There is a well-known quote by Warren Buffett about economic or financial crisis. “When the tide goes out do you discover who’s been swimming naked.” In recent years, I notice a rise in complaints against MCST council and Managing agents. To be fair, some are trivial issues voiced by overly-sensitive residents, while others can be as severe as mismanagement, extreme lack of financial prudence and even ‘hidden political agendas’.
Usually these are discussed openly in AGMs or in private with the MA. However in the current covid-19 crisis, many subsidiary proprietors (SPs) have found time to publicized their concerns on social media. I was told these pent-up frustrations have been accumulating for years in a number of condominiums around Singapore.
The crisis presents an excellent opportunity for Property Managing Agents (MA) to step up their modus operandi. Some have resisted change for too long. Others have pushed for upgrades with an exorbitant price tag. Neither is in the best interest of residents. As chairman, I am constantly looking for MAs who can improve their efficiency and provide value.
I am glad the six month impasse has finally ended. “The keys to the management office were given to the new managing agent on Monday, after an all-day affair which saw the police called in for assistance.”
From all that has been reported in the media, the 22nd Management Council (MC) clearly raises my eyebrow when they tried to postpone AGM at the final hour. This is totally unacceptable. From my years of being MC Chairman, the AGM date cannot be rescheduled unless two criterion are met.
Everyday we struggle a little under the constraining measures of the circuit breaker. We cannot visit shopping malls; they are closed. No dining with friends. Young ones bemoan no bubble tea. And even younger ones cry for their playgrounds. Only when we are done with the complaining, we begin to realise the important stuff that matters has continued as normal.
All around me, Food and Cleanliness is uninterrupted. Supermarkets operate. Hawkers and restaurants continue to feed take-away patrons and supply delivery riders. The condo estate remains clean and litter-free. Even the pathways are swept clear of fallen leaves every morning.
While volume of transactions has declined over the past few months, prices have only dipped 1.2% in the first quarter of 2020. Somehow the numbers do not match the gravity of Covid-19. Why so?
The illiquidity of properties makes it slow to price in market factors. It normally requires six to nine months of lag period to gradually adjust towards where majority of buyers are willing to match sellers.
When Singapore injects a second round of fiscal spending only a month after the February budget, you know the economy is choked. The $48 billion additional support for businesses and individuals is a welcomed relief. But my guess is, this may not be sufficient for the next 4-6 months.
Singapore has started to ban all short-term visitors (less than 90 days) into the country as of today 11:59pm. The tightening of our borders is an additional measure to containing the covid-19 outbreak.
A number of people who are on the hunt for their first condo home have asked many questions on online forums and via face-to-face conversations. Leasehold or Freehold? Facilities, residential profiles, monthly maintenance fee, etc. Within that monthly maintenance fee lies two components; the managing fund (MF) and the sinking fund (SF).
In other words, the SF takes care of the big items in the near future, while MF runs a monthly expense to keep the condo operational. Therefore it is crucial to find out what are the SF reserves an existing condo have. And whether it is financially stable to fund future works. If not, an extraordinary AGM may be called for all owners to cough up a lump sum. (see Case study: Killer lifts?)
One advice for first time condo buyers: ask the seller for the recent AGM booklet. Reading it will give you an excellent idea of how well the place is managed. And whether the existing sinking funds are sufficient to cover outstanding and future liabilities.
Take the case of Viz Holland and Citylights. Both are 99 year leasehold condos; built in 2008 and 2007. On first look the key difference is that Viz Holland has 165 units, while Citylights have 600 units.
In the span of 12 years, Citylights would have collected $8,396 from a unit owner. Viz Holland would have collected $9,240 from a unit owner since its beginnings. Yet, a chunk of Citylights sinking fund has already been spent and only 37% of total collections remain. What does it mean? Bear in mind things like lift overhauls, pipes and pumps replacement, roof works can easily cost $100k- $1 million, especially over the 10 year mark.
Whereas for Viz Holland, 70% of the sinking fund remains to be deployed. The numbers do look much better and prudently managed. The question to ask then is whether Viz have done their 10 year replacement items? If not, when is it due? And what is the financial impact?
Again the details can be sourced from the Seller and verified with an on-site visit. If all things are equal, then clearly one is far better than the other. Go see for yourself. Caveat emptor.
A french start-up is using an app to help owners manage their residential buildings, akin to strata titled condos in Singapore. Seems like a great solution for Condo owners who prefer to stay out of sight but in-the-loop.
“Matera has built a web-based platform to view information, communicate with other co-owners and make sure everything is up-to-date. Everybody has their own account and can access the platform. Co-owners meet regularly to handle outstanding issues. Matera centralizes all topics, helps you write a report and checks that it complies with legal requirements.
No doubt our government is highly concerned and has swiftly implemented measures to keep Singapore safe. These include tracking at risk personnel and keeping them quarantined. I recall the overly restrictive (but on hindsight, forward-looking) rules of People’s Park Complex. Last August they decided to track and restrict visitors for vice. I believe the residents now benefit from an additional layer of administrative protection from the Wuhan virus.
Once in a while we hear of killer litter offences. Yet there is another high-rise danger lurking; the killer lifts are often forgotten. (Some say killer pools.) These silent killers have a stranglehold on our finances through high maintenance and a large one-off sum for replacement at the end of their life spans.
We look at an example of an almost two decade old condo in District 21, with approximately 341 units. In the AGM previously, a list of facilities were drawn up to highlight their replacement costs due in the coming 3-5 years. They amounted to almost $11.5 million!
Nowadays we see a lot of hype in green landscaping among condos. Kudos to the Building and Construction Authority (BCA) whom promoted sustainable development with the green mark schemes and incentives. Our air is fresher and the economics made great sense for developers.
Yet some condo owners are not cheering. On closer examination, the green maintenance costs are surprising. I have heard much woes from friends in different MCSTs. Take a look at this excerpt from The Straits Times, which sums its up.
Today, Pemex is the world’s most indebted oil company with $176 billion of debts and liabilities. The Mexican government announced a $5 billion bailout for the company this year. However analysts say it needs to invest at least $10-$13 billion a year.
How did that happened over less than 15 years? Well, in short, years of disregard and non-maintenance. This is similar to managing a condo. Take for example the following chain of events: