Personal Updates: Singaporean Venture Into Cambodia Property Investment Horror Story

 

I guess the horror story began back in 2014 when my wife came back home one evening and told me that she had purchased a USD220K 2 bedroom condominium unit jointly with her sister in Cambodia at a road show. The property agent (let's call her Ms M) was a close friend of both of them and has extolled the virtues of overseas property investment because the quantum involved is so much cheaper than getting an investment property in Singapore. Ms M is a successful property investor who currently owns 3 condominium units in Singapore and has accumulated a high net worth from buying and selling Singapore properties. She has also invested in this particular Cambodian project being jointly developed by Singapore based Oxley Holdings and their Cambodian partner.

My initial reactions

I was rather shocked as my wife did not consult or discuss with me on this big ticket item purchase. Her argument then was that she was using her own money. Basically, it works like that, the money she earned is her money but the money I earned is also her money and need to consult her on major item purchase together (unfortunately this is a 1 way street and how it works in my family.....haha).

In addition, Ms M had mentioned 5 "convincing" reasons to wifey for recommending the purchase:

1. Cambodia is an upcoming country in development;

2. The quantum involved to get a condonimum in Cambodia is lesser than a 5 room HDB flat;

3. Oxley Holdings is a well known developer listed in Singapore;

4. The are 3 years of guaranteed rental at 6% per annum by Oxley Holdings & partner;

5. Ms M herself had already purchased 1 unit of the new project in development.

1. Beginning of horror story- USD bank borrowings is around 8% at that time.

The financing rate quoted by the  Cambodian banks for bank borrowings is incredible. No one sane will dare to borrow from them. This seems to have caught my wifey and sister in law by surprise. When they called up to ask Ms M, she brushed this away as saying that she thought the purchase amount is not a large sum and she has all the way plan to finance it by paying in cash for the instalments and assume they will also do that hence it did not cross her mind.

No choice, wifey and sister in law coughed up the USD220K over in hard cash over the course of the work in progress till completion of the project.  

2. Property agent Ms M does not seemed to have reminded her clients/friends that there is withholding tax in Cambodia. 

The selling point seems to have been overemphasis on the 6% guarantee rental by the developer for 3 years. Netting of withholding tax on rental, the amount repatriated is a lot lesser. Also, future capital gains (if lucky and not a loss) made by non-residents is subjected to withholding tax of around 20%. 

3. USD rental return subject to much unfavorable forex conversion costs 

To opt for cash received in SGD back in Singapore leads to additional losses in forex markup. The local bank exchange rate is also another interesting weird point. I told my wife and sister in law to open up USD bank account and then use SingX (started by an ex-Citibank banker) for the conversion to reduce the forex conversion loss due to inferior rates.

4. Guaranteed rental scheme ending soon- Oxley Holdings will not renew it due to poor market conditions.

The rental guarantee scheme will come to an end as informed by developer upon its expiry as COVID has wiped out tourism and many expats and the Cambodia economy is in a virtual standstill. An alternative profit sharing scheme maybe rolled out pending indication of sufficient interest from other Singaporean owners to help pay for the monthly maintenance expenses. 

Also, who will help go to the Cambodian government agency to pay for property tax or other administrative matters? 

I guess the matter of exit plan and contingencies were not addressed during the purchase. "Buy first then see how later" will normally lead to eventual headaches.  

5. Lack of networking to find trustworthy property agents in Cambodian market

In the event that the developer "washed their hands off" the renewal of the rental management scheme, investors will need to either find their own tenants or sell off the property on behalf. The problem is the property agent market in Cambodia is not well established yet and there seems to be a lack of regulation. So how does one find a trustworthy agent? 

Language is also a major barrier for effective communication with the Cambodians agents.

As for selling off the property, I was told that even if one lowers the price significantly, there is currently not a lot of expat buyers due to the COVID situation in Cambodia.

Parting Thoughts

I think that property investment in a developing country is a real headache and will not recommend it...simply too much hassle and risk. For those who also have investment properties in Cambodia, maybe can help share your thoughts on the current predicament and possible solutions or networking referral of a good property agency in Cambodia. 

