Leasehold versus Freehold - the Comparison Continues (2016)

[tonymontana]

The Value is whether you want your Cash to depreciate with Time or buy property to appreciate with Time.

In property, if you do the right way of levering your risk is minimum. TDSR, LTV.

In Cash confirm you going to lost money over Time. Bank print money MAS control the rate of printing.

Don't believe put your Cash in the Bank, 10 years later go and see what you can buy with the Cash.

Basically you are right. I know some senior generation they only bought one property for own stay, right now retired 20 years already have to downgrade lifestyle.
But if property crash, you will lose money. So property still have risk.

[Arcachon]

Basically you are right. I know some senior generation they only bought one property for own stay, right now retired 20 years already have to downgrade lifestyle.
But if property crash, you will lose money. So property still have risk.

It depends on whether after you buy your property you do nothing and just pray everything will be fine.

My Program Manager bought his condo before 1996 when he retired he ask me how to buy HDB because he wants to sell his Condo.

Another bought landed property at 200k, then rent out landed stay in HDB.

Risk increase when you stop learning, refuse to learn and don't want to learn.

I was also one of them until my friend told me he bought a 2 Bedroom FH at Lor 37 for 420k in 2006

[Hakuho]

To those interested in the mechanics of enbloc, how is the "gross development value of $1.4 bil" calculated?

To calculate, let's assume the developer's GP margin as 10%.


http://www.straitstimes.com/business...rth-6765m-done

Rio Casa in Hougang Avenue 7 was sold for $575 million to the joint venture firm Oxley-Lian Beng Venture comprising KSH Development, Oxley Holdings, Lian Beng Group and Apricot Capital.

"We received a handful of submissions for Rio Casa; it was hotly contested," said Mr Ian Loh, head of investment and capital markets at Knight Frank, the project's marketing agent. The intention is to apply for the grant of a fresh 99-year lease for the property and to redevelop it, the consortium said in a separate stock exchange filing yesterday.

It would have to fork out a further $208 million in estimated differential premiums for topping up the lease and to develop the site to a gross plot ratio of 2.8. Knight Frank noted that the combined sale price and differential payment translates to a land price of about $706 per sq ft per plot ratio based on the maximum permissible gross floor area of about 1.1 million sq ft.


Rio Casa comprises seven blocks of 286 apartment and maisonette units. Each owner stands to pocket about $2 million from the deal.

"The gross development value for this project is estimated at $1.4 billion and can potentially be redeveloped to build about 1,400 residential units, assuming an average size of 70 sq m per unit," Mr Loh added.

[tonymontana]

And as if to provide people here with an answer, here is what SLA is doing to some expiring lease houses, the first residential properties in singapore where lease is expiring.

http://www.channelnewsasia.com/news/...owners-8961922

[teddybear]

Not sure whether these people still staying put because they believe the myth or some people's propoganda that their leasehold properties will always get enbloc and hence have great value as leases getting expired?

And as if to provide people here with an answer, here is what SLA is doing to some expiring lease houses, the first residential properties in singapore where lease is expiring.

http://www.channelnewsasia.com/news/...owners-8961922

[Kelonguni]

It merely informs that it is disadvantageous to start with a 60 year lease if the intention is ultimately to hope for enbloc.

Similarly, we can see that Hillford may not live to see the days of enbloc.

For a building that has only 60 years lease at the start, during the first 20-30 years, people will be happy to live in a relatively new building. But when they want to sell, there are only 30 years of lease left. 30 years left means no loan allowed if sell to individuals, and sell via enbloc will need huge top up, unless Govt allows top up to 60 years. This is still fine if the intention is to live in the building till death within another 30 years later.

Starting with 90-99 years, the story is vastly different. When you have built a family and lived out your most productive years from 90-99 years, there is still 60-70 years' lease left. There may be a second owner who does not mind buying 30 years later, not to mention the potential for subsequent enbloc to renew the building. So far developers have shown that they are willing to top up if the asking sum is not too high to begin with.

