants of premium flats are getting them at a bargain compared to private condominium unit buyers - or even, in some cases, resale flat buyers.

The perception is that homeowners get flats in prime locations ‘on the cheap’. So the flat selection system for these premium flats turns into a lottery of sorts.

What can be done to solve this impasse between the Board and young homeowners?

Feedback from young couples is that the BTO system forces buyers to wait three to four years to get their flat. This is a key reason why many drop out of the queue. They either turn to resale flats, or - tellingly - join popular sales exercises, such as HDB’s recent sale of so-called balance flats, which offered 2,132 ready or almost-ready flats across the island.

Should HDB offer more completed flats that will be attractive to young couples keen to move in and start families?

One thing to do might be to offer completed flats for immediate occupation in outlying new estates that HDB is trying to grow. This would give people a strong incentive to select flats they are offered.

Conversely, BTO flats should be offered in popular mature estates where demand is likely to be highest and people will grab any offer anyway, however long the wait to completion.

Until some such solution is found, I suspect HDB and young couples will continue to disagree. And unless attitudes change, I don’t see anyone having the last word on this.

Source : Straits Times - 26 October 2009

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MINDY YONG

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mindy@mindyyong.com

Home-buying euphoria tapers off

Home-buying euphoria tapers off

For the first time in months, supply outstrips demand but supply glut is unlikely

By Fiona Chan

A quiet period is always a good time for taking stock - and the rare breather in the housing market right now is allowing buyers to size up the state of home supply.

As the feverish pace of new home sales begins to subside following price hikes and the Government’s efforts to cool the market, the stock of available homes for sale is beginning to outstrip demand for the first time in months.

Last month, developers sold fewer units than they launched, only the second time they had done so since the property market started picking up in February this year.

The last time this happened was in July. Even then, however, the take-up rate was still almost one for one, at 96 per cent.

The take-up rate of brand-new homes last month was 81 per cent, by far the lowest since February, according to data released by the Urban Redevelopment Authority (URA) last week.

Last month’s figures, however, seemed to signal a turning point in the housing market’s current boom.

What the falling take-up rate translates to is a growing inventory of units that have already been launched and are therefore available for sale but remain untouched by home buyers.

As of the end of last month, there were 3,157 units that had been launched but were still unsold, URA data shows.

This was a 10 per cent increase from the number in August - a significant reversal of the trend, which had been on the decline since January.

As the home-buying momentum tapers off and the Government resumes regular scheduled land sales, the supply of new homes is poised to rise further - and probably faster than demand can keep up, say property consultants.

The good news, though, is that take-up rates have been so unexpectedly high in recent months that a serious supply glut is unlikely to result any time soon.

One reason home demand started to lag supply last month could be the cooling measures introduced by the Government on Sept 14.

Any knee-jerk reaction to the moves, which included the removal of the interest absorption scheme and the resumption of scheduled land sales, would have taken a toll on home sales in the latter half of the month.

However, property consultants also point to an increasing resistance by home buyers who are starting to be put off by price hikes.

‘The buying euphoria seen in the earlier months of the year has cooled somewhat, with sales moving at a slower pace, as buyers are likely to take longer to evaluate their purchase decisions,’ said Ms Tay Huey Ying, director of research and advisory at property firm Colliers International.

On the supply side, developers have also held back on new launches as they anticipate an adverse reaction by buyers to the Government’s measures, said Dr Chua Yang Liang, head of South-east Asia research at real estate consultancy Jones Lang LaSalle.

Ms Tay expects developers to continue launching and selling fewer units for the rest of the year, as a result of cooling measures dampening market sentiment.

‘Developers are likely to be selective in their project launches or release units in small batches to test the market’s response,’ she said.

‘Depending on market conditions, some developers may also choose to defer their project launches to next year.’

She believes that for this month, developers may launch and sell fewer than 1,000 units. If this happens, it would be the first time since March and January respectively.

Of the top 10 developments with the most units launched and unsold as of the end of last month, half are entry-level condominiums in suburban areas, while the other half are mid-tier projects on the city fringe.

They range from developments that have just been launched, such as CapitaLand’s The Interlace in Alexandra Road, to those that have been on the market for a considerable amount of time, such as Hong Leong Holdings’ Aalto in Jalan Kechil, near Meyer Road, which first started sales in August 2007.

Source : Straits Times - 25 October 2009

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MINDY YONG

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