Leasehold versus Freehold - the Comparison Continues (2016)

[tonymontana]

I don't understand why a bond issuance is considered money-printing?

In this case HDB issued a bond, subscribers of the bond paid real money to HDB. Please illustrate which part of it created new money; real or un-real?

You think HDB does not use real money for the coupon payments?

Unless MAS is the one buying up all the HDB bonds, perhaps it can be considered some form of "money printing", although not exactly.

[Hakuho]

Unless MAS is the one buying up all the HDB bonds, perhaps it can be considered some form of "money printing", although not exactly.

Yes.

If MAS used new money (that is, not using the money mopped up from an asset sale in market operation) to buy the HDB bond, then the exercise is money-printing.

So, only Central Banks have the mandate to create new money.

HDB cannot create money as someone here has claimed.

[Arcachon]

Yes.

If MAS used new money (that is, not using the money mopped up from an asset sale in market operation) to buy the HDB bond, then the exercise is money-printing.

So, only Central Banks have the mandate to create new money.

HDB cannot create money as someone here has claimed.

You are right HDB bonds are not money printing but government bond are money printing, I must be wrong because the two bond on the same type of paper are different.


Government bonds themselves have nothing to do with regulating the money supply. However, central banks may buy or sell government bonds in order to inject liquidity (that is, increase the money supply) into the economy, or to fight inflation (that is, decrease the money supply).

https://www.quora.com/How-do-governm...e-money-supply

[Arcachon]

[Hakuho]

You are right HDB bonds are not money printing but government bond are money printing, I must be wrong because the two bond on the same type of paper are different.


Government bonds themselves have nothing to do with regulating the money supply. However, central banks may buy or sell government bonds in order to inject liquidity (that is, increase the money supply) into the economy, or to fight inflation (that is, decrease the money supply).

https://www.quora.com/How-do-governm...e-money-supply

No.

A bond is a bond, regardless of who is the issuer; the credibility of the issuer determines the grade of the bond. A bond issuance is not money-printing.

You need to be able to understand the difference between MONETARY and FISCAL actions, and see the difference between deficits spending and money-printing.

When a Central Bank buys the government bond, it is not necessarily money-printing also. It is all about intent.

No point harping on money-printing when the basic is not understood.

[Arcachon]

No.

A bond is a bond, regardless of who is the issuer; the credibility of the issuer determines the grade of the bond. A bond issuance is not money-printing.

You need to be able to understand the difference between MONETARY and FISCAL actions, and see the difference between deficits spending and money-printing.

When a Central Bank buys the government bond, it is not necessarily money-printing also. It is all about intent.

No point harping on money-printing when the basic is not understood.

You are right both print on the same type of paper call Bond, it depends on who buy it.

Same with Paper Money, some are more valuable than others, they are not the same Money.

Small amount only, getting near to 600 billion (600,000,000,000,000) don't know the zero correct of not.

http://www.tablebuilder.singstat.gov...ion?refId=5398

https://tradingeconomics.com/singapore/money-supply-m2

[blah5]

Western political and economic systems differentiate between the government (treasury/ministry of finance) and the central bank (fed reserve/MAS).

The government’s revenue, spending and budget are termed “fiscal”. The central bank’s policy regarding interest rates and money supply are termed “monetary”. They are supposed to be independent i.e. central bank have no obligations to finance the government.
Money printing refers to the central bank financing the government’s budget, to the extent that there is an unusually large increase in the money supply (M0, M1, M2 etc).

In the US, the Fed controls the money supply (close control of M0, looser control of M2) and loosens interest rates through the following mechanism:
- Treasury issues a new short-term bond, to raise money for the fiscal budget, through an auction.
- US banks that are market-making dealers are required to make a bid in the auction. Banks who win the bid passes on money to the government, takes the bond in exchange.
- The Fed then buys the bonds from the banks. Cash is “reinstated” to the banks. This relates to M0.
- Banks may then loan the money to borrowers, who can use it to finance properties, amongst other things. Singapore’ s TDSR is a way to filter the bank-borrower dealings. This relates to M2.
In the above, the government gets more money to spend because of the central bank’s indirect buying. Banks and borrowers also have more M0 to lend and borrow against.

