New Reporter
11-06-24, 17:06
Hoping to extend the land lease on your private home? Don’t count on it
Getting owners to agree on lease extension duration and amounts payable will be tough
Jun 3, 2024
Thinking of getting a private landed home for under a million Singapore dollars? Not impossible.
Sure, some much sought-after Housing and Development Board (HDB) flats transact for well over that amount these days.
Still, two terrace houses sold for way below S$1 million each in Jalan Chempaka Kuning in District 16 in the east last December. One house with land area of 4,136 square feet (sq ft) changed hands for S$570,000, while another house with land area of 3,904 sq ft fetched S$800,000.
The land sizes of the Jalan Chempaka Kuning houses are large for terrace houses here, which often have land area of under 2,500 sq ft each.
The catch is that the houses sit on land leases that expire in August 2034 or in just over 10 years’ time. The houses are among 144 terraced and semi-detached houses in Jalan Chempaka Puteh, Jalan Chempaka Kuning and Bedok Road that have a 70-year lease beginning from 1964.
The homes sit on a large plot of land, which belonged to the late Koh Sek Lim, who died in 1948. Today, the land is managed by Camelot Trustees.
Last week, The Straits Times reported speaking to about 20 homeowners who said they want greater clarity on the fate of the land after the lease runs out. Some owners hoped to have the option to stay on, possibly with a lease extension of 10 or 20 years.
Extending leases
Allowing the homeowners to extend their land leases can be tricky.
The Singapore Land Authority has a table showing leasehold value as a percentage of freehold value, which is applied to development charge rates to compute the differential premium payable.
https://i.imgur.com/YIouC90.png
Possibly, the above table can be used to help compute the value of leasehold land parcels with different land tenures. Based on the table, a land parcel with tenure of 10, 20 and 30 years is worth 30 per cent, 48 per cent and 60 per cent of the freehold value, respectively.
If the value of freehold land is S$1,300 per square foot, an owner of a house sitting on 4,000 sq ft of leasehold land may need to pay S$2.5 million for a 20-year extension.
Might owners of the Chempaka landed homes baulk at potential amounts payable for extending their land leases? Moreover, getting financing to pay for land lease extension could prove to be challenging.
Critically, would the underlying landowner be willing to let some homeowners extend their land leases by varying periods such as five, 10, 15, 20, 25 and 30 years, and others have their leases expire?
Indeed, a tract of land’s development potential could be compromised if various houses were to sit on land leases with different maturity dates.
For example, if the land leases of all the houses expired at the same time, the owner of the underlying land could upon taking back the land possibly work with partners to redevelop the houses and sell them as freehold, 99-year leasehold or even 70-year leasehold homes. Given limited new landed housing supply, demand for the newly built landed homes may be firm.
In the five-year period to Q1, the number of private non-landed homes excluding executive condominiums grew by 13.1 per cent to 336,883 units, while that of private landed homes inched up by 0.6 per cent to 73,517.
Leasehold condos
Over the coming decades, the issue facing the owners of the Chempaka homes whose land leases expire in the not too distant future will loom large for owners of many private non-landed homes that were built on land parcels with initial 99-year leases.
As land leases dwindle, might some condo owners who want to continue living in their units be hoping for land leases extensions? In reality, this could be a forlorn hope.
Firstly, all the owners in a leasehold condo development may need to agree on wanting to extend the land lease for a specific duration and be willing to cough up the required sums for land lease extension, in order to possibly persuade the owner of the underlying land to extend their land lease. Getting such commitments from the various condo owners will likely be a major stumbling block.
Realistically, the options for owners of ageing 99-year leasehold condos will be to either sell out via an en bloc sale, subject to being able to top up the land lease to say a fresh 99-year lease, or hand their site back to the underlying landowner for zero compensation when the land lease matures.
Certainly, there is much merit to the government selling private housing sites largely on 99-year land leases.
By selling leasehold land, the government can take back the land when the lease matures so that the land can then be used to meet future development needs.
An initial tenure of say 94 years, after factoring in time to develop a project, when a new condo owner collects the key to his home should adequately cover the life of a young adult homebuyer.
Where private-home buyers, worried over seeing land leases maturing, need to exercise care is when buying older resale leasehold homes. Amid rising life expectancy, a buyer aged 40 years old may want to avoid buying a home with under 60 years of land lease remaining to insure against possibly living to 100 years old.
Having a land lease of a private home that matures shortly can be scary, especially if one then has to hunt for new lodgings in one’s advanced years.
However, while some leasehold private homeowners may be keen on lease extension when an existing land lease expires, the chances of extending a lease are slim. Thus, a homebuyer seeking a home to live in for the remainder of his life may simply need to pay up for a unit with a sufficiently long land lease remaining.
https://www.businesstimes.com.sg/opinion-features/hoping-extend-land-lease-your-private-home-dont-count-it
Getting owners to agree on lease extension duration and amounts payable will be tough
Jun 3, 2024
Thinking of getting a private landed home for under a million Singapore dollars? Not impossible.