A Game Of Thrones in Condominium Disputes And Filing of Case With The Singapore Strata Title Board

This is a follow-up posting from the last one on "Problems With Living In Singapore Condominiums- Not As Glamorous As One Think It Is". When communication breaks down between residents and the Management Committee of the MCST, all hell breaks loose, in particularly, with many egos being at stake, some estate issues will definitely escalate out of control. This is where a group of very pissed off resident group will get together to campaign to overthrow the incumbent Management Council team by mudslinging on social media and tit for tat went on between the 2 parties This is also whereby some residents will file a case with the Strata Title Board ("STB") to take on their own MCST.

1. Procedure of Filing to STB and whereby all residents gets punished from depletion of management funds in the legal dispute.

From my last posting, one typical problem will be whether 2nd and 3rd car can park for free issue in most condominiums  or whether the MCST can enforce stringent wheel clamping rules against fellow residents.

The proceedings at Strata Titles Boards consist of 4 main stages:

(1.1)  Application: The Applicant will file an application against the Respondent.

(1.2) Mediation: All parties (Applicant and Respondent) are required to attend mediation session(s) fixed by the Board. The matter may stop at mediation if parties resolve the dispute at that stage.

(1.3) Hearing: If the matter cannot be resolved at the mediation stage, the Board will give directions to the parties to prepare for a hearing and fix the hearing date.

(1.4) Post-hearing: The Board’s orders is binding on parties and may be enforced at the Singapore State Courts.

1.1 Cost of Application Stage- Money commences burning

An application fee of S$500 is required to submit the application along with the "prayers" being sought. Prayers here is not referring to the religious prayers but rather a specific request for judgment, relief and/or damages at the conclusion of a complaint or petition. The applicant/applicants will typically hire a lawyer at this stage to help prepare the filing and incur additional cost of between S$3K to S$5K.

At this point, the MCST is known as the respondent. The Management Council Members may also be named by the applicant/applicants individually as additional respondents along with the MCST. To get ready a respond, the MCST will typically incurr legal fees for crafting the respond. This can cost anywhere from S$3K to S$5K depending on the number of issues, its complexity and hours spent by the legal counsel.

 1.2  Mediation- Extra money burnt for legal counsel to attend Mediation session on behalf of Applicants/Respondent

The lawyers representing the applicants and the MCST at this stage will be very happy as they can bill around S$3K to attend the mediation session. 

So applicant wasted S$3K out of their own pocket if they hired legal counsel at this stage and the respondent will also waste S$3K. 

Normally, there will be at least 2 mediation sessions before all stakeholders either resolve the issues or decided that mediation is useless and to move on to full hearing. If there is another mediation session, another S$3K will be wasted at each side.

Therefore, at least S$6K will thus be burnt by applicants and respondent respectively at the mediation sessions.

1.3 to 1.4 Hearing and Post Hearing

There will be an STB hearing cost here as well as individual legal counsel cost. This stage typically cost around S$10K to S$20k for each respective party depending on the number of hours spent by the legal counsel on hearing preparation and submission.

One import thing to note here is that many people have the wrong notion that if they win the STB case, they can get back all legal consultation and mediation costs from the losing party. This is totally wrong concept. Only party to party cost and panel hearing cost can be recovered. To give an example, I have known of MCST who spent S$50K in legal fees overall to defend against the prayers sought by the applicants and won the case but in the end only got back S$10K in cost recovery. 

Summary

A typical STB case may thus cost up to S$20K to S$30K for applicants and respondent respectively depending on the number of prayers and the complexity of the issues. This is a lose lose situation as this means that S$40K to S$60K would have been wasted by both parties. The only winners out of this will be the legal counsels. Unfortunately, such incidents are not isolated. There are many people with different personalities and principles living in any estate. Residents should thus participate actively in the Annual General Meeting and ensure that they elect their council members wisely. 

Most importantly, more residents should step forward to take up the thankless job of being a management council member lest the council is left in the control of an extremist group of residents who can then make numerous house rules to turn the entire estate into an army camp or prison which will have negative repercussions such as the estate getting into multiple lawsuits with vendors at Small Claims Tribunal/State Courts or cases lodged by fellow residents at STB.

