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60 years leasehold condominium in Singapore.

Thursday, September 6, 2012

When I was told many years ago that residential properties in Hong Kong generally come with a 50 years lease, I was amazed. 

So, if someone in his 30s were to buy a condo in Hong Kong and if he should live to be 90 years old, he could be kicked out of the property as there is no guarantee that the lease would be extended?

To someone from Hong Kong, a 99 years leasehold property in Singapore is probably a steal! The lease is twice as long as back home and the prices are probably lower too, like for like. However, what I have read in the papers today could change things in Singapore for the next generation.

A 1.02 ha residential site in Jurong Kechil comes with an unusual 60 years leasehold term.  This is believed to be the first time a private housing site is being sold on such short tenure under the GLS.

Developers have options for a 30, 45 or 60 year lease period for the plot, URA said. The development conditions for the site cap the maximum number of units at 203 units and can be built up to part 5 storeys and part 8 storeys. The tender will be launched in about two weeks.

Industry experts are expecting a top bid of between $200 to $250 psf ppr and a sale price of $550 to $600 psf. This compares with freehold developments in the area going for about $1,000 psf.

(Source: The Business Times, 6 September 2012)

The government did mention some time ago that it would explore offering residential sites with shorter leases to bring down the cost of home ownership in Singapore.

Possibly, I am out of touch with the reality on the ground. Foreigners, new citizens and younger Singaporeans are probably less concerned with shorter land leases. 

They might just want a home in their living years or to reap as much rental returns as possible in the same years. A project that is freehold or 999 years leasehold and selling at a premium might only be attractive to older Singaporeans over time.

Now, in my 40s, maybe, I would consider buying a new private residential property with a 60 years lease if I could save 40 to 50% compared to buying a similar property which is freehold or has a longer lease. This is for self stay only as the property could be hard to resell as its lease gets progressively shorter. 

Just pray I do not live to be a hundred.

However, for someone in his 20s or 30s, would he buy a new private residential property that comes with a 60 years lease? By the time the project gets its TOP, the property would only have 55 years left to the lease...

17 comments:

Unknown said...

Well I am 23 and I would not. I am currently living in the freehold property that my parents bought 10 years back and I am glad that the property price increase around 2.5 times. I think the value of these short lease condominium will depreciate very fast, leaving little room for flexibility if I want to change property.

Anyway I plan to not take any position in private housing (probably buying my own flat with HDB) since the private housing market can be quite volatile. Would rather invest in shares since I can dollar average cost my investments.

Sheng Shi

meesiam said...

AK

Financing would have problem
1. if you use CPF to service your loan, then you might be caught at the old age where you need to fork out cash. (look out for withdrawal limits for properties with lease within 30 t0 60 yrs)
2. Also, which means you need to pay more cash upfront. So even value is low, you won't enjoy much on leveraging.

But of course,it all depends on your purpose of buying and one's financial situation.

AK71 said...

Hi Sheng Shi,

My preference is for freehold or 999 years leasehold too. :)

I just wonder if Singapore would come to a point where younger people who want to own a condominium would have no choice but to buy in projects with 60 years leases due to affordability consideration.

My friends in Taiwan tell me that there is little hope for young Taiwanese to ever own their own homes in Taipei or even Taichung now as prices are astronomical. In Hong Kong, the situation is just as bad, if not worse. Is Singapore going down the same road?

AK71 said...

Hi meesiam,

Yes, I wonder about this too. Banks might be reluctant to lend.

So, such projects are only good for people who are buying for self stay and who have plenty of cash on hand.

I am very curious how the market would respond to this project. Will it be a sell out in a single day like certain projects launched of late?

temperament said...

Hi AK71,
This means 999 and freehold is going to be more and more expensive or less & less expensive?
Actually it all depends why you buy in the first place. Is it for residence, rental collection, flipping unit or passing it down to the next generation. For me i think flipping the unit is best because less upfront capital is needed. Especially flipping the unit after buying from the developer. The Sinkapore's property market has catched up with HK, PEKING, etc....
i read now even HK. is limiting people from Mainland from buying houses in HK.
Sinkapore will be "limiting" Sinkaporeans from buying houses in Sinkapore due to "affordability". SAD!

coven said...

I doubt it will sell very well. Singaporeans are still fairly conservative in investments vs hongkongers/taiwanese

Plus there seems to be a sort of condo oversupply nowadays, which would probably get worse next year

AK71 said...

