journo
26-08-22, 08:03
Prime freehold resale properties are now available at suburban leasehold prices.
Aug 26, 2022
An advertisement for a condo unit for resale proclaims, "Freehold selling at leasehold price!" Another estimate is $2,064 per square foot for a freehold project in District 9 that is less than nine years old. A third simply states, "Less expensive than 99-year leasehold."
These properties have a few characteristics in common: they are prime district freehold, non-landed homes, and their asking (and sold) prices are lower than the new 99-year leasehold AMO Residence project's median selling price of S$2,110 per square foot (psf).
AMO Residence sold over 98% of its 372 units on the first day of its launch on July 23, with one of its three penthouses selling for a staggering S$6 million, or S$2,406 per square foot.
Our searches on Singapore's largest real estate website, PropertyGuru, revealed approximately two dozen projects in prime districts 9, 10, and 11 that are selling for less.
The search criteria included freehold or 999-year leasehold resale condominium units that received their Temporary Occupation Permit within the past 10 years, with sizes ranging from 500 to 1,500 square feet (sq ft) and asking prices of less than S$2,100 psf.
In addition, a cross-check was conducted to ensure that the asking prices reflect the actual prices paid.
Our search revealed available properties in the Core Central Region (CCR) that may be less expensive than new leasehold properties in the Outside Central Region (OCR).
A 797-square-foot, 2-bedroom freehold unit in District 9's Sophia Residence is available for S$1.6 million. A 1,066-square-foot, two-bedroom condo at Verdure @ Holland Park in District 10 could be purchased for S$2.2 million, while a 1,421-square-foot, three-bedroom condo on a high floor at Cube 8 in District 11 could be purchased for just under S$2.9 million.
If older condominiums are considered, there are even more affordable freehold properties in prime areas.
The appeal of OCR new releases
Why are buyers purchasing 99-year leasehold properties in the OCR at comparable or higher per square foot prices?
The majority of analysts with whom we spoke cited familiarity with suburban locations and proximity to children's schools and elderly parents as significant factors, particularly for Housing Development Board (HDB) upgraders who wish to remain in certain neighborhoods.
Catherine He, director and head of research at Colliers, stated that the progressive payment scheme for new launches permits purchasers to spread out their payments over the construction period. For resale properties, payments are made in advance and the mortgage begins immediately.
Moreover, purchasing a new launch unit enables the purchaser to capitalize on long-term price increases. "By the time the project is finished, if market conditions are stable, it will likely fetch a higher price," said He. In addition, because it takes about three years to build a home, the Seller's Stamp Duty (SSD) period will have passed, and buyers can lock in profits without paying SSD if they decide to sell.
The progressive payment plan also assists young couples in surpassing the Total Debt Servicing Ratio (TDSR) threshold, which limits a borrower's total debt obligations to 55% of income. According to an industry observer, the couple can purchase a new launch unit by paying an option fee and securing a loan only when construction begins and progress payments commence.
They can then sell, say, 1% of the property to their parents, who, assuming this is not their first home, will pay a manageable Additional Buyer's Stamp Duty for this minority stake. Together with their parents, the couple will then apply for financing. Thus, their income for TDSR calculation will increase, and they will be able to afford a larger loan.
Additionally, there are buyers who are only interested in new homes, as opposed to resale units that will likely incur renovation costs and time.
Other reasons relate more to marketing effectiveness.
Nicholas Mak, the head of research and consultancy for ERA Realty, stated, "For any new launch, developers will mobilize three of the largest agencies, which will have more than sixty percent of the agents in Singapore and offer a vast network."
Social media is flooded with marketing materials, including videos, infographics, and marketing collateral, so that anyone searching online for real estate will see the new project everywhere and be redirected there.
Agents are incentivized to sell new launch units because developers pay commissions of up to 2%, as opposed to the standard 1% for resale properties.
Some buyers are also unaware that CCR options within their price range are available. Even if they are aware, the process of locating a suitable resale unit is time-consuming and labor-intensive, and it may not result in a residence on a desired floor or facing.
Up, up and away?
Lee Sze Teck, senior director of research for Huttons Asia, observed that 40.6% of new launch transactions in the OCR cost more than S$2 million in July 2022, compared to 9.9% in August 2021.
Eighty percent of buyers with a HDB address purchased properties worth up to S$2 million, while eighty percent of buyers with a private address purchased properties worth up to S$2.5 million.
"This demonstrates that properties up to S$2 million are well within the means of buyers," he said, adding that the future proportion of homes priced between S$2 million and S$2 million could be between 40 and 50 percent.
Analysts note that Ang Mo Kio is a mature estate with popular schools and other amenities, as well as a high demand for housing, and that it has been a long time since a new condominium was launched there.
"Therefore, we must be cautious before asserting that all condos in OCR will cost more than S$2,100 per square foot in the future," said Mak.
Christine Sun, senior vice-president of research & analytics at OrangeTee & Tie, noted that although 195 new OCR units costing at least S$2 million were sold in July, they accounted for only 23.9% of total non-landed OCR sales.
Ferreting out gems
As a result of appealing new launches, demand has shifted toward mass market properties, and Colliers' research reflects this shift. Since 2021, the difference in median unit prices between resale freehold CCR units and new 99-year leasehold OCR units has been decreasing (see Table 2).
In addition to a lack of new supply in the CCR, "there may be more value and upside in the luxury segment," she explained.
The upcoming suburban launches of GuocoLand's Lentor Modern and Frasers Property's Sky Eden@Bedok will determine whether the success of AMO Residence can be replicated.
