Freehold land Owners READ THIS!
Property Buyers and Investors need to know?Singapore property buyers and Investors need to know this because the future value of their condominium and cluster landed properties with Strata titles will be affected some 20 to 30 years down the road when the development becomes run-down. Is a cluster terrace really a terrace when you don’t really own the land title but collective land called Strata titled land? (Isn’t it just a bigger size multi-storey condo?)
What about Singapore property owners with Freehold or 999 Leasehold land titles?
For current Singapore property owners who owned landed properties with freehold or 999 leaasehold land titles, this means a potential future bonanza. Please read on, we have got the reply from Singapore land authority.
Reply from Singapore Land Authority (SLA) On Freehold land being sold as Leasehold strata titled developments.
“www.PropertyBUYER.com.sg:
We are doing a research for the benefit of our readers. Our website is at www.PropertyBUYER.com.sg and our readers have been urging us to enquire about how Far East and numerous other property developers have been able to acquire FREEHOLD land from the government (either SLA or from the open market) and then develop and sell the properties as a 99 years property? Could you please help us understand under what circumstances are Developers allowed to buy Free Hold land and re-sell as Lease hold land? We appreciate if you could point us to any such literature, web link, sites? which explains these in greater details.?
Singapore Land Authority:
Developers can buy freehold land through the private market. You ?should? approach the developers for details on your queries as these are all? private transactions.?
“www.PropertyBUYER.com.sg:
Thank you for your reply.?We understand that developers can buy from the private market. But having? said that, our readers would like to understand under what statute does ?it? allow the developer to buy Free Hold land and then sell it as a 99 years?lease? ?Hope you can point us in the right direction.?
Singapore Land Authority:
We refer to your enquiry dated 11 Jan 2010.
Common Law provides that a smaller interest in land can be carved out? from ?a? larger interest in land, with the registered proprietor/developer? retaining? a ?reversionary interest.
The duration of this smaller interest is not? governed by ?any statutory provision.?? Hence it is acceptable for a developer to retain the reversionary? Freehold ?title in a development and merely sell the strata lots in the development ?with ?a 103-year lease or any determinate number of years out of the Freehold ?title.?
”
Good News for Singapore Property Owners with Freehold land or 999 lease hold land
Singapore land authority has clarified that “Common Law provides that a smaller interest in land can be carved out from a larger interest in land, with the registered propietor/develop retaining a reversionary interest.”
This means that you can possibly sell your landed property on a 99 years lease or any numbers of years lease as you deem fit if you sort out the legal paperwork.
This would mean that you will be able to pass on wealth to your descendants while selling properties while retaining the reversionary rights to freehold land.
Maybe you are stting on 3 or 4 Semi-detaches or Bungalows, you can’t really lease it out to get a good cashflow and yet you don’t want to sell it as you may not be able to buy another property in a similar good location and you need to grow your business.
What could the Singapore Property landlords do?
Perhaps you can sell one or two of your Semi-detaches as leasehold while you maximise and free up capital and at the same time share in the upside the land can possibly provide.
Sad day for Singapore Property buyers
For Singapore property buyers, it means that more and more property developers will likely get in on the strategy to retain the freehold title while selling developments as Strata title leasehold. Freehold land may gradually disappear into the hands of the well funded and rich property developers.
Property developers buys Free Hold land and releases it as lease hold
January 29th, 2010
Posted by chief under Compare singapore home loan, Singapore Property Investor, novice property investors with No Comments
Property developers buys Free Hold land and releases it as lease hold
In view of the recent few launches such as that of “The Shore residence” and the “Greenwood terraces”, both of which are bought as Free hold land, redeveloped and sold as 103 years lease hold strata title. These are 2 Far East developments which have been launched recently. We are still checking which are the other properties sold under such arrangements.
Singapore government can release land in various forms, but more likely than not, most land parcels being released are 99 years leasehold land, while very few are freehold or 999 lease hold land. This means that the supply of perpetual land (FH, 999 lease hold) are diminishing all the time.
In land scarce Singapore, this means that in the coming years, Freehold land may become even more scarce.
The recent developments where developers who bought Free Hold land, develop and then subsequently sell it as 99 years lease hold could further accelerate the depletion of Free Hold land to the public.
We look at the implications of such developments
IMPLICATIONS OF DEVELOPERS RETAINING A REVERSIONARY LEASE
Developers may now bid for many Freehold land parcels or take over existing free hold property through en-bloc sales. The Singapore economy is still weak, if you look at the salary census, Singapore’s salary growth has been slower than that of growth of property prices.
In other words, affordability is an issue. Say for instance a couple earning a combined income of $10,000 a month with no financial commitment on a 30 years loan repayment tenure can only afford a $987,000 Singapore property loan with a threshold interest rate of 4.5%.
At 20% downpayment, and a loan of $987,000, the property price that such a property buyer can afford is $1,233,750.
If the property developer who wants to market his property at $1300 psf for a 1,100 sq feet property, the Singapore property developer would need to either reduce prices or reduce size to meet that affordability figure.
Singapore property developer’s goal
The developer’s goal is always to maximize profit (There is nothing wrong with it).
Trend of Smaller singapore condominium units
In this scenario, the property developer can choose to reduce the size of unit, thereby meeting the affordability price quantum and achieve superior price per sq feet per plot ratio (psfppr). This could lead to a trend of smaller size condominium units in the future.
FreeHold land becomes Leasehold 99 years land
In another scenario, the property developer opt to maintain the size of the unit, but converts the Free hold land to a 99 years leasehold land. The developer owns the Free Hold land title. This could lead to the gradual disappearance of the Free Hold land titles available to the public.