In money printing/QE, the central bank
- Keeps buying the government’s issues of bonds.
- Goes on to buy lower-quality, non-government, long-dated bonds (corporate bonds, mortgage securities) that are newly or previously issued, giving the seller (banks, insurance firms, pension funds) monies.
- Even goes so far as to buy stocks or exchange traded funds directly.

The “money printing” above is intended to place money in the hands of businesses and consumers. The spending of the money will then stimulate the economy.

Such money printing may lead to asset price inflation. However, it does not in itself guarantee it. For example, Japan’s interest rates have been virtually 0 since 1999. Yet there was no property bubble there.
https://tradingeconomics.com/japan/money-supply-m2
https://tradingeconomics.com/japan/interbank-rate

For price inflation to happen, you need the final step to be completed: banks to lend to consumers and businesses, who then spend and invest to boost demand beyond supply. In Europe, banks have been reluctant to lend. In Singapore, TDSR has limited the impact of money printing (MAS does not have an independent interest rate policy, so the external impact of QE filters through) on the housing market.

[Hakuho]

Western political and economic systems differentiate between the government (treasury/ministry of finance) and the central bank (fed reserve/MAS).

The government’s revenue, spending and budget are termed “fiscal”. The central bank’s policy regarding interest rates and money supply are termed “monetary”. They are supposed to be independent i.e. central bank have no obligations to finance the government.
Money printing refers to the central bank financing the government’s budget, to the extent that there is an unusually large increase in the money supply (M0, M1, M2 etc).

In the US, the Fed controls the money supply (close control of M0, looser control of M2) and loosens interest rates through the following mechanism:
- Treasury issues a new short-term bond, to raise money for the fiscal budget, through an auction.
- US banks that are market-making dealers are required to make a bid in the auction. Banks who win the bid passes on money to the government, takes the bond in exchange.
- The Fed then buys the bonds from the banks. Cash is “reinstated” to the banks. This relates to M0.
- Banks may then loan the money to borrowers, who can use it to finance properties, amongst other things. Singapore’ s TDSR is a way to filter the bank-borrower dealings. This relates to M2.
In the above, the government gets more money to spend because of the central bank’s indirect buying. Banks and borrowers also have more M0 to lend and borrow against.

In money printing/QE, the central bank
- Keeps buying the government’s issues of bonds.
- Goes on to buy lower-quality, non-government, long-dated bonds (corporate bonds, mortgage securities) that are newly or previously issued, giving the seller (banks, insurance firms, pension funds) monies.
- Even goes so far as to buy stocks or exchange traded funds directly.

The “money printing” above is intended to place money in the hands of businesses and consumers. The spending of the money will then stimulate the economy.

Such money printing may lead to asset price inflation. However, it does not in itself guarantee it. For example, Japan’s interest rates have been virtually 0 since 1999. Yet there was no property bubble there.
https://tradingeconomics.com/japan/money-supply-m2
https://tradingeconomics.com/japan/interbank-rate

For price inflation to happen, you need the final step to be completed: banks to lend to consumers and businesses, who then spend and invest to boost demand beyond supply. In Europe, banks have been reluctant to lend. In Singapore, TDSR has limited the impact of money printing (MAS does not have an independent interest rate policy, so the external impact of QE filters through) on the housing market.

Thanks.

The last paragraph worths more than one reading.

[Hakuho]

In the Landed segment, the price differential between FH and LH is more pronounced than condo or HDB. Partly because a buyer is more aware that he has to price the land, and then the building that sits on the land. Separately. Valuer Aldo does the same way.

In condo or HDB, normally a buyer doesn't do that so consciously. And of course, the land on which the building sits, the title is with MCST and SLA respectively.

I suggest a reading of a report to gain an insight.

https://www.orangetee.com/Research/R...ldAnalysis.pdf

One takeaway from OT report, the driver of the bull market last seen in CCR was the Developer land grabs of FH lands in 2006-2007.

This was a far more powerful driver when we compare it with the GLS land grabs today, because it created a cohort of buyers (seller yesterday becomes buyer tomorrow; not vested today is a buyer tomorrow).

