Let me illustrate with a personal story, the names and location I shall not disclose to protect privacy. Let's call this the Lim family. They lived in a sprawling old bungalow somewhere in Tanjong Katong. It looked somewhat like the photo here. They were'nt rich folks but lucky to benefit from a cheap permanent tenancy of S$100 a month.
The bungalow was an old prewar house which at the time was under the Rent Control Act. This was a British administration legislation intended to suppress landlords' market power during times of high demand for housing. Tenants of prewar properties were protected from rental increases. Landlords can only revise rents to market rates on a change of tenant. The Lims were lucky as the patriarch of the family lived to a ripe old age of 90+. So they enjoyed the monthly rental rate of S$100 first signed before WWII.
The Rent Control Act created an untenable situation that caused such properties to go into a terrible state of disrepair. If the tenant does some structural change to the property, his tenancy was voided. Thus it was not in the interest of both tenant and landlord to take care of the property. I remember the house of the Lims had decaying floor boards, leaking roofs, sunken floors.
In the 1980s the Lims decided to buy and flip the property in a hot market. Since it was generating no returns for the owners, perhaps they could be persuaded to depart with it for a certain sum. It turned out there were by then about 25 beneficiaries to the property who were non-contactable. For a compensation of $25,000, one of the beneficiary worked on the Lims behalf to obtain all the necessary signatures. It took almost 2 years to get this finalised. Most of the beneficiaries probably saw no meaning to hang on to a worthless property shared amongst 25 so they signed the release. I actually helped fund a bit in the purchase.
The Lims then put it on a market where a prewar house was an anathema. A potential buyer agreed to take it at $100,000 but never turned up. A second buyer agreed at $225,000, put down a deposit but never saw the transaction through. The Lims were a bit disheartened but encouraged at the price which was rising like crazy. Then third time lucky, and everyone was over the moon. In a span of less than a year, the Lims sold the property for $500,000.
The said property was 15,000 sq ft of prime district, but for its prewar status, it would have fetched a couple of million dollars easily. There was no investor at the time who in his proper mind would want to plonk down half a million on a prewar property. Back then I wondered who could the buyer be? Does he know something we don't? It turned out he was a civil servant, a director in Telecoms.
Lo and behold, in 2001 the government repealed the Rent Control Act. Obviously it must have taken many years of studies, research, and the crafting of the repeal legislation. It would mean top civil servants were well aware of the government's direction and policy regarding prewar properties long before 2001. Did they take advantage of this information? Well it's open knowledge many cabinet members and top civil servants took advantage of Ong Beng Seng's special discounts for Nassim Jade. It would be naive to think those good folks let a golden opportunity to flip prewar houses slip by. Had they acted on the privileged information, it is something we now call 'insider trading'. I'm not sure if there was anything illegal with that at the time, but it certainly calls into question the integrity of bureaucrats.
Am I making an opinion based on one solitary incident? Certainly not. I know of one very top civil servant who acquired several prewar properties. That was narrated by his neighbour who cheekily quoted that his investment strategy is to follow his neighbour's (the civil servant) acquisition - wherever the latter buys, he followed.
Any feedback to be shared would be extremely useful.
**********
No comments:
Post a Comment