View Full Version : Value of leasehold properties over time
Londonproperty123
22-04-14, 20:23
A general question.
99 years leasehold property, what happens to its value when it has only 60 years or even 50 years on the lease?
Is it true that the value will drop because banks are more unwilling to lend?
Some of the older leasehold properties may be in this situation. Has their market value dropped?
Thanks for your views.
Read this.... Especially the table.
http://www.sla.gov.sg/doc/ser/DP%20policy%20wef%2031%20Jul%202000.pdf
Value is leasehold land falls to zero in 99 years at an accelerating rate. Even if you go enbloc, the amount SLA charges increases exponentially as the lease runs out. Good luck to those who think LH is as good as FH.
Location Location Location.
http://www.propertyguru.com.sg/singapore-property-listing/hdb/marine-parade/marine-terrace_107605/1/hdb-listings/sale/1
39 yrs old
Marine Parade 28 06 to 10 123.00 Standard 1975 $860,000.00 May 2013
16 yrs old
Geylang 28 16 to 20 120.00 Improved 1998 $785,000.00 Mar 2014
Geylang 30 01 to 05 120.00 Improved 1998 $795,000.00 Mar 2014
13 yrs old
Sembawang 354C 11 to 15 113.00 Improved 2001 $525,000.00 Mar 2014
old airport road
3R Standard 06 to 10 56 1969 $388,000 Mar 2013
Read this.... Especially the table.
http://www.sla.gov.sg/doc/ser/DP%20policy%20wef%2031%20Jul%202000.pdf
Value is leasehold land falls to zero in 99 years at an accelerating rate. Even if you go enbloc, the amount SLA charges increases exponentially as the lease runs out. Good luck to those who think LH is as good as FH.
Look at queens vs anchorage
http://www.propertyguru.com.sg/project/queens-164
Look at pearl bank
http://www.propertyguru.com.sg/project/pearl-bank-apartment-437
It all depends what the leasehold property means to you. For self stay, for rental, for capital appreciation, for hedging, for parking idle money???
There's so many and various reasons. Gone are the days where you throw a stone to pick a property and wait for money to grow. Textbook or googled information are not closely relevant now. Got to be in the market to feel it and due your own due diligence. No answers here in the forum will dictate and confirm your buy as a positive move.
If you think London is for you, buy at all means. No one is bearing the liability for your decision.
Location Location Location.
http://www.propertyguru.com.sg/singapore-property-listing/hdb/marine-parade/marine-terrace_107605/1/hdb-listings/sale/1
39 yrs old
Marine Parade 28 06 to 10 123.00 Standard 1975 $860,000.00 May 2013
16 yrs old
Geylang 28 16 to 20 120.00 Improved 1998 $785,000.00 Mar 2014
Geylang 30 01 to 05 120.00 Improved 1998 $795,000.00 Mar 2014
13 yrs old
Sembawang 354C 11 to 15 113.00 Improved 2001 $525,000.00 Mar 2014
old airport road
3R Standard 06 to 10 56 1969 $388,000 Mar 2013
HDB seems to buck the trend. PCs will drop in value.
Landed Terrace at City-fringe, $280k only! 6 years lease left... If this is freehold, it would fetch $1.3 - $1.5 mil at least.
http://www.propertyguru.com.sg/listing/15349316/for-sale-lorong-3-geylang-singapore
smellyfish
23-04-14, 10:33
wah 6 years a bit extreme. i suppose buyer need to partition and subdivide and rent to workers.
In any case, all else being equal, FH will fetch more than LH, my 3 yr old kid also know.
but nothing is equal in life, and a lot of people made a lot of money from property that are leasehold in the last cycle.
Singapore is too young to witness the final stage of LH99 properties. And no one's investment horizon is more than 30yrs.
The value of FH is only pronounced when the ownership last generations. Plus, you need a government that last that long, with recognition of land title that last as long.