Not sure whether these people still staying put because they believe the myth or some people's propoganda that their leasehold properties will always get enbloc and hence have great value as leases getting expired?

[anythingwhatever]

Not sure whether these people still staying put because they believe the myth or some people's propoganda that their leasehold properties will always get enbloc and hence have great value as leases getting expired?

To begin with, these are not Private Leasehold with En-bloc Potential...

[tonymontana]

Not sure whether these people still staying put because they believe the myth or some people's propoganda that their leasehold properties will always get enbloc and hence have great value as leases getting expired?

actually poor thing , those who have stayed there for a long time. hope they get some option & grant to purchase back the HDB that is gonna be built there .

ah bear, i think there are myriad possible outcome to different cases in question.

toodles.

[2824]

Actually it will be more interesting to see when the time comes when high rise HDB in the heartlands reach the 99 year lease and hundreds of families are affected, what the decision will be.

[Kelonguni]

At this juncture, as they are public housing and affect millions actually, it is not difficult to imagine buying over (SERS) before lease runs out and replacing with 60 years leasehold HDBs to allow to cash out partially via downgrading.

Actually it will be more interesting to see when the time comes when high rise HDB in the heartlands reach the 99 year lease and hundreds of families are affected, what the decision will be.

[henryhk]

At this juncture, as they are public housing and affect millions actually, it is not difficult to imagine buying over (SERS) before lease runs out and replacing with 60 years leasehold HDBs to allow to cash out partially via downgrading.

Don't dream garment will extend the lease of hdb after it ends , as already said..SERS is for selected hdb...I am a very realistic person, don't want to give myself false hopes, my clementi hdb left 60 years, most likely I will sell and buy another 99 year condo, ....I don't tink I will get enblock anyway 😃

[Kelonguni]

That is a wise move.

Although the current SERS model is not applicable for all the people affected, it is probable that it can be modified to assist with transition into another housing model for more. We are talking about maybe a million people some 30-50 years from today, and maybe another million every 10-15 years subsequently.

For your case, 30 years later, it is possible to buy over your remaining 30 years lease, top up to 60 years lease and reduce your flat size by 50%, just to speculate on how this transition can be made sustainable.

Nonetheless, these are all speculations. If you can get a condo first, it is the safer and more comfortable way. Might even earn much more by assuming more risks.

Don't dream garment will extend the lease of hdb after it ends , as already said..SERS is for selected hdb...I am a very realistic person, don't want to give myself false hopes, my clementi hdb left 60 years, most likely I will sell and buy another 99 year condo, ....I don't tink I will get enblock anyway 😃

[tonymontana]

Don't dream garment will extend the lease of hdb after it ends , as already said..SERS is for selected hdb...I am a very realistic person, don't want to give myself false hopes, my clementi hdb left 60 years, most likely I will sell and buy another 99 year condo, ....I don't tink I will get enblock anyway 😃

why sell? once you sell the HDB you can't buy back another. just rent it out.

[Arcachon]

why sell? once you sell the HDB you can't buy back another. just rent it out.

Agree, if you don't need the money HDB rental yield is the best.

Bought my 5 room for 250k rent for 2.8k.

Just calculate 60 years what is the total rental return (2,016,000) without inflation factor in.

[teddybear]

Last time mata wear shorts, now wear what?

Last time Singapore economy grows 7-9% per year, now what (1-3% per year)?

Last time population grows by 5-7(?)% per year, now what (1(?)% per year)?

So, Now HDB rental yield may be best, next time what?
You think will still continue to be best?
I won't bet on that, may be back to:
Last time HDB flats cannot rent out in 1997, now what?
Last time HillView condos cannot rent out in 1997, now what?
(Since economy and population growth is real low and bad now)

Agree, if you don't need the money HDB rental yield is the best.

Bought my 5 room for 250k rent for 2.8k.

Just calculate 60 years what is the total rental return (2,016,000) without inflation factor in.

[teddybear]

Where got millions people affected?

