En bloc debate, HK style

WHEN land is scarce, your right to live in your home ends when your neighbours sell theirs.

This logic applies not just to Singapore – which defied expectations by recently producing its first collective sale offer since the recession took hold – but also to Hong Kong, which is now deep in debate over proposed changes to its compulsory property sale rules.

On the surface, the operative concept in both cities is the same: Urban renewal is expensive, and private capital speeds up the process. The government lends a hand by allowing an estate to be sold even if the sale does not get the unanimous approval of all the owners.

But Hong Kong and Singapore differ in the weight each accords to minority owners. Singapore requires an 80 per cent consent for a sale of a property at least 10 years old, and a 90 per cent approval for a development less than 10 years old.

Meanwhile, Hong Kong has maintained a 90 per cent threshold since the 1990s, with a tribunal giving the final go-ahead after considering a host of factors, including the property’s age and state of repair.

The Hong Kong administration has recently proposed that the threshold be lowered to 80 per cent – but only in cases where all but one unit has been acquired by one party, and where the development is at least 50 years old.

A observer may think this is just a case of laissez-faire Hong Kong playing catch-up, but the territory’s deliberations on the matter actually hold many lessons for the Republic.

For starters, Hong Kong remains protective of minority rights. Even if the proposed change is passed, it would still be harder for the majority of owners in a Hong Kong estate to push though a sale, compared with those in Singapore.

And yet, the opposition to the proposed change in some quarters in Hong Kong has been fierce. The change, they say, is tantamount to a subsidy for developers as it would mean that they would not need to entice as many home owners with a good sale price.

One South China Morning Post reader declared in a letter published on Aug 3: ‘The powers to compulsorily take away private homes are a draconian statutory provision that should be vested only in government – and used only for a defined public purpose. Making a profit for developers is not a public purpose.’

The language is refreshing, considering the tendency here to cast in a negative light those opposing an en bloc sale.

At times, they are made out to seem as greedy home owners holding out for more money, or eccentric seniors unduly attached to their property, or simply stubborn people who will not let their neighbours get on with their lives elsewhere.

Some here may point to Singapore’s public housing programme, where upgrading works are passed with a 75 per cent vote. If the majority can rule in public housing, why can’t it rule in private estates?

But that is hardly a parallel, given that public flat owners who have their homes renovated via a majority vote get to keep their homes whether they approved the upgrade or no. Private home owners have no such comfort.

Another interesting point about the Hong Kong debate is that it gives weight to environmental concerns.

The proposal notes that the normal working life of reinforced concrete buildings – during which they are unlikely to require major repairs – is assumed to be 50 years. Consequently, it sets 50 years as the minimum age for a building which may be subject to a compulsory sale application under the relaxed guidelines.

Given the huge amount of energy and material that erecting a building requires, this safeguard reduces the likelihood of unnecessary demolition waste.

In Singapore, money is by far the biggest measure used to determine whether a collective sale can go ahead.

The Strata Titles Board, which gives such sales the final nod, takes into account the transaction’s sale price, the method of distributing the sale proceeds and the relationship of the buyer to any of the unit owners.

Objections to the sale have to be couched in the language of dollars and cents. The minority owner has to suffer a financial loss or be unable to redeem the mortgage against his home in order for the sale to be called off.

The potential loss of built heritage or good architecture is not a consideration. Neither is the environmental cost of demolishing a building that is in good working condition.

There are mitigating factors of course.

Singapore has a pro-active conservation authority which keeps a look-out for historically and architecturally valuable buildings, and adds them to its protected list. This may lessen somewhat the need for stringent collective sale rules to protect urban heritage.

Singapore is also two-thirds the size of Hong Kong. This means the Republic has a smaller buffer of land and cannot afford to leave decaying buildings untouched for long.

Still, the debate in Hong Kong does hold up a useful mirror to our practices, whichever way that debate pans out.

It has been 10 years since the laws were amended here to allow a private estate to be sold without the unanimous consent of all its owners.

In the most recent property peak in 2007, 111 estates changed hands for $12.4 billion, according to property consultancy CB Richard Ellis.

As the Republic braces itself for the next en bloc wave, it could also cast its eye beyond its shores for clues as to how else it might reshape the Singapore skyline.

Urban renewal, after all, is far from being only a numbers game.

Source : Straits Times – 10 Aug 2009