In UK, plenty of private owned LH pties expire the lease and the owner practically ask whoever on the land to get out. even the building sitting on top belongs to the owner if you do not demolish it. (UK is a good example because the kingdom last centuries, survived all the wars, and land title has been recognized throughout. )
In SG, if this gov does not fall , in 50yrs time you will start to see pties worth 0. And only near then ppl start to really appreciate the meaning of FH. Today, whatever you say, ppl dun really give a sh**.
HDB is different and special : gov guarantee to enbloc you when it gets old. It's the gov's obligation. It's almost like FH. (In fact you never even "lease" it. You really just "rent an apartment" from Gov).
Singapore is too young to witness the final stage of LH99 properties. And no one's investment horizon is more than 30yrs.
The value of FH is only pronounced when the ownership last generations. Plus, you need a government that last that long, with recognition of land title that last as long.
In UK, plenty of private owned LH pties expire the lease and the owner practically ask whoever on the land to get out. even the building sitting on top belongs to the owner if you do not demolish it. (UK is a good example because the kingdom last centuries, survived all the wars, and land title has been recognized throughout. )
In SG, if this gov does not fall , in 50yrs time you will start to see pties worth 0. And only near then ppl start to really appreciate the meaning of FH. Today, whatever you say, ppl dun really give a sh**.
HDB is different and special : gov guarantee to enbloc you when it gets old. It's the gov's obligation. It's almost like FH. (In fact you never even "lease" it. You really just "rent an apartment" from Gov).
If the aging leasehold property gets enbloc, the next group of buyers will have to pay for the renewed lease, and it is not going to be cheap. There is a possibility that renewal could be on 60-year basis to keep houses affordable. The premium for new SERS flats may also go up.
HDB is different and special : gov guarantee to enbloc you when it gets old. It's the gov's obligation. It's almost like FH. (In fact you never even "lease" it. You really just "rent an apartment" from Gov).
HDB "almost freehold", never thought if it that way, maybe next time enblocees will be given shorter lease and will be according to what you originally had left as balance.
HDB "almost freehold", never thought if it that way, maybe next time enblocees will be given shorter lease and will be according to what you originally had left as balance.
HDB cannot play play. There are a lot of political costs.
Unless the leasehold property is more than 70 years old, the decrease in value as a percentage of freehold is actually quite gradual. A leasehold property that is more than 40 years old for example still has about 80% of the freehold value. So its not true that leasehold will drop drastically once it becomes aged. In Sg, i think its safe to assume that when a private leasehold property crosses the 50+ years mark (still has about 75% of the freehold value), enbloc or some form of redevelopment (conservation like in Pearl bank case) would have already taken place.
Though it is true that the lease top up and Differential Premium (DP) would increase over time when an old devt is up for redevelopment, one must not forget that this is a direct result of the increase in the value of land which the property sits on over time, leasehold regardless. Do you think the value of land 40 years from now will be the same as today? With the potential for enbloc or redevelopment for leasehold property as they get older, there will always be value for leasehold props in SG.
End of the day, one must never forget that SG is just an island. ;)
cheers all.
Singapore government biggest income comes from selling LH lands, and it will be in the government's interest to ensure that their customers' interest are protected.
One way to do that, is to constantly invest in infrastructure to boost the land value, especially for LH estate. And this should give older LH property a chance to get en bloc before 99 years lease expire.
Having said that, Singapore government can only continue to do that if they are given strong support for their policies, so come 2016 Singaporeans, should cast their vote wisely.
Singapore government biggest income comes from selling LH lands, and it will be in the government's interest to ensure that their customers' interest are protected.
Even if the customer's interest are not protected what can you do about it? See LHL's reply on the pinoy party to be held in NA City, he is more worried about what the world thinks then what his people think and it is the people who are doing the voting.....so?
Singapore government biggest income comes from selling LH lands
this statement is factually incorrect. land sale proceeds are not income of the gov. you can check the budget.
and let's really not mix HDB into this LH->FH story. HDB is so special, it has "no lease".
another thing, dun assume (or take it for granted) the end of a LH pty is enbloc. Again in UK, many such LH owners simply let the lease lapse and never bother to sign on "enbloc", for which the existing "leasee" will get a payoff. In SG so far all the enbloc can happen easily because the owner is the Gov. If the land is owned privately, you can be sure the "enbloc" will be very different. Think what FEO will do with its Silversea 30ys down the road. It can ask whatever it wants. Again SG is too young to see this.