Sure, some much sought-after Housing and Development Board (HDB) flats transact for well over that amount these days.
Still, two terrace houses sold for way below S$1 million each in Jalan Chempaka Kuning in District 16 in the east last December. One house with land area of 4,136 square feet (sq ft) changed hands for S$570,000, while another house with land area of 3,904 sq ft fetched S$800,000.
The land sizes of the Jalan Chempaka Kuning houses are large for terrace houses here, which often have land area of under 2,500 sq ft each.
The catch is that the houses sit on land leases that expire in August 2034 or in just over 10 years’ time. The houses are among 144 terraced and semi-detached houses in Jalan Chempaka Puteh, Jalan Chempaka Kuning and Bedok Road that have a 70-year lease beginning from 1964.
The homes sit on a large plot of land, which belonged to the late Koh Sek Lim, who died in 1948. Today, the land is managed by Camelot Trustees.
Last week, The Straits Times reported speaking to about 20 homeowners who said they want greater clarity on the fate of the land after the lease runs out. Some owners hoped to have the option to stay on, possibly with a lease extension of 10 or 20 years.
Extending leases
Allowing the homeowners to extend their land leases can be tricky.
The Singapore Land Authority has a table showing leasehold value as a percentage of freehold value, which is applied to development charge rates to compute the differential premium payable.
https://i.imgur.com/YIouC90.png
Possibly, the above table can be used to help compute the value of leasehold land parcels with different land tenures. Based on the table, a land parcel with tenure of 10, 20 and 30 years is worth 30 per cent, 48 per cent and 60 per cent of the freehold value, respectively.
If the value of freehold land is S$1,300 per square foot, an owner of a house sitting on 4,000 sq ft of leasehold land may need to pay S$2.5 million for a 20-year extension.
Might owners of the Chempaka landed homes baulk at potential amounts payable for extending their land leases? Moreover, getting financing to pay for land lease extension could prove to be challenging.
Critically, would the underlying landowner be willing to let some homeowners extend their land leases by varying periods such as five, 10, 15, 20, 25 and 30 years, and others have their leases expire?
Indeed, a tract of land’s development potential could be compromised if various houses were to sit on land leases with different maturity dates.
For example, if the land leases of all the houses expired at the same time, the owner of the underlying land could upon taking back the land possibly work with partners to redevelop the houses and sell them as freehold, 99-year leasehold or even 70-year leasehold homes. Given limited new landed housing supply, demand for the newly built landed homes may be firm.
In the five-year period to Q1, the number of private non-landed homes excluding executive condominiums grew by 13.1 per cent to 336,883 units, while that of private landed homes inched up by 0.6 per cent to 73,517.
Leasehold condos
Over the coming decades, the issue facing the owners of the Chempaka homes whose land leases expire in the not too distant future will loom large for owners of many private non-landed homes that were built on land parcels with initial 99-year leases.
As land leases dwindle, might some condo owners who want to continue living in their units be hoping for land leases extensions? In reality, this could be a forlorn hope.
Firstly, all the owners in a leasehold condo development may need to agree on wanting to extend the land lease for a specific duration and be willing to cough up the required sums for land lease extension, in order to possibly persuade the owner of the underlying land to extend their land lease. Getting such commitments from the various condo owners will likely be a major stumbling block.
Realistically, the options for owners of ageing 99-year leasehold condos will be to either sell out via an en bloc sale, subject to being able to top up the land lease to say a fresh 99-year lease, or hand their site back to the underlying landowner for zero compensation when the land lease matures.
Certainly, there is much merit to the government selling private housing sites largely on 99-year land leases.
By selling leasehold land, the government can take back the land when the lease matures so that the land can then be used to meet future development needs.
An initial tenure of say 94 years, after factoring in time to develop a project, when a new condo owner collects the key to his home should adequately cover the life of a young adult homebuyer.
Where private-home buyers, worried over seeing land leases maturing, need to exercise care is when buying older resale leasehold homes. Amid rising life expectancy, a buyer aged 40 years old may want to avoid buying a home with under 60 years of land lease remaining to insure against possibly living to 100 years old.
Having a land lease of a private home that matures shortly can be scary, especially if one then has to hunt for new lodgings in one’s advanced years.
However, while some leasehold private homeowners may be keen on lease extension when an existing land lease expires, the chances of extending a lease are slim. Thus, a homebuyer seeking a home to live in for the remainder of his life may simply need to pay up for a unit with a sufficiently long land lease remaining.
https://www.businesstimes.com.sg/opinion-features/hoping-extend-land-lease-your-private-home-dont-count-it