[hopeful]

In the Landed segment, the price differential between FH and LH is more pronounced than condo or HDB. Partly because a buyer is more aware that he has to price the land, and then the building that sits on the land. Separately. Valuer Aldo does the same way.

In condo or HDB, normally a buyer doesn't do that so consciously. And of course, the land on which the building sits, the title is with MCST and SLA respectively.

I suggest a reading of a report to gain an insight.

https://www.orangetee.com/Research/R...ldAnalysis.pdf

perhaps the price differential between FH & LH landed is more pronounced than condo or HDB because
1) there are actual cases of leases of LH landed expiring (Geylang?) whereas there are none yet for LH condo / HDB (SIT?)

2) i think govt more likely allow top-up lease if there are re-development. if no re-developement, like Arcadia, then likely rejected.
so if need re-development to top-up lease, then buyers of LH condo may find comfort in that it is easier to enbloc LH condo. Trying to re-develop/enbloc several adjoining landed is perhaps more tedius and risky to a developer since there is no >80% rule for landed. one example is Haig Court / Haig 162.

3) buyers of HDB think when flats grow old, there will always be SERS/reverse mortgage/lease buy-back. Are there similar schemes for LH landed?

[tonymontana]

**>[Trying to re-develop/enbloc several adjoining landed is perhaps more tedius and risky to a developer since there is no >80% rule for landed. one example is Haig Court / Haig 162. ]

The owner of the bungalow around which haig court was built, Dr. F. P, must have held out against that developer buying up her plot, only to have been cheated by the construction worker of that very same development coming up around her house: such a sad turn of events. god rest her soul.

[hopeful]

re-looking at the enbloc of One Tree Hill Garden, now that we have benchmark of FH land price (one tree hill garden) at $1664psf, we can calculate land value of LH (one tree hill mansion)

99LH from 1973, so 55 years remaining.
from dc table,
calculation of LH land value is 1664/96% x 77.3% = 1340psf.

so why are there 4 URA caveats One Tree Hill Mansion that are way below the calculated value of the land?
we have to remember that the transacted price of $892psf include BOTH the land & building, whereas calculated value of ONLY the land is $1340psf.
so are the 4 sellers stupid or what? if the excuse is they don't have data for one tree hill garden, they could have use one tree hill residence (FH) data, which seems to be selling for ~$1900psf.
less construction cost $400psf for the residence, that would give an indicative land value of 1500/96% x 77.9% = ~1200psf for one tree hill mansion.
and paying ~1200psf, which includes both land & building, that seems to be a bargain for a buyer when land value itself is ~1200psf, you buy land @1200psf, u get free unit

but does the market work that way?
no. i dont think so, that's why there are no transactions at 1200psf.
are the sellers ignorant of mathematics or are there some other reasons for the reluctance of buyers to pay 1200psf for a 55LH property (land&building)?

so to all those who like to spot enbloc properties, do you think one tree hill mansion has good en-bloc potential ?
purchase at $890psf and enbloc at $1340psf.

as to my question posted:
http://forums.condosingapore.com/sho...741#post525741

how does a developer calculate? does it calculate forward or backward?
forward calculation means land price + construction cost + profit = selling price (land price determine selling price)
backward calculation means selling price - profit - construction cost = land price (selling price determine land price)

in current market condition, forward calculation (like SC Global) seems to be quite risky to me.
i would think more likely is a developer will look at surrounding properties, their selling prices, from there on work backwards on how much to bid for the land. and since buyers are prepare to pay more for FH, so developer will selling FH at a higher price.

lets say Lum Chang sell the new FH development at $2200psf.
at the same time, another developer XYZ wants to enbloc one tree hill mansion and determines the LH can sell for $2000psf (FH only 10% more expensive).
if XYZ pays the same $1664, (enbloc price $1340psf and top-up lease $324), if construction cost only $200, then Lum Chang earns $336psf (2200-1664-200) and developer XYZ earns $136psf (2000-1664-200)
same amount of work and capital invested (1664+200), different returns. so what does a developer do? perhaps they preferentially enbloc FH.

and if developer XYZ wants to enjoy the same margin as Lum Chang, what will he do, he will be prepared to pay only 1140 psf (2000-324-200-336).
One Tree Hill Garden owner will earn 524psf (1664-1140) or 46% more than One Tree Hill Mansion owner.