In a bull market, people does not care whether it is LH or FH as the price difference is not so pronounced. But when the tide turns, people will see the value of FH when you compare them, especially when the 2 properties are in close proximity.
Again there are many points of contention when it comes to valuing the land, and location/ surrounding plays a most important part.
Whether or not LH becomes worthless or not, only time will tell :D
There is no doubt that FH land is more valuable than LH given all else are the same. Its a no brainer cos with FH land there is no need for lease top up, only intensification of use if the plot ratio changes. But to say that LH land drecreases exponentially in value over time or its worth '0' in 50 years time is an overstatement as no owners are so stupid to let the lease lapse and do nothing about it. That is unless of course they are sited on some wasteland that has not appreciated in value for the last 50 years or govt has some other use for the land and does not approve the lease renewal.
this statement is factually incorrect. land sale proceeds are not income of the gov. you can check the budget.
and let's really not mix HDB into this LH->FH story. HDB is so special, it has "no lease".
another thing, dun assume (or take it for granted) the end of a LH pty is enbloc. Again in UK, many such LH owners simply let the lease lapse and never bother to sign on "enbloc", for which the existing "leasee" will get a payoff. In SG so far all the enbloc can happen easily because the owner is the Gov. If the land is owned privately, you can be sure the "enbloc" will be very different. Think what FEO will do with its Silversea 30ys down the road. It can ask whatever it wants. Again SG is too young to see this.
http://www.transitioning.org/2012/07/01/top-five-revenue-churners-in-singapore/
There is no doubt that FH land is more valuable than LH given all else are the same. Its a no brainer cos with FH land there is no need for lease top up, only intensification of use if the plot ratio changes. But to say that LH land drecreases exponentially in value over time or its worth '0' in 50 years time is an overstatement as no owners are so stupid to let the lease lapse and do nothing about it. That is unless of course they are sited on some wasteland that has not appreciated in value for the last 50 years or govt has some other use for the land and does not approve the lease renewal.
FH property is only worth the title if you can keep it forever. For those who own FH apartment or condo, you are only acting as a custodian for the land for as long as the apartment is still standing. Once its en bloc, its doesnt belongs to you and developer will not pay for the the future value of your FH land.
Do u want your FH to last forever? Most properties become very old and high maintenance fee kicks in. Most likely rot when 50yrs old and living condition is bad, u get leaking pipes, rusty water pipes, sewage problem.
Wolverine23
23-04-14, 20:25
What are the options when lease gets shorter?
And how to calculate the cost?
http://www.transitioning.org/2012/07/01/top-five-revenue-churners-in-singapore/
??? Even this sensational article you quoted also said :
"In Singapore, income from government land sales is booked directly into reserves and not reflected as revenue in the annual budgets."
????
As I said earlier, if u dun believe, go check the official budget from MOF site.
What are the options when lease gets shorter?
And how to calculate the cost?
This is one of the option.
http://www.stproperty.sg/articles-property/singapore-property-news/pearl-bank-owners-bank-on-conservation-order/a/161722?utm_source=EDM&utm_medium=Email&utm_campaign=STProperty_News_230414
Pearl Bank owners bank on conservation order
http://www.skyscrapercity.com/showthread.php?t=358211
There are 65 years remaining on the leasehold site along North Bridge Road, and it could cost an estimated $8.5 million to top it back up to 99 years.
http://www.propertyguru.com.sg/property-management-news/2010/6/27898/sla-approves-60-percent-of-lease-top-up-applicatio
More building owners are likely to seek lease top-ups from authorities as the stock of buildings developed on 99-year leasehold sites sold by the Singaporean government since the late 1960s gets older.
Since 2007, the Singapore Land Authority (SLA) has processed 56 applications for lease extensions, but only 60 percent were approved and the rest were rejected.
http://www.orangetee.com/Research/RED/FreeholdandLeaseholdAnalysis.pdf
regardless of what someone wants to believe - there are clear differences between the two.
common sense dictates it.