About 800k HDB flats in Singapore now, spread over 99 years, so 8080 flats affected per year only. So just like those few hundreds of people, can take back after lease expire every year (since only affect 8080 flats only per year) without compensating a single $. Then recycle and resell again, Govt huat ah!

At this juncture, as they are public housing and affect millions actually, it is not difficult to imagine buying over (SERS) before lease runs out and replacing with 60 years leasehold HDBs to allow to cash out partially via downgrading.

[anythingwhatever]

Agree, if you don't need the money HDB rental yield is the best.

Bought my 5 room for 250k rent for 2.8k.

Just calculate 60 years what is the total rental return (2,016,000) without inflation factor in.

13% Yield!!

Well worth the ABSD paid...

[teddybear]

60 years get $2,016,00 and your property left = $ZERO value ONLY!

Based on your calculation, you should really buy a freehold private property!

If you can rent out for $2k per year, and hold for eternity, that is INFINITY $$$ !

E.g., Even if rent for 10,000 years = $2k x 12 x 10,000 = $240,000,000 = $240 MILLIONS! (before including INFLATION and appreciation of your land further)!

Agree, if you don't need the money HDB rental yield is the best.

Bought my 5 room for 250k rent for 2.8k.

Just calculate 60 years what is the total rental return (2,016,000) without inflation factor in.

[henryhk]

60 years get $2,016,00 and your property left = $ZERO value ONLY!

Based on your calculation, you should really buy a freehold private property!

If you can rent out for $2k per year, and hold for eternity, that is INFINITY $$$ !

E.g., Even if rent for 10,000 years = $2k x 12 x 10,000 = $240,000,000 = $240 MILLIONS! (before including INFLATION and appreciation of your land further)!

Actually is true, if garment let u keep hdb after 99 years, then the country how to be rich and how to provide land for future people wanting to stay here, as Singapore got no more land lei, ....so they will take back the land and sell at double or triple the price....

[Kelonguni]

Actually is true, if garment let u keep hdb after 99 years, then the country how to be rich and how to provide land for future people wanting to stay here, as Singapore got no more land lei, ....so they will take back the land and sell at double or triple the price....

The Math can still work out even if cannot SERS in an intensified manner.

For example, if they buy back your 120sqm (30 years) and rebuild, giving you 60sqm for 60 years, they can build another 60sqm and sell for 60 years as well!

Of course, in most cases, they should be able to build up to 180sqm (slight intensification of land use).

[teddybear]

Another fallacy and myth being perpetuated......................

Think about it, nowsday the HDB flats and private condos have plot ratio 2.8 and higher and already built up to 36 storeys high or higher, you expect they can build double the height?

If cannot, why need to buy back from you for SERS / enbloc (when they can wait for another 30-69 years and take back for FREE)?

Better hope that your MCST or town councils don't try to save money on maintenance, otherwise you will have to climb up and down 36 storeys when the lifts break down! (or you may get "free-falling" adventure ride for FREE!)

The Math can still work out even if cannot SERS in an intensified manner.

For example, if they buy back your 120sqm (30 years) and rebuild, giving you 60sqm for 60 years, they can build another 60sqm and sell for 60 years as well!

Of course, in most cases, they should be able to build up to 180sqm (slight intensification of land use).

[Kelonguni]

You don't quite understand what is public good.

No need to build higher. Just take your larger units (120sqm) and cut into smaller units (40 sqm or 60 sqm).

Build the blocks closer by a bit. Problem solved, case closed...

Another fallacy and myth being perpetuated......................

Think about it, nowsday the HDB flats and private condos have plot ratio 2.8 and higher and already built up to 36 storeys high or higher, you expect they can build double the height?

If cannot, why need to buy back from you for SERS / enbloc (when they can wait for another 30-69 years and take back for FREE)?

Better hope that your MCST or town councils don't try to save money on maintenance, otherwise you will have to climb up and down 36 storeys when the lifts break down! (or you may get "free-falling" adventure ride for FREE!)

[teddybear]

Are you referring to HDB flats or private properties like condos?