Hi temperament,

Well, it used to be that freehold properties would command a 10 to 15% premium over similar leasehold properties in the same area. These days, there is less or no differentiation as buyers are seemingly less bothered by tenures.

You are right about buying the right property for the right purpose, of course. This is something that I am still trying to internalise as I have a bias for freehold and 999 years leasehold properties. ;p

AK71 said...

Hi coven,

I keep wondering about the condo oversupply which everyone, including Minister Khaw, is expecting to hit Singapore in 2014 and 2015. I wonder how badly it would hit prices then.

It would be nice if I am able to buy back the properties I sold last year at a 20 to 25% discount by then. ;p

SnOOpy168 said...

AK

In HK, it is 50 years from 1997. Whatever happens thereafter, it's everybody's guess. Hence there is about 35 years leasehold left on the paper. Still, the prices are astronomical for their liveable area. Perhaps Victor will have more to add.

Buying a 40 or 60 years lease hold property for self stay or rental income. perhaps it may be similar to the industrial REITs, with 30 years lease. Will the yield will look fantastic ?

AK71 said...

Hi SnOOpy168,

Hong Kong's property prices are indeed astronomical! Will anyone graduating from university today be able to afford to buy a decent apartment in Hong Kong?

I was toying with the idea of buying a 60 years leasehold condominium for self stay if it should be much cheaper but I have thrown the idea out the window now. I just cannot accept that it would be worth next to nothing when my time is up on Earth. ;p

Buying for rental income? Well, if its rental yield is some 3.5% per annum, we would take some 30 years to get back our capital and if we took out a loan, it would take us another few years to recoup. Doesn't sound sufficiently rewarding to me.

Singapore Man Of Leisure said...

AK,

In China, the residential property lease is 70 years.

Singapore bagus or what!?


A very gentle poke. If your time is up, you still care about the property value? LOL!

Let go of the cookie in the cookie jar ;)

Tok, tok, tok - sound from the "wooden fish".

AK71 said...

Hi SMOL,

Ah! That explains why the Chinese from PRC are buying up luxury 99 years leasehold properties here like there is no tomorrow!

When it is time to go, would I still care about how much my home is worth? Indeed, would I care what is the value of all my investments then?

I care now because my parents are still around. I will continue to care if my niece is still around when I am about to go as I would like her to have an inheritance so that she could have a better life.

If, unfortunately, I should be all alone when the time comes to bid farewell to this world, I guess I wouldn't care two hoots. :)

Maybe, I would sell everything and move to stay in Wudang Mountain in China in my old age. I would like that.

Taoists no need to tok tok tok the wooden fish hor?

temperament said...

Hi AK71 & SMOL,

Both of you talking about
Tok, tok, tok - sound from the "wooden fish", really makes me laugh.

But when we visit the next world, the most important thing is Who (which GOD we believe in) we believe in this world. If you don't believe in next world, well you have chosen.

AK71 said...

Hi temperament,

Er... today's weather is not bad hor? I went for a walk earlier. ;p

Singapore Man Of Leisure said...

AK,

That's great!

I was scratching my head... Old age, single, no children - and if money is not a problem - why would I care what's the value when I'm giving it all away anyhow when my batteries run out. But that's me, LOL!

Ah! Taoism in Singapore need more young blood like you! So refreshing info on your spiritual leanings!

Good, good. Next time I can use you as a sounding board when I come across some interesting Taoist philosophy!


AK71 said...

Hi SMOL,

I am more Buddhist than Taoist. So, don't use me as a sounding board as the only sound you would hear in return is a hollow one. ;p

Aiyoh, simi young blood? I am only a few years your junior hor.

I am feeling somewhat jaded these days...

AK71 said...

The Urban Redevelopment Authority (URA) said it will monitor and review the outcome of Singapore's first retirement village before deciding if it will release more land for similar projects in the future, or tweak any parameters.


It added that as retirement housing is a relatively new concept in Singapore, it saw merit in giving the market and the developer the flexibility to determine the concept for this new housing development.


The Hillford at Jalan Jurong Kechil was a sellout, with all 281 units snapped up in a day.


With units priced at around S$400,000 to S$700,000 and its location in the Bukit Timah area, the project attracted buyers including retirees, young families and some investors.


Its developer World Class Developments said that a substantial proportion of buyers were over 50 years of age.

Sold on a 60-year lease, The Hillford comes with elderly-friendly features and is aimed at providing affordable housing for retirees.


Source: http://www.channelnewsasia.com/news/business/singapore/retirement-housing/965352.html

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