However common sense is sometimes not that common.
I have enbloc'd 99 Yr LH and enbloc'd FH - If you think you don't get more from a developer because they don't have to pay development charges and leasehold top for FH - best of luck to you.
??? Even this sensational article you quoted also said :
"In Singapore, income from government land sales is booked directly into reserves and not reflected as revenue in the annual budgets."
????
As I said earlier, if u dun believe, go check the official budget from MOF site.
Why do we even need to talk about budget or no budget. Obviously it is in the government interest keep the land revenue away from the budget so they can tell you that they are steering a very tight ship, and they need to be prudent about spending and tax more.
Ultimately, its just left and right pocket, money still goes to government.
What are the options when lease gets shorter?
And how to calculate the cost?
Actually is not overly cumbersome to calculate what a potential enbloc property is worth. Basically you just have to factor in lease renewal cost and intensification of land use cost. SLA website has one example on how this can be calculated. Also land sales information is aplenty in the public domain and one can have an estimate of how much the chief valuer will value that piece of land which the property sits on. Its a very worth while exercise because if a particular property is selling below its fair value, then it represents a buying opportunity and to wait for the en-bloc which as I have suggested earlier, will definitely come. just a matter of time. In fact there is more urgency or impetus for leasehold owners to consider ennbloc as the property ages since the cost to developer will only go up (albeit gradually) as the property ages. For FH, as there is no so called time frame, owners might be less keen to consider the enbloc route. I think many bros here have missed a key fact about aged property, It is not the building units that holds the value. It is that piece of grassy land underneath them.
Cheers.
There is no doubt that FH land is more valuable than LH given all else are the same. Its a no brainer cos with FH land there is no need for lease top up, only intensification of use if the plot ratio changes. But to say that LH land drecreases exponentially in value over time or its worth '0' in 50 years time is an overstatement as no owners are so stupid to let the lease lapse and do nothing about it. That is unless of course they are sited on some wasteland that has not appreciated in value for the last 50 years or govt has some other use for the land and does not approve the lease renewal.Sure or not bro?
http://www.propertyguru.com.sg/listing/16472215/for-sale-lor-3-geylang
Terrace at $210k only! 6+ yrs lease left. Nothing else they can do leh except rent or sell and see it become $0
Sure or not bro?
http://www.propertyguru.com.sg/listing/16472215/for-sale-lor-3-geylang
Terrace at $210k only! 6+ yrs lease left. Nothing else they can do leh except rent or sell and see it become $0
landed property really has got no choice because government will just let it lapse before revising the plot ratio. So always avoid buying LH landed property
Why do we even need to talk about budget or no budget....
Because I wanted to correct the misinformation that you posted , that " the government's biggest income is selling LH lands". This is just factually wrong. Acknowledge this and we move on.
Because I wanted to correct the misinformation that you posted , that " the government's biggest income is selling LH lands". This is just factually wrong. Acknowledge this and we move on.
There is nothing wrong with that statement because I have already shown you how large the number government generate through land sale.
The only thing which you are disputing is that the income from land sale is not reflected in government budget and it goes into our reserves. And who managed our reserves?
So please dont waste my time trying to dispute which is left or right pocket.
This is property forum, not some government monetary policy discussion.
Sure or not bro?
http://www.propertyguru.com.sg/listing/16472215/for-sale-lor-3-geylang
Terrace at $210k only! 6+ yrs lease left. Nothing else they can do leh except rent or sell and see it become $0
we are talking about huge land that can be redeveloped not puny land that has little redevelopment value. pls dont let me think u are the owner of the unit..pls.
Wolverine23
23-04-14, 22:25
Emm..so how do you value the enbloc potential of say Textile Centre, Adelphi or Roxy Square?