I hope that nobody (eg. Ke*****ni) argues that there is a difference between Lum Chang paying $1664psf and developer XYZ paying $1340psf + top-up lease $324, both comes up to $1664

[Hakuho]

perhaps the price differential between FH & LH landed is more pronounced than condo or HDB because
1) there are actual cases of leases of LH landed expiring (Geylang?) whereas there are none yet for LH condo / HDB (SIT?)

2) i think govt more likely allow top-up lease if there are re-development. if no re-developement, like Arcadia, then likely rejected.
so if need re-development to top-up lease, then buyers of LH condo may find comfort in that it is easier to enbloc LH condo. Trying to re-develop/enbloc several adjoining landed is perhaps more tedius and risky to a developer since there is no >80% rule for landed. one example is Haig Court / Haig 162.

3) buyers of HDB think when flats grow old, there will always be SERS/reverse mortgage/lease buy-back. Are there similar schemes for LH landed?

In the Landed segment, very few buyers are interested in LH. Therefore the demand for those LH standing is very low, this is the market force and it depresses the price of LH vis-a-vis FH naturally.

For a Landed buyer, either he bought it because he likes the building/location, or he likes only the location and plans to tear the building it down to reconstruct. The cost of reconstruction is high, so he better be sure that the new building is going to sit on a FH land (construction can be delayed; he runs out of fund, or his builder has gone missing before construction is completed etc).

For Landed, for an area/estate that is zoned say semi-d, a Developer who manages to buy over the entire area/estate will still have to construct semi-d. So, this has nothing to with whether the area/estate comprises of LH or FH (of course, if it is LH he will run far away first).

All he can leverage on, is to maximise the plot ratio and possibly amalgamation of semi-d plots to build Detached provided the zoning allows. It is a high risk low profit potential venture, not to mention that it is almost impossible to get all the existing owners to sell to him at the same time. However, if the zoning is revised from Landed to Condo then it is a different story all together (because the existing owners want to sell to him in order to profit from the zoning revision haha).

I remember that someone here in the forum has attempted to self develop a Detached estate, maybe he can share his experience.

For reverse mortgage, I supposed that if the property owner wants to do it the bank should have no issue even for LH. It is a business decision of the bank.

For lease-buyback, no the government has no obligation for private property.

Regarding LH condo with expiry:

https://www.theedgeproperty.com.sg/c...old-properties

[Hakuho]

re-looking at the enbloc of One Tree Hill Garden, now that we have benchmark of FH land price (one tree hill garden) at $1664psf, we can calculate land value of LH (one tree hill mansion)

99LH from 1973, so 55 years remaining.
from dc table,
calculation of LH land value is 1664/96% x 77.3% = 1340psf.

so why are there 4 URA caveats One Tree Hill Mansion that are way below the calculated value of the land?
we have to remember that the transacted price of $892psf include BOTH the land & building, whereas calculated value of ONLY the land is $1340psf.
so are the 4 sellers stupid or what? if the excuse is they don't have data for one tree hill garden, they could have use one tree hill residence (FH) data, which seems to be selling for ~$1900psf.
less construction cost $400psf for the residence, that would give an indicative land value of 1500/96% x 77.9% = ~1200psf for one tree hill mansion.
and paying ~1200psf, which includes both land & building, that seems to be a bargain for a buyer when land value itself is ~1200psf, you buy land @1200psf, u get free unit

but does the market work that way?
no. i dont think so, that's why there are no transactions at 1200psf.
are the sellers ignorant of mathematics or are there some other reasons for the reluctance of buyers to pay 1200psf for a 55LH property (land&building)?

so to all those who like to spot enbloc properties, do you think one tree hill mansion has good en-bloc potential ?
purchase at $890psf and enbloc at $1340psf.

as to my question posted:
http://forums.condosingapore.com/sho...741#post525741

how does a developer calculate? does it calculate forward or backward?
forward calculation means land price + construction cost + profit = selling price (land price determine selling price)
backward calculation means selling price - profit - construction cost = land price (selling price determine land price)

in current market condition, forward calculation (like SC Global) seems to be quite risky to me.
i would think more likely is a developer will look at surrounding properties, their selling prices, from there on work backwards on how much to bid for the land. and since buyers are prepare to pay more for FH, so developer will selling FH at a higher price.