Problems with Living in Singapore Condominiums- Not as glamorous as one think it is

After buying a brand new condominium and waiting for the construction to reach Temporary Occupation Permit stage typically requires 3-4 years for an average 600 unit size development. Of course, many residents could not contain their excitement upon receiving their keys and moving in after renovating their dream home. But this is where the nightmare will start. 

1. Dealing with hardcore smoker neighbours staying above or below your unit smoking every 2 hours at Balcony

Many condo residents were sold by their property agent the idea of Alfresco dinning by utilising the balcony space. Hence they have planned for dinning tables to be shifted to the balcony area in order to free up inner space and a bigger allowance for the living room.  Alfresco is a style of dining that is casual and often offer a party-like ambience and looks cool. 

However, some condo residents are in for a rude shock when they discover that at dinner time, they often have to breathe in cancer causing harmful second hand smoke coming from their neighbours staying directly at the unit above them or under them. The effect of the second hand smoke is so bad that any units within a radius of 2 floors (approximately 6m) from that chain smoker unit will have second hand smoke drifting into their balcony.

Hence it is a fallacy to believe that upgrading from HDB to a EC or private condominium will mean the end of the 2nd hand smoke issue. This second hand smoke issue will never go away unless one purchases a landed property. 

2. Lack of good talents who wants to volunteer to join the Management Committee after the end of the 1st year
During the 1st year, the developer will run the condo along with the appointed Management Agent. However, by the end of the 1st AGM, the MCST is supposed to elect its own Management Committee ("MC") members. Most of the good residents will not want to volunteer. In Army National Service terms, these are extra duties which snaps up valuable time especially for residents who are still working.  There is also no remuneration for being in the MC to look after the estate. One will also have to deal with countless unreasonable complaints and fellow residents demanding to be served by the MC in all their requests. Hence most residents do not want to take up such thankless job. 

Those who joined will have a few types, namely, (i) truly altruism folks (this group is a rare breed), (ii) power crazy folks, (iii) resident associated with the People's Association or government grassroot and (iv) residents who need to get their children into the primary school of their choice- type (iv) is actually a subset of (iii) as the objective is to form the "Neighbourhood Committee" to promote grassroot outreach into the condo.

3. Carparking Woes

This is the most frequent issue in all condominiums. If there are insufficient carpark lots, this will create a problem. If there are ample carpark lots, this will also still be a problem and headache. The insufficient carpark lot scenario think everyone understands why it is a problem. SO let me elaborate on why a condo with ample carpark lots will also be a big problem. 

In most condominium, carparking house rule will stipulate that every owner will be entitled to 1 carpark lot. Then there will be units without cars and units with multiple car ownership. Those with multiple cars will assert that since there are ample lots, they can park unlimited cars in the condo to save on thousand of dollars of annual season parking. The other non-car owner group will be unhappy and demanded that this is unfair as maintenance such as carparking surface epoxy paintings and carpark barriers maintenance is unfairly borne by them hence they will demand second car parking charges. Once the root of all evil (money) surfaced, then World War 3 will begin in the Condo estate. Hence if during the 1st AGM, the carparking and registration rule is not converted into by-law, some of the owners with multiple cars will start to "play around with the Ënglish" in order to argue the best case scenario for themselves.

There are other issues for carparking rules that I will probably go into more details in my future posts.

Parting thoughts:

A smart and wise resident should propose a motion to convert all the existing house-rules into by-law in order for the MC to have legal powers to enforce them. This is the critical step at the 1st AGM which a lot of newbies do not know. House rules set by developers are just rules that looks fun but in the eyes of the Building Maintenance and Strata Act ("BMSMA"), they cannot be enforced without being blessed by the General Body of residents to convert into by-law.

Woodleigh Residences Offering Up Till S$250K Worth Of Discount- Property Prices Finally Going Down?

I received a promotional email yesterday (5th August 2020) on upcoming weekend sales discount of up till S$250K for a unit at Woodleigh Residences.  Is property price finally softening? This COVID-19 recession sure is different from the 2008 Global financial Crisis for properties. I recalled that properties price crash by 30% to 40% then. But the Singapore property market appears resilient during this COVID-19 period with only slight decline in prices so far. This is incredible. No wonder Germaine Chow of iQuadrant keeps saying in her advertisements that property prices do not fluctuate as wildly as the stock market (Anyway, I am having an overdoes of Germaine Chow-she keeps popping up on my YouTube videos-would appreciate if anyone can provide technical tips on how can I disable her advertisements). 