Actually is not overly cumbersome to calculate what a potential enbloc property is worth. Basically you just have to factor in lease renewal cost and intensification of land use cost. SLA website has one example on how this can be calculated. Also land sales information is aplenty in the public domain and one can have an estimate of how much the chief valuer will value that piece of land which the property sits on. Its a very worth while exercise because if a particular property is selling below its fair value, then it represents a buying opportunity and to wait for the en-bloc which as I have suggested earlier, will definitely come. just a matter of time. In fact there is more urgency or impetus for leasehold owners to consider ennbloc as the property ages since the cost to developer will only go up (albeit gradually) as the property ages. For FH, as there is no so called time frame, owners might be less keen to consider the enbloc route. I think many bros here have missed a key fact about aged property, It is not the building units that holds the value. It is that piece of grassy land underneath them.
Cheers.
Emm..so how do you value the enbloc potential of say Textile Centre, Adelphi or Roxy Square?
Same principles bro.
Emm..so how do you value the enbloc potential of say Textile Centre, Adelphi or Roxy Square?
Project affected by government redevelopment plan will be compensated fairly based on market value and you are most likely to be relocated by the government as well. So all is no lost.
Btw, is Adelphi going to be acquire by government?
Wolverine23
23-04-14, 22:50
Project affected by government redevelopment plan will be compensated fairly based on market value and you are most likely to be relocated by the government as well. So all is no lost.
Btw, is Adelphi going to be acquire by government?
There is a possibility of en-bloc by government for Adelphi. How much is the question...???
Wolverine23
23-04-14, 22:54
Same principles bro.
Can't seem to find the SLA example. Is it the DP calculation PDF?
There is a possibility of en-bloc by government for Adelphi. How much is the question...???
thats really bad news for adelphi owner for sure.
If government taking over, it wont be call en bloc lah.
Perhaps they need space to expand supreme court?
Wolverine23
23-04-14, 23:13
thats really bad news for adelphi owner for sure.
If government taking over, it wont be call en bloc lah.
Perhaps they need space to expand supreme court?
What was the most recent en-bloc/ takeover from government?
The Japanese occupation of Singapore in World War II occurred between 1942 and 1945 after the fall of the British colony on 15 February 1942.
What was the most recent en-bloc/ takeover from government?
Rochor center?
Wolverine23
23-04-14, 23:21
Rochor center?
I thought Rochor was HDB?
It should be Pearls Centre.
It should be Pearls Centre.
this and rochor center were acquired for infrastructure development, and both are LH development.
Wolverine23
24-04-14, 07:22
this and rochor center were acquired for infrastructure development, and both are LH development.
What was the compensation price then???
Leasehold properties always have a stigma to them. If you are not comfortable, just avoid. However I see value for leasehold properties that are within 10 min walk from MRT stations. Their value will be maintained by rising cost of private transportation and cost of personal time/energy.
Property is about Location3. Rental yield should be better for LH than FH most of the time although there is always exception. Renewal of Lease when LH property expired will be much higher in future if it is near good location, mrt, etc. URA may also intensify the land use when lease expired with higher plot ratio. FH has less of such issues. :p
Leasehold properties always have a stigma to them. If you are not comfortable, just avoid. However I see value for leasehold properties that are within 10 min walk from MRT stations. Their value will be maintained by rising cost of private transportation and cost of personal time/energy.
I think while many of us can disagree on certain issues. I think one issue which all of us can agree is that land is scarce in SG and over time, it has to appreciate. The last 50 years have shown it to be true and I dont think it will be any different in the next 50 years. It would necessarily mean that the land which all properties are sitting on be it FH, LH or 999 or whatever...will appreciate in value over time. If this happens, as long as the exit strategy (enbloc, redevelopment, conservation or whatever creative stratey people in the future can think of) is not towards the tail end of the lease of the property, the land which the property sits on will definitely be worth loads more than what it is worth today and owners will be able to get back something after living on the land for many years. Of course individually, whether an owner makes, loses or breakeven will very much depends on when he joins the game and at what price he pay of the property. so it will be different at an individual level.
What i am not comfortable with are LH JB props. These have no proven exit strategy when the lease tapers off and land is aplenty over there especially freehold ones. That said, i am a firm believer of FH landed JB props tho. ;)
Busypeople
24-04-14, 09:05
Leasehold properties always have a stigma to them. If you are not comfortable, just avoid. However I see value for leasehold properties that are within 10 min walk from MRT stations. Their value will be maintained by rising cost of private transportation and cost of personal time/energy.