lets say Lum Chang sell the new FH development at $2200psf.
at the same time, another developer XYZ wants to enbloc one tree hill mansion and determines the LH can sell for $2000psf (FH only 10% more expensive).
if XYZ pays the same $1664, (enbloc price $1340psf and top-up lease $324), if construction cost only $200, then Lum Chang earns $336psf (2200-1664-200) and developer XYZ earns $136psf (2000-1664-200)
same amount of work and capital invested (1664+200), different returns. so what does a developer do? perhaps they preferentially enbloc FH.

and if developer XYZ wants to enjoy the same margin as Lum Chang, what will he do, he will be prepared to pay only 1140 psf (2000-324-200-336).
One Tree Hill Garden owner will earn 524psf (1664-1140) or 46% more than One Tree Hill Mansion owner.

I hope that nobody (eg. Ke*****ni) argues that there is a difference between Lum Chang paying $1664psf and developer XYZ paying $1340psf + top-up lease $324, both comes up to $1664

It is not easy at all for a layman like us to calculate the potential.

The starting point is to know what is the land size & shape.

From the land size, we know the maximum GFA permissible based on the existing plot ratio.

But the permissible is not necessarily what can be built, we have to look at the land shape. There are more than a handful of building bylaws to comply with, these may interfere the design of the building that can maximise the GFA. Only an architect/QP is able to say for certain.

Never mind, we can assume the maximum GFA can be done; so from here the Developer can apply a $ psf he thinks the market can bite. This is the revenue figure.

The other side is the cost.

We start with the hypothetical cost, we can assume that the baseline cost is 48 units x approx $1.5 mil = $72 mil. This should be the figure if the 48 units are summarily sold in the open market, that is without an enbloc (take note that this is my assumption, and I am not a Developer).

Then we add the DP to top up the lease to 99 years; this rate is not a straight line, the DP increases exponentially toward the end of lease lifespan.

I don't know if there is DC to be incurred to maximise the GFA?

So basically the cost is $72 mil + DP payable + DC payable

Next we add the building cost, say $400 psf x max GFA.

Finally we have the total hypothetical cost ($72 mil + DP payable + DC payable + building cost)

Revenue minus total hypothetical cost = hypothetical gross profit.

I think that only at this juncture the Developer is able to tell how much to negotiate for the enbloc price? Provided that there is a meaningful hypothetical gross profit to start with.

The bottomline is, unless one is close to the dealmakers especially the Developer side, 没门.

[hopeful]

It is not easy at all for a layman like us to calculate the potential.
........
The bottomline is, unless one is close to the dealmakers especially the Developer side, 没门.

and regarding LH vs FH ?

[hopeful]

In the Landed segment, very few buyers are interested in LH. Therefore the demand for those LH standing is very low, this is the market force and it depresses the price of LH vis-a-vis FH naturally.
.......

yes because of pyschological and technical factors that applies to LH landed vs LH non-landed / HDB.
any numbers to throw around the FH premium between new LH landed and new FH landed ?
for new LH non-landed vs FH non-landed, the FH premium for non-landed has been quoted to range from 10%-20%

[Hakuho]

and regarding LH vs FH ?

Not sure which part you are referring to.

If you are referring to the example of Lum Chang vs XYZ, mathematically, there is no difference to the seller in getting $1664 psf ppr la.

In reality, I doubt that we can see the same number $1664 psf ppr happening at the same time. Not within time periods that is close. The land rights is simply different.

If there is, one of them has been mis-priced. Do you agree?

Moreover, $1334 psf ppr is incorrectly derived please refer to my last post on DP costing.

[Hakuho]

yes because of pyschological and technical factors that applies to LH landed vs LH non-landed / HDB.
any numbers to throw around the FH premium between new LH landed and new FH landed ?
for new LH non-landed vs FH non-landed, the FH premium for non-landed has been quoted to range from 10%-20%

For Landed, a buyer has to really know how to price a purchase. There is mis-pricing galore, this is my view.