You don't quite understand what is public good.

No need to build higher. Just take your larger units (120sqm) and cut into smaller units (40 sqm or 60 sqm).

Build the blocks closer by a bit. Problem solved, case closed...

[Kelonguni]

I think his idea is useful for consideration!

http://www.propertyguru.com.sg/prope...oc-potential-2

Why the hype around properties with en-bloc potential?
Contributor • June 23, 2017

Eunosville
The recent en-bloc sale of Eunosville made headlines after the former HUDC estate was sold for almost $766 million. (Photo: OrangeTee)

By Eugene Huang

Properties have life cycles, just like us. We know that property prices are largely driven by demand and supply. Today as we examine the correlation between the price and age of a property, we exclude external influences like demand, supply, inflation, immigration policies, infrastructure changes, etc.

Let’s look at the profile of a typical 99-year leasehold or freehold condominium since it forms the majority of private residential properties in Singapore.

Chart 1 Property Life Cycle
Source: Redbrick Mortgage

The launch – forming of a property

After land is acquired and architecture plans are drawn, a developer will launch the property for sale. At this stage, prospective buyers do not get to see a finished product. Instead, they purchase the property based on drawings, plans, and probably a nice model of how the development looks like.

The purchaser then takes up a mortgage on the property, servicing instalments as the developer calls for progressive payments. Since the property is not completed, there is no rental income.

You imagine and anxiously wait for the finished product.

The birth – Temporary Occupation Permit

After years of crossed fingers and eager anticipation, you finally get to see the finished product. We usually see a price increase (about 10 to 20 percent) between the launch and the Temporary Occupation Permit (TOP) because:

– There is no risk of the developer going bust and property not completing

– What you see is what you get – bask in the full glory of the physical product

– Instant gratification – you can use the property right away, or rent it out for income

However, I must point out that this is not the time where rental value is the highest – because there are a few hundred units within the same development that, like yours, are waiting anxiously to get rented.

The aging – depreciation

Just like humans, properties age too. Cracks start forming on the walls, and facilities start to look worn and dated. While a resort-themed pool was all the rage 15 years ago, tenants and homeowners now prefer cantilevered infinity pools perched on rooftops. Tastes change; what was fashionable before now gets phased out by newer, more functional / efficient replacements.

Rentals decline as tenants look out for newer developments, resulting in price declines on the property.

The bottom – cessation of depreciation

Land does not depreciate. At least for all freehold land and leasehold land which the government will allow a top-up on the lease.

The rejuvenation – redevelopment

We know Singapore has limited land. However, Singapore has less of a limitation on airspace much like Hong Kong and many other cities around the world. The Urban Redevelopment Authority (URA) manages the Master Plan which governs land usage in Singapore.

Plot ratio is the magical number to determine the intensity of the land usage, or how much of floor area can be built within a plot of land.

As land gets used up in Singapore, the authorities will start putting higher numbers to the plot ratio, intensifying land use – of course, first ensuring the infrastructure (roads and transportation) and amenities (shops and schools) can support a denser population.

So, this results in many of the en-blocs (also known as collective sales) we are seeing today – a more efficient use of land.

Because of a higher plot ratio, developers can now build more units on a given plot of land. Hence, the depreciated piece of land your property is sitting on now suddenly becomes more valuable. As new properties are sold for higher prices, the land your property is sitting on also appreciates.

Case study: The Bayshore vs. Bayshore Park

Both developments are in District 16, right next to each other.

A check on the units from each of these developments would bring about similar results – an average asking price of about $800 to $1,000 psf.

When you look at the age of each development, Bayshore Park received its TOP in 1986, about 31 years ago. On the other hand, The Bayshore received its TOP in 1999, which means its age is currently about 18 years.

Both developments have a 99-year lease.

Astute investors know that The Bayshore has maximised its gross floor area (GFA), according to its plot ratio, while Bayshore Park has more room towards its maximum allowable GFA.

