When value trumps price

Dennis Chan
Deputy Money Editor

Jul 8, 2018

My life is richer despite missing out on becoming an en-bloc millionaire

In 2007, my wife and I decided that we would move from Woodlands to somewhere nearer the city before our older daughter began Primary 1.

Our house-hunting took us to an old HUDC (Housing and Urban Development Company) estate in Serangoon North. I checked that it was within a 1km radius of Rosyth School, a sought-after primary school that I had been eyeing for my daughters.

Externally, the development looked dull and listless. But the maisonette we found ourselves in was in immaculate condition. The owners, a Caucasian-Chinese couple, told us the unit had been extensively renovated barely a year before.

"We replaced everything, including the piping," said the husband.

It was nicely done up and the built-in wardrobes and cupboards looked expensive.

As an added bonus, the seller's agent told us that privatisation of the estate was on the cards.

He said the owners would accept an offer of $580,000 for the 1,700 sq ft apartment. We were tempted but not entirely sure that it was what we wanted because the renovation had included converting the wet toilet on the lower floor to a carpeted powder room. We felt that a wet toilet was more practical.

While we were still debating the offer, the agent called us that night to say the unit had been sold. We found out later that the sale was done at $575,000.

Weeks later, we settled on an HDB maisonette in Toa Payoh for $580,000 - the same asking price as the Serangoon North HUDC flat but smaller, at 1,572 sq ft.

Fast forward 10 years, the HUDC development - known as Serangoon Ville - had been privatised and subsequently sold collectively or en bloc to an Oxley Holdings consortium for $499 million. Each owner pocketed about $2 million.

On the other hand, resale maisonette units in my estate have struggled to cross the $800,000 mark.

Financially, I made a poor choice between two houses that had comparable prices, in the mistaken belief that an HDB flat in a superior location would retain its value better than a private apartment, owing to the en-bloc effect.

As a consolation, I look back in wonder to see what blessings my choice has brought me. Quite a few, actually.

First, the HUDC flat did not meet my family's needs. Apart from the powder room, the owners had combined two bedrooms upstairs into a gigantic master bedroom that would rival a master bedroom of an upmarket penthouse in size. It was more space than what we knew to do with. To rectify the issues would have meant spending a small fortune tearing up fairly new fixtures and renovating the flat again.

Second, the Serangoon North neighbourhood had fewer amenities and transport connections than my flat in Toa Payoh, which is a mere three stops away from Orchard MRT station and minutes by car to the Central Business District.

Third, I managed to enrol my daughter into a decent neighbourhood school. With 118 applicants for 74 places for the 2008 Primary 1 intake, balloting for a place at Pei Chun Public School was already an unnerving affair. I shudder to imagine what it was like at Rosyth, where the odds for a successful outcome were far more daunting.

Fourth, my home is just a five-minute commute to the workplace. This means that although my working hours extend far into the night, I am able to go home and have dinner with the family before returning to work. This would not be possible if I were living in Serangoon North.

One could argue that I might have had the best of both worlds: buy the Serangoon Ville flat in 2007, sell it for $2 million in 2018 and then get an HDB executive flat in Toa Payoh for $800,000 or so. But this involves too many ifs and buts, as well as the opportunity costs in the intervening 11 years.

The quality time that I was able to spend with my daughters almost every evening in their growing-up years living in Toa Payoh is incalculable.

Fifth, a collective sale is not mine alone to decide and it may well come at an inopportune time. I have a friend who bought a spacious ground-floor apartment at an old private estate about a year and a half ago, spent $150,000 to refurbish the place and is looking forward to enrolling her son in Primary 1 in a nearby school.

To her dismay, her neighbours have jumped onto the en-bloc bandwagon and are campaigning to reach the 80 per cent approval threshold to kick-start the sale.

The potential payout from a successful sale is not worth her while and there is also the issue of paying a seller's stamp duty if she sells before the fourth anniversary of her property purchase.

Lastly, I avoided the anxiety of seeking a replacement home at a time of rising home prices owing to a lengthy wait to collect proceeds from the buyer. Apparently, the completion of Serangoon Ville's sale was delayed due to objections from a few minority owners.

With prices of private homes rising across the board, finding a comparable home that does not take a huge bite out of the collective sale proceeds can be problematic. The recent spate of collective sales is like a rising tide that lifts all boats although only a fraction will be successful. Consequently, many owners are demanding a high price for their homes.

No doubt a successful en-bloc sale can bring untold riches; a colleague recently sold his apartment bought for less than a million dollars some 30 years ago for more than $9 million.

However, it is easy to lose sight of the anxiety and unpleasantness that can poison the atmosphere in a collective sale process. The Sunday Times has run stories of neighbours falling out with one another over whether to stay or sell.

Even a unanimity of minds to sell is no guarantee of peace of mind.

Owners of Tampines Court, for example, had to endure an interminable wait for the proceeds after signing a $970 million deal with Sim Lian last August due to regulatory and other hurdles.

For many, this golden egg was also their sole property.

Pending legal completion, some owners had been reluctant to look for a replacement home even as prices began escalating in case the sale was called off or delayed further. Happily, their dilemma ended last month when the proceeds finally came through.

On balance, I'm not vexed at missing out on an extra million bucks or so for picking a home with a lower investment value.

But had the sum been $9 million? It doesn't bear thinking about.