Why is there a mis-pricing galore?

Because most buyers price by looking at the building, the internal layout etc, in other words the same way how they price a condo; at entry level buyers are more often than not upgraders from condo. The land portion is often forgotten, haha.

Regarding the premium of new LH vs new FH. There is no 'standard' premium that I heard of.

But here is an interesting case study using an example of new FH (Cluster) vs new FH (free standing).

Right now, you can take the price of a Belgravia (Cluster) to buy a new or nearly new FH (free standing), with almost the same build up. The opportunity is there if you look hard enough at the right time.

Now, remember that although Belgravia is FH, it is also a strata meaning that the owner has no direct title to the land.

Price-wise, very little different. Build up maybe the same. TItle rights, big difference.

The general rules for Landed (1) buy only FH (2) Cluster is overpriced; I didn't look at it often but when I did all of them said "over-price".

[hopeful]

Not sure which part you are referring to.

If you are referring to the example of Lum Chang vs XYZ, mathematically, there is no difference to the seller in getting $1664 psf ppr la.

In reality, I doubt that we can see the same number $1664 psf ppr happening at the same time. Not within time periods that is close. The land rights is simply different.

If there is, one of them has been mis-priced. Do you agree?

Moreover, $1334 psf ppr is incorrectly derived please refer to my last post on DP costing.

just to correct a little bit, it is "there is no difference to the buyer paying $1664".

Yes unlikely to see same transactions since every property is unique in its own way

from the DP table, the market premium of 10% for FH seems to infer that enbloc would be around ~22 years and a premium of FH of 20% would indicate enbloc would be around ~40 years. This is the point at which FH owner would get even with LH owner when enbloc. If enbloc before 40 years, then LH owner would benefit more, after 40 years, FH owner would benefit more

but the LH owners forget that developers want to maintain margin (FH can fetch higher price), so they would press down the LH enbloc price (so enbloc price LH +top up lease < enbloc price FH), that would shift the breakeven point to not 40years, but earlier (perhaps 25years to break even?), if enbloc after 25 years, LH owner would lose out to FH owner.

So is LH owner is over-paying or FH owner is getting a bargain? i would think it depends on when property is en-bloc.
or at the end of the day, perhaps there may be no difference at all, the better rental yield offsetting the reduction in enbloc price LH

as for $1334 psf ppr miscalculation, perhaps you can walkthrough the calculations?

[star]

Question: With the recent high bids will we see nearby resale condo price up too? Let's say new launch condo plan to sell at $1300psf and is 40% higher than nearby resale condo, will nearby condo prices increase too? If yes by how many percent?

[hopeful]

Question: With the recent high bids will we see nearby resale condo price up too? Let's say new launch condo plan to sell at $1300psf and is 40% higher than nearby resale condo, will nearby condo prices increase too? If yes by how many percent?

i am interested to know too. would buyers prefer Martin Place Residence (<10years FH) or Martin Modern (new 99 LH).
going by indicative prices, it seems MM is priced higher than MPR, wow.

[Hakuho]

just to correct a little bit, it is "there is no difference to the buyer paying $1664".

Yes unlikely to see same transactions since every property is unique in its own way

from the DP table, the market premium of 10% for FH seems to infer that enbloc would be around ~22 years and a premium of FH of 20% would indicate enbloc would be around ~40 years. This is the point at which FH owner would get even with LH owner when enbloc. If enbloc before 40 years, then LH owner would benefit more, after 40 years, FH owner would benefit more

but the LH owners forget that developers want to maintain margin (FH can fetch higher price), so they would press down the LH enbloc price (so enbloc price LH +top up lease < enbloc price FH), that would shift the breakeven point to not 40years, but earlier (perhaps 25years to break even?), if enbloc after 25 years, LH owner would lose out to FH owner.

So is LH owner is over-paying or FH owner is getting a bargain? i would think it depends on when property is en-bloc.
or at the end of the day, perhaps there may be no difference at all, the better rental yield offsetting the reduction in enbloc price LH

as for $1334 psf ppr miscalculation, perhaps you can walkthrough the calculations?

I mentioned the baseline cost of the land as $72 mil. Why I think that this is the baseline? It is because that is the collective price the owners can get by selling in the open market. This is hypothetical of course, in reality the open market doesn't function that.