S$250K VVIP discount is a lot. Anyone thinking of getting a unit at Woodleight Residences? Or more discounts coming? Well, this appears to be good news for consumers but bad news for SPH shareholders. 

Sengkang Grand Residences Mixed Integrated Development at Buangkok MRT

Sengkang Grand Residences is one of the most anticipated new launch of the year. This development  is directly linked up with Buangkok MRT station and it has a hawker centre and retail mall inbuilt into it. Residents living in Sengkang Grand will enjoy convenient access to all these amenities right under their home. 

As this is a CDL and Capitaland joint development, one can be assured of the quality of luxury finishing of their purchased home. 

Prices are expected to start from S$1,600psf plus and estimated pricing as follow:
(i) 1 bedder + study: S$798K;
(ii) 2 bedder: S$998K;
(iii) 3 bedder: s$1,498K and
(iv) 4 bedder + flexi: S$2.1Mil

There are a few points here that prospective buyers need to be aware of:

1. Car parking might be an issue- Only 80% of parking lots provided for residents

Total residential units in this development is 680. However, parking lots available are only 544 on level 3, Mezzanine A and B. In other words, only 80% parking lots are provided. The property agents will tell you that many units to be purchased are for investors who will rent out to tenants. Hence these tenants of smaller units will not be driving and only taking MRT. 

I just think that this is very strange for a luxury development as if one can afford paying almost S$1Mil plus for a 2 bedder and above, the residents here will most likely also own a car. As a matter of fact, some may even own multiple cars.  Also, how about visitors of residents to the development?

This may lead to future animosity among residents in the 2nd year AGM after the MCST is formed. Have seen a few cases of such disagreements being surfaced even for 1 to 1 parking with regard to how parking lots are allocated.

Do bear in mind that property agents will not be living in this development after your TOP. So best to get some clarity on how the developer and their first year management plan to resolve this issue.

2. Lack of privacy- Some blocks have up to 10 units per floor.

As the number of floors is only around  8 to 10 levels, the developers have squeezed many units into the 9 blocks in order to get to the 682 units.  Some blocks will have up to 10 units on the same floor while most of the others will have 8 units. The ideal case for private exclusivity is 4 per floor. 

Potential buyers will have to assess whether they are fine living with so many neighbours living together on the same floor. It maybe best to avoid the block with 10 units per floor during selection. 

Potential buyers of Sengkang Grand residences will also need to see whether they are comfortable with the number of lifts serving all units in one block. This is especially so during the morning rush hours when parents are sending kids to school or going to work.

3. Unit Layout- 2 bedders and 4 bedders here are better than 3 bedders in terms of functional usage.

This point can be personal and depends on whether you are a balcony lover. For me, I do not like balcony in the Master bedroom as it is a waste of space. I would rather have this balcony space moved to the living room area to be combined into 1 bigger balcony space than having a space that is neither big nor small for usage. To me, balcony in a master bedroom is just a white space.

Hence I think that the 3 bedder layout is a no no to me. 

4. Facing of some blocks is East and West

In Singapore, I would suggest folks go by the general convention to go for North-South facing units and skip the blocks that have either morning or afternoon sun. If no choice and have to choose a East-West facing block, then go for the stack that only have morning sun (East facing) so that when you come back from work in the evening, your home does not feel too hot and warm which may agitate one especially after a hard and stressful day at work already.

Summary

Overall, Sengkang Grand Residences is a very good development. Since CDL and Capitaland have bid over S$1 billion for the site, their breakeven price is around S$1,500psf. Hence, selling at S$1,600psf plus as a starting base is considered a good price for a new integrated development. For me, at this price, my personal preference would be to buy a cheaper resales unit at Punggol Watertown which has the mega mall Punggol Waterway Point right at the doorstep with Shaw Cinema in it.

