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10-03-12, 00:41
http://www.straitstimes.com/Singapore/Story/STIStory_772697.html
Idea for flats with shorter leases may not fly
Experts cite current financing plans as one main stumbling block
Published on Mar 2, 2012
By Jermyn Chow
A MEMBER of Parliament has proposed that the Government sell new flats with shorter leases, as that would mean cheaper flats which would be a boon for young couples.
But property experts The Straits Times spoke to said the proposal is unlikely to fly for now because it would mean overhauling the current housing policy as well as existing financing plans available to homebuyers.
The proposal was mooted by Mr Gan Thiam Poh, MP for Pasir Ris-Punggol GRC, in Parliament on Tuesday.
He urged the Government to consider building more affordable two- and three-room units with shorter leases, such as 30 or 60 years.
Rising property prices have caused many couples and upgrading families to worry about buying a home. With shorter leases, couples can better control their costs, he said.
Elaborating on this yesterday, he said: 'It is about giving them the option and leeway to spread the financial burden and defer the paying of higher prices until they earn more money.'
New HDB flats have 99-year leases. Older flats in the resale market, however, have between about 60 and 80 years left on their leases.
Mr Nicholas Mak, head of research and consultancy at SLP International, estimated that the price of a four-room Build-to-Order flat in Punggol with a 99-year lease will fall from $300,000 to $230,000 if its lease is shortened to 60 years - or down by about 20 per cent.
On a 30-year lease, the same flat will cost $140,000, about half the original price.
He said that while the proposal may look good on paper, implementing it will be an administrative nightmare.
'Shorter HDB leases will run up against the brickwall of current financing options offered by CPF and banks,' he added.
He noted too that 'most of us want to sell our property at a profit... with shorter leases, it will not be profitable, and may even be a loss'.
Ms Deon Tan, director of brokerage firm Providence Capital Advisors, said that banks may not be as willing to offer long-term loans for flats with shorter leases. Even if they do, some might place more restrictions like offering lower loan quantums and requiring borrowers to pay back the loan in a shorter time.
Mr Lee Sze Teck, senior manager of DWG Research and Consultancy, said Singaporeans may not yet be ready to accept homes with short leases, like those in Hong Kong and China.
While such flats may be cheaper, in the long run, it may make it harder for those who outlive the leases to buy new flats. 'The aim is ultimately to help everyone to own a roof over their head. Shorter leases cannot solve long-term housing needs,' he said.
National Development Minister Khaw Boon Wan had said in a reply to Parliament in January that cutting short the lease of new flats to bring prices down may not be suitable for the needs of young couples.
Young married couples, who form the vast majority of new HDB flat buyers, need their first flats to help them upgrade to larger homes or private properties when their families grow, he said.
If their flats have shorter leases, these couples may have limited prospects of using their flats to buy studio apartments when they retire, he added.
Young couples interviewed were generally lukewarm about the proposal too.
Marketing assistant Cynthia Chia, 23, who has two children, noted that longer flat leases fetch a higher premium.
She and her husband recently bought a Build-to-Order four-room flat in Sengkang for $320,000. She hopes to make at least a 10 per cent profit if they sell it.
'I may pay less for a flat with shorter lease, but I don't want to be stuck with the property which will not be worth much 10 or 20 years down the road,' she said.
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Idea for flats with shorter leases may not fly
Experts cite current financing plans as one main stumbling block
Published on Mar 2, 2012
By Jermyn Chow
A MEMBER of Parliament has proposed that the Government sell new flats with shorter leases, as that would mean cheaper flats which would be a boon for young couples.
But property experts The Straits Times spoke to said the proposal is unlikely to fly for now because it would mean overhauling the current housing policy as well as existing financing plans available to homebuyers.
The proposal was mooted by Mr Gan Thiam Poh, MP for Pasir Ris-Punggol GRC, in Parliament on Tuesday.
He urged the Government to consider building more affordable two- and three-room units with shorter leases, such as 30 or 60 years.
Rising property prices have caused many couples and upgrading families to worry about buying a home. With shorter leases, couples can better control their costs, he said.
Elaborating on this yesterday, he said: 'It is about giving them the option and leeway to spread the financial burden and defer the paying of higher prices until they earn more money.'
New HDB flats have 99-year leases. Older flats in the resale market, however, have between about 60 and 80 years left on their leases.
Mr Nicholas Mak, head of research and consultancy at SLP International, estimated that the price of a four-room Build-to-Order flat in Punggol with a 99-year lease will fall from $300,000 to $230,000 if its lease is shortened to 60 years - or down by about 20 per cent.
On a 30-year lease, the same flat will cost $140,000, about half the original price.
He said that while the proposal may look good on paper, implementing it will be an administrative nightmare.
'Shorter HDB leases will run up against the brickwall of current financing options offered by CPF and banks,' he added.
He noted too that 'most of us want to sell our property at a profit... with shorter leases, it will not be profitable, and may even be a loss'.
Ms Deon Tan, director of brokerage firm Providence Capital Advisors, said that banks may not be as willing to offer long-term loans for flats with shorter leases. Even if they do, some might place more restrictions like offering lower loan quantums and requiring borrowers to pay back the loan in a shorter time.
Mr Lee Sze Teck, senior manager of DWG Research and Consultancy, said Singaporeans may not yet be ready to accept homes with short leases, like those in Hong Kong and China.
While such flats may be cheaper, in the long run, it may make it harder for those who outlive the leases to buy new flats. 'The aim is ultimately to help everyone to own a roof over their head. Shorter leases cannot solve long-term housing needs,' he said.
National Development Minister Khaw Boon Wan had said in a reply to Parliament in January that cutting short the lease of new flats to bring prices down may not be suitable for the needs of young couples.
Young married couples, who form the vast majority of new HDB flat buyers, need their first flats to help them upgrade to larger homes or private properties when their families grow, he said.
If their flats have shorter leases, these couples may have limited prospects of using their flats to buy studio apartments when they retire, he added.
Young couples interviewed were generally lukewarm about the proposal too.
Marketing assistant Cynthia Chia, 23, who has two children, noted that longer flat leases fetch a higher premium.
She and her husband recently bought a Build-to-Order four-room flat in Sengkang for $320,000. She hopes to make at least a 10 per cent profit if they sell it.
'I may pay less for a flat with shorter lease, but I don't want to be stuck with the property which will not be worth much 10 or 20 years down the road,' she said.
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