Tenant doesn't care about fh or LH
Fh or LH building will age at the same pace
Fh command premium to buy and sell. While LH if cheaper to buy and sell.
So it really depends on location and if your property is located within the grow region of Singapore
There is a possibility of en-bloc by government for Adelphi. How much is the question...???
Minimum is token sum of $1
What i am not comfortable with are LH JB props. These have no proven exit strategy when the lease tapers off and land is aplenty over there especially freehold ones. That said, i am a firm believer of FH landed JB props tho. ;)
So how many FH landed JB properties have you bought? I think the price diff betw terrace and semi-d is too wide in JB, so I have concentrated on acquiring terraces instead..... So far, both of my JB terraces are within 15 mins drive to CIQ, as such landed are still limited in quantity.
LH JB commercial properties will definitely have value though. More impt to acquire gd human traffic commercial properties, as against the lease status.
There is nothing wrong with that statement ....
never mind. I begin to see why you can easily antagonize ppl around here.
So it really depends on location and if your property is located within the grow region of Singapore
Where is the growth region of Singapore? :confused:
Tenant doesn't care about fh or LH
Fh or LH building will age at the same pace
Fh command premium to buy and sell. While LH if cheaper to buy and sell.
So it really depends on location and if your property is located within the grow region of Singapore
I'm referring to properties that are walkable to MRT stations. Leasehold is not so critical in such cases.
Wolverine23
24-04-14, 11:31
Where is the growth region of Singapore? :confused:
Depends on where the government wants it to be.
Currently, it's kampong Bugis/ beach road and Marina South.
never mind. I begin to see why you can easily antagonize ppl around here.
FACTS : Government largest income comes from selling LH lands.
So please stop wasting your time trying to tell us which pocket the money goes to because its irrelevant.
And please stop making personal remarks at others. Thats childish.
FACTS : Government largest income comes from selling LH lands.
So please stop wasting your time trying to tell us which pocket the money goes to because its irrelevant.
And please stop making personal remarks at others. Thats childish.
Section I: What comprises the reserves and who manages them?
Summary
The reserves refer to the total assets minus liabilities of the Government and other entities specified in the Fifth Schedule under the Constitution1.
Government’s assets include:
(i) physical assets like land and buildings;
(ii) financial assets like cash, securities and bonds.
http://app.mof.gov.sg/reserves_sectionone.aspx
ANNEX C: FISCAL POSITION IN FY2014
http://www.singaporebudget.gov.sg/data/budget_2014/download/annexc.pdf
So how many FH landed JB properties have you bought? I think the price diff betw terrace and semi-d is too wide in JB, so I have concentrated on acquiring terraces instead..... So far, both of my JB terraces are within 15 mins drive to CIQ, as such landed are still limited in quantity.
LH JB commercial properties will definitely have value though. More impt to acquire gd human traffic commercial properties, as against the lease status.
I bot one cluster 3 years ago when the price has not run up yet. Now the price is like double. But wont be selling anytime soon as holding cost is super low and fun factor is high. :D I think u know what i mean. Many a times, dont even need to pay for electricity usage cos Msian Govt absorbs the first RM20 for electricity. i.e. if u spend less than Rm20 monthly for electricity, it is maciam free. Water is like RM5 per month no matter how much i use whenever i am there. I try to go in every weekends with the whole family in tow.
Wolverine23
24-04-14, 20:40
No more comments / debate on leasehold properties???
No more comments / debate on leasehold properties???
I think everyone is jaded on this subject because it has been talk about, disputed argued many times over.
Londonproperty123
26-04-14, 17:11
We started this thread because we are seriously looking at buying into Singapore, be it leasehold or freehold.
We are under-invested in Singapore. So we have been looking, but haven't bought anything.
Today, ST published an article on falling prices. Also, we went to check out some condos today. I have blogged more here.
http://londonproperty123.blogspot.sg/2014/04/singapore-property-prices-coming-down.html
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