Developer SPH and Kajima Slashed Woodleigh Residences Price by 10%-13% from $2000psf to starting from $1733psf For Relaunch in May 2019.

Interestingly, my property agent messaged me last week that Singapore Press Holdings ("SPH") and its partner Kajima had slashed the price of Woodleigh Residences by 10% to 13% from S$2,000psf to as low as S$1,733psf. This was despite their initial assertion that the VVIP launch in October 2018 was a resounding success with over 60% of the launched units sold at an average price of 2,000psf. However, for the re-launch of Woodleigh Residences in May 2019, the developer SPH and Kajima must have decided that the risk of the market downturn may not be worth it and started slashing prices drastically in order to move more units. After all, the developer was only able to sell 30 units on the first weekend of its initial launch albeit declaring that 60% were sold by proclaiming that they only launched 50 units.  

For a 958sqft 3 bedder unit, prices would have dropped from S$1.92Mil to S$1.66Mil which translates to substantial savings of +S$256K for potential buyers relative to the first batch of VVIP. This does not seem fair to those first batch of buyers who had supported this integrated mixed commercial and residential project of SPH and Kajima during launch. I hope that SPH and Kajima would have given some goodwill renovation packages to compensate these initial buyers. 

On the property market front, I am not sure whether other developers will also take the lead in slashing prices but I hope so for the benefit of consumers. Once the music stops, property developers holding on to the most unsold inventories would need a very strong balance sheet to wait out the economic downturn. 

From the stock investing perspective, I have previously highlighted the lingering impairment risk of the Bidadari project, that is, Woodleigh Residences, due to the potential property market downturn and uncleared inventories.  I am glad that SPH has decided to slash the price in order to move their inventory of unsold units. Coupled with the bad news from the US/China trade war today, SPH price has dropped to S$2.40 per share and it may be worthwhile to re-look into their newly transformed property business from the previous media giant model. The new UK student accommodation segment acquisition should prove invaluable in the event of an economic downturn due to earnings resiliency.  

Note: Please refer to my previous SPH post "Singapore Press Holdings Transformation Into Property Giant Almost Completed".

Florence Residences at Hougang Ave 2- Mega Launch at S$1,450psf average?

Went down to The Florence Residences showflat last week to see the latest upcoming development developed by Logan Property in Hougang. This was originally a HUDC site that was being en bloc. I can still remember visiting one of the units during my search for a resales HDB during 2007/2008. The cost price of a unit then was around S$800K. If only I have bought it then, would have become an instant en bloc millionaire last year....whaha.

This is a huge site that is approximately 386,000sqft in size. The developer will be building 1,410 units. The Florence Residences and is near north east line Hougang MRT station and Kovan MRT station. The side gate at Florence Road will lead to Kovan area with a 10min -12mins walk. Many good eateries such as the famous Punggol Nasi Lemak, Yong's Teochew Kueh and Lola's Cafe are found along Upper Serangoon Road and Simon Road. Since this is within 700m to Kovan MRT station, this is actually a walkable distance to MRT and bodes well for rental or future capital appreciation.

There are over 12 amazing club concepts and 128 facilities in this development. The centerpiece is the gigantic 80m main pool at the center of the estate. The only issue I have is the presence of only 1 swimming pool which is being shared by 1,410 units. For similar en bloc HUDC such as Riverfront Residences and Jadescape, there are 2 swimming pools to spread out residents.  For the internal layout of units, I love the efficient squarish layout of units on display.

However, I nearly fainted when the property agent told me that the developer target to launch this at an average of S$1,450psf. So, a 2 bedder (635sqft) starts from around S$863K, 3 bedder (893sqft) at around SS1.222Mil, 4 bedders (1,281sqft) at approximately $1.675Mil and 5 Bedder (1,668sqft) at S$2.41Mil. I am still shocked at the launch price of units in suburbia areas these days. With S$1,450 psf, one may consider getting a unit at Kovan Residence (right on top of Kovan MRT station) if one does not mind a resales unit. If compare to the upcoming CDL and Capitaland Sengkang Centre Residences at Buangkok which is projected to launch at S$1,650psf to S$1,700psf, Florence Residences thus appeared to be cheaper. Will you buy a unit at The Florence Residences?