Aug 26, 2022
An advertisement for a condo unit for resale proclaims, "Freehold selling at leasehold price!" Another estimate is $2,064 per square foot for a freehold project in District 9 that is less than nine years old. A third simply states, "Less expensive than 99-year leasehold."
These properties have a few characteristics in common: they are prime district freehold, non-landed homes, and their asking (and sold) prices are lower than the new 99-year leasehold AMO Residence project's median selling price of S$2,110 per square foot (psf).
AMO Residence sold over 98% of its 372 units on the first day of its launch on July 23, with one of its three penthouses selling for a staggering S$6 million, or S$2,406 per square foot.
Our searches on Singapore's largest real estate website, PropertyGuru, revealed approximately two dozen projects in prime districts 9, 10, and 11 that are selling for less.
The search criteria included freehold or 999-year leasehold resale condominium units that received their Temporary Occupation Permit within the past 10 years, with sizes ranging from 500 to 1,500 square feet (sq ft) and asking prices of less than S$2,100 psf.
In addition, a cross-check was conducted to ensure that the asking prices reflect the actual prices paid.
Our search revealed available properties in the Core Central Region (CCR) that may be less expensive than new leasehold properties in the Outside Central Region (OCR).
A 797-square-foot, 2-bedroom freehold unit in District 9's Sophia Residence is available for S$1.6 million. A 1,066-square-foot, two-bedroom condo at Verdure @ Holland Park in District 10 could be purchased for S$2.2 million, while a 1,421-square-foot, three-bedroom condo on a high floor at Cube 8 in District 11 could be purchased for just under S$2.9 million.
If older condominiums are considered, there are even more affordable freehold properties in prime areas.
The appeal of OCR new releases
Why are buyers purchasing 99-year leasehold properties in the OCR at comparable or higher per square foot prices?
The majority of analysts with whom we spoke cited familiarity with suburban locations and proximity to children's schools and elderly parents as significant factors, particularly for Housing Development Board (HDB) upgraders who wish to remain in certain neighborhoods.
Catherine He, director and head of research at Colliers, stated that the progressive payment scheme for new launches permits purchasers to spread out their payments over the construction period. For resale properties, payments are made in advance and the mortgage begins immediately.
Moreover, purchasing a new launch unit enables the purchaser to capitalize on long-term price increases. "By the time the project is finished, if market conditions are stable, it will likely fetch a higher price," said He. In addition, because it takes about three years to build a home, the Seller's Stamp Duty (SSD) period will have passed, and buyers can lock in profits without paying SSD if they decide to sell.
The progressive payment plan also assists young couples in surpassing the Total Debt Servicing Ratio (TDSR) threshold, which limits a borrower's total debt obligations to 55% of income. According to an industry observer, the couple can purchase a new launch unit by paying an option fee and securing a loan only when construction begins and progress payments commence.
They can then sell, say, 1% of the property to their parents, who, assuming this is not their first home, will pay a manageable Additional Buyer's Stamp Duty for this minority stake. Together with their parents, the couple will then apply for financing. Thus, their income for TDSR calculation will increase, and they will be able to afford a larger loan.
Additionally, there are buyers who are only interested in new homes, as opposed to resale units that will likely incur renovation costs and time.
Other reasons relate more to marketing effectiveness.
Nicholas Mak, the head of research and consultancy for ERA Realty, stated, "For any new launch, developers will mobilize three of the largest agencies, which will have more than sixty percent of the agents in Singapore and offer a vast network."
Social media is flooded with marketing materials, including videos, infographics, and marketing collateral, so that anyone searching online for real estate will see the new project everywhere and be redirected there.
Agents are incentivized to sell new launch units because developers pay commissions of up to 2%, as opposed to the standard 1% for resale properties.
Some buyers are also unaware that CCR options within their price range are available. Even if they are aware, the process of locating a suitable resale unit is time-consuming and labor-intensive, and it may not result in a residence on a desired floor or facing.
Up, up and away?
Lee Sze Teck, senior director of research for Huttons Asia, observed that 40.6% of new launch transactions in the OCR cost more than S$2 million in July 2022, compared to 9.9% in August 2021.
Eighty percent of buyers with a HDB address purchased properties worth up to S$2 million, while eighty percent of buyers with a private address purchased properties worth up to S$2.5 million.
"This demonstrates that properties up to S$2 million are well within the means of buyers," he said, adding that the future proportion of homes priced between S$2 million and S$2 million could be between 40 and 50 percent.
Analysts note that Ang Mo Kio is a mature estate with popular schools and other amenities, as well as a high demand for housing, and that it has been a long time since a new condominium was launched there.
"Therefore, we must be cautious before asserting that all condos in OCR will cost more than S$2,100 per square foot in the future," said Mak.
Christine Sun, senior vice-president of research & analytics at OrangeTee & Tie, noted that although 195 new OCR units costing at least S$2 million were sold in July, they accounted for only 23.9% of total non-landed OCR sales.
Ferreting out gems
As a result of appealing new launches, demand has shifted toward mass market properties, and Colliers' research reflects this shift. Since 2021, the difference in median unit prices between resale freehold CCR units and new 99-year leasehold OCR units has been decreasing (see Table 2).
In addition to a lack of new supply in the CCR, "there may be more value and upside in the luxury segment," she explained.
The upcoming suburban launches of GuocoLand's Lentor Modern and Frasers Property's Sky Eden@Bedok will determine whether the success of AMO Residence can be replicated.