Chart 2 Property Life Cycle
Source: Redbrick Mortgage

Based on the property life cycle, The Bayshore at 19 years since its TOP, is currently in the depreciation phase. It’s still set to depreciate further, and may only bottom out when the URA decides to increase the density of residents on the piece of land by tweaking its plot ratio.

Conversely, Bayshore Park has already been through its depreciation phase and even past the bottom of the life cycle. It’s currently working its way back up the rejuvenation stage, where there is more potential for redevelopment.

A property purchase can be an emotional process. Many a time, we choose to follow our hearts. The newer property may look more attractive, but we should look beyond face value and do our research to seek out options that will bring us the best returns on our investment.

[Kelonguni]

Are you referring to HDB flats or private properties like condos?

Public goods means what?

[Hakuho]

60 years get $2,016,00 and your property left = $ZERO value ONLY!

Based on your calculation, you should really buy a freehold private property!

If you can rent out for $2k per year, and hold for eternity, that is INFINITY $$$ !

E.g., Even if rent for 10,000 years = $2k x 12 x 10,000 = $240,000,000 = $240 MILLIONS! (before including INFLATION and appreciation of your land further)!

I think to illustrate the merit of FH vis a vis LH, we should first define the investment timeframe properly.

I don't know what other people used, but the timeframe is 30-years for me. 30-years for a comparison, not 30-years for funding alright?

How can we use 10,000 years as the investment timeframe? Or infinity, LOL.

Obviously I agree with your viewpoint on FH, but it is not necessary to base it on a large scale investment timeframe lah.

[Arcachon]

Another fallacy and myth being perpetuated......................

Think about it, nowsday the HDB flats and private condos have plot ratio 2.8 and higher and already built up to 36 storeys high or higher, you expect they can build double the height?

If cannot, why need to buy back from you for SERS / enbloc (when they can wait for another 30-69 years and take back for FREE)?

Better hope that your MCST or town councils don't try to save money on maintenance, otherwise you will have to climb up and down 36 storeys when the lifts break down! (or you may get "free-falling" adventure ride for FREE!)

For your info, we are looking at removing the limit set by Bukit Gombak. If you don't know why, you are not one of them.

http://www.teoalida.com/singapore/serslist/

http://www.skyscrapercity.com/showth...252482&page=26

[teddybear]

I won't be surprised that in future, people will be buying new-launch 70 years leasehold properties at as much as new-launch 99-years leasehold price (regardless of their lease length because they just hope that they can flip quickly to the next greater fool - just like now people paying as much or even more for new launch 99-years leasehold property vs freehold property).................

For your info, we are looking at removing the limit set by Bukit Gombak. If you don't know why, you are not one of them.

http://www.teoalida.com/singapore/serslist/

http://www.skyscrapercity.com/showth...252482&page=26

[Arcachon]

I won't be surprised that in future, people will be buying new-launch 70 years leasehold properties at as much as new-launch 99-years leasehold price (regardless of their lease length because they just hope that they can flip quickly to the next greater fool - just like now people paying as much or even more for new launch 99-years leasehold property vs freehold property).................

They already did it on 60 years leasehold. Sold out very fast.

If they sell 30 years leasehold and the rental is more than the selling price I will also buy.

https://www.iproperty.com.sg/news/81...ancing-hurdle-

[teddybear]

Why 30 years?
You may live till 150 years old you know (in future because of advance medical technology).
So, may be better to use 150 years rental instead of 30 years? (may be you may outlive your property hence the longer period of rental you can collect the better!)
In this case, now you can see why it makes perfect sense to buy freehold at a premium than 99-years or even 30-years at slight discount because:
30 years rental = $3000 x 12 x 30 = $1080k
150 years rental = $3000 x 12 x 150 = $5440k!
Clear as sky that I should buy freehold at current price (to hedge against inflation and living too long)!

They already did it on 60 years leasehold. Sold out very fast.

If they sell 30 years leasehold and the rental is more than the selling price I will also buy.

https://www.iproperty.com.sg/news/81...ancing-hurdle-