Overtime, if the law permits, developers could even sell properties on 70 years lease, 50 years and lesser.
Singapore hands power over to the large property developers?
If developers are allowed to hold on to the free hold land titles while developing properties and selling it as a 99 years lease, then this will over a period of time dilute the effectiveness of Singapore Land authority to regulate the market by controlling the differential premium.
Say for instance when the building is 20 years old and run down, the residents opt for selling en-bloc, they can sell en-bloc for the remaining lease of 79 years. Whoever buys this piece of land en-bloc would find it hard to redevelop and sell it again as there is not much lease remaining.
Supposedly in any potential en-bloc deals, the residents are only selling the remainder 79 years lease of the land to another developer.
In order to make this development attractive, a top up of the lease by 20 to 30 years would be required. In the case of topping up of this lease, the singapore property developer that owns the land has the final say on setting the rates. (Not SLA through regulating the Development charge).
So whether you can en-bloc or not depends solely on the goodwill of the property developer. If the property developer sets a high price for the top-up, then that would mean that no other developer would want to bid for it, leading to lower market value for that property.
The final rights then remains in the hands of the developer who owns the master title of the free hold land.
In this case, Far east wold retain the rights and option to develop the land should the residents want to go en-bloc. Far East having a right to set development charges or extract additional fees, will have the first right of refusal in any land parcel development.
As more and more developers do this in the near future, the authority of Singapore land authority could become eroded. There is always a worry that such developers will eventually wield too much power.
DEPRECIATION OF THE CONDOMINIUM BUILDING
Let’s say the building is poorly maintained, the condition becomes worse, over time the value of the building drops. So in such a scenario, even if Far east makes an offer for the land that is giving only a slight premium, the residents will have no choice but to accept the offer and sell back the remaining lease to the developer and lose any potential upside.
We have already got in touch with Singapore land authority to enquire about under what circumstances are developers allowed to buy Free Hold land and release it back as 99 years lease hold land.
We are not against property developers maximizing profit, we are in a capitalist society. Ultimately it is a matter of buyer power versus seller power. If the seller has the pricing power, it is very obvious that buyers will have to do so on the seller’s terms and the reverse is true as well. Ultimately all profit seeking enterprises are there to make money, and rightly so.
What does this mean for you if you own a FREE HOLD properties?
We are checking with SLA under what statute or circumstances are such arrangements allowed. If this is allowed, wouldn’t you then be able to offer your Free Hold landed property for sale at a slight discount as a 99 years lease hold property?
Imagine, this is really a unique way of passing money and assets to the next generation while retaining a vested option in the land value of the property.
I would say, it has all the UPSIDE and none of the downside.
IF SINGAPORE PROPERTY OWNER HAS FREEHOLD PROPERTY AND ARE GOING EN-BLOC
If you are singapore property owner and has a Freehold strata title property which is going to go en-bloc, why not consider modifying the lease. Sell your Freehold property collectively to the Singapore property developer as a Lease Hold 99 years property and retain the rights to the Freehold land?
Stay tuned while we wait for a reply from Singapore Land Authority.
Singapore home loans becomes easier as DBS OCBC and Maybank eases credit
January 16th, 2010
Posted by chief under Singapore Property Investor with No Comments
DBS Singapore term loans - Equity loans (loan to valuation) has been revised from 70% to 80% starting January 2010.
OCBC bank Singapore term loans - equity loans (loan to valuation) has been revised from 70% to 80% starting January 2010.
Maybank has raised the lending limit from 80% to 90% loan to valuation.
Note: Monetary Authority of Singapore allows banks to lend up to 90% of the valuation of a Property, but not all banks offer 90% loans.
Term loans are also known as equity loans. These type of loans allow property owners to take cash out of a property whose valuation have risen by refinancing these properties.
How Singapore Property term - equity loans work
For example (if CPF is not used)
A property which was bought for $1m dollars with an outstanding loan of 800k.
If the property valuation increases to $1.2m, this Singapore property owner can go to a bank to refinance their home loans. At $1.2m valuation and at a Loan to valuation of 80%, the bank can lend you $960,000.
If your new possible loan size is $960,000 that means you will be able to refinance your $800,000 home loan + a term loans (or equity loan) for $160,000.
This immediately avails $160,000 (after 12 weeks) of cash if your income can support $960,000 of loan quantum.
These cash out is not allowed for down payment for another property.
The actual impact or increase in liquidity is likely to be limited. These lending changes are not announced openly, as a result, they are not likely to lead to people suddenly going to the bank to apply to Singapore property buyer with “cash out”.
In Singapore Monetary Authority of Singapore do not make a lot of announcements unlike the federal reserve in the USA.
Therefore if we use DBS as a proxy for the Singapore government’s policies, it does possibly infer a credit easing stance, albeit a very minor one. This could mean that credit and financial risks have abated and the climate is more positive for lending or it could be just a minor adjustment to keep Term loan and home loan maximum Loan to valuation cap in-line with home loans loan-to-valuation caps.
Easing of Credit typically fuel property asset prices.
What does it mean for Singapore property investors and buyers alike?
We do not think this is a big tide of change, rather it should be taken as just one more positive signal (out of many other signals) for property buying rather than a definitive BUY signal. Please exercise your own judgement and due diligence before committing to any property. More research can be found at Singapore Property Investors.
We all know this but now this is official. Whether you have children or not, FH is the only way to go.