What do the developer get based on the hypothetical $72 mil. Nothing but the land, the building will be torn down.

So the developer will have sent for a valuer assessment of the land. If the residual value of the land as assessed is way below the baseline $72 mil, the enbloc prospect clearly diminished unless there is ample room to maximize the GFA.

The other known cost components are all due to the government.

You should realize that the $1664 psf is "ppr"; I have appended the "ppr" which was missing in your earlier posts. By "ppr", it means that the buildable GFA needs to be known in order to calculate.

I am not a developer, that's all the guesswork done.

I didn't comment on the other part, the LH < FH in various scenario etc, and not going to comment because it requires moar guessworks.

I am the kind who look at downside risks first and last, so it has been FH all the while. It is just 10% more, sometimes 0% difference if you look harder, it is not going to change the equation meaningfully.

[hopeful]

I mentioned the baseline cost of the land as $72 mil. Why I think that this is the baseline? It is because that is the collective price the owners can get by selling in the open market. This is hypothetical of course, in reality the open market doesn't function that.

What do the developer get based on the hypothetical $72 mil. Nothing but the land, the building will be torn down.

So the developer will have sent for a valuer assessment of the land. If the residual value of the land as assessed is way below the baseline $72 mil, the enbloc prospect clearly diminished unless there is ample room to maximize the GFA.

The other known cost components are all due to the government.

You should realize that the $1664 psf is "ppr"; I have appended the "ppr" which was missing in your earlier posts. By "ppr", it means that the buildable GFA needs to be known in order to calculate.
......

from this article:
https://kopitiambot.com/2017/05/05/l...eal-this-year/
72.8mio is the asking price, 65mio is the transacted price, so why do you take the baseline as 72.8mio ?

the psf paid is 65000000/39063 = ~1664psf
if plot ratio is 1.4, the psf ppr = 1664/1.4 = ~ 1188psf ppr
if plot ratio is 2.1, the psf ppr = 1664/2.1 = ~792psf ppr
if plot ratio is 2.8, the psf ppr = 1664/2.8 = ~594psf ppr
(i did not find out the plot ratio of the land)

am i or are you mixed up in the definiton of psf ppr?
i am damn worried i am getting old, mixing up definitions.

[PropVestor]

For those who looked at the resale market exclusively, it might not be a bad idea to look at the FH market over LH. However, given the micro-location of where it sits, connectivity and the unique design of the building itself, even FH properties nearby might not command that kind of pricing even over time. If its prime land, its prime land, plain and simple. The nearby amenities like MRT interchange is not going to shift anytime soon. Given the perceivable difference in price (subjective since its perceived value is gauge by you and the bank at that point in time) and just looking at the downside risk is simply playing it safe. The investor might end up buying something sub par just because it is FH sitting at a secondary prime location which is fairly matured. What is prime is of course subjective. What some see as trash but be picked up as gold. Works both ways.

I look for future upside in any given location first be it LH or FH. What is the potential for this piece of property and where it will become in the next few years. I believe those who made the most money are those who see 'yet-to-be reality upon current emptiness'. Just like developers who bought land parcels and waiting for developments to happen first. Far East is one of them. Hence, those who buy new properties need to see future upside to surroundings. It must of course meet 2 conditions; Is it a Transformational Project and at right Entry Price (Developer discount). That one and only location (FH or LH does not really matter) where it sits is supremely important coupled with risk mitigation from mentions in the MasterPlan so there is no self imagined reality.

2 cents,
PropVestor

[Hakuho]

from this article:
https://kopitiambot.com/2017/05/05/l...eal-this-year/
72.8mio is the asking price, 65mio is the transacted price, so why do you take the baseline as 72.8mio ?

the psf paid is 65000000/39063 = ~1664psf
if plot ratio is 1.4, the psf ppr = 1664/1.4 = ~ 1188psf ppr
if plot ratio is 2.1, the psf ppr = 1664/2.1 = ~792psf ppr
if plot ratio is 2.8, the psf ppr = 1664/2.8 = ~594psf ppr
(i did not find out the plot ratio of the land)

am i or are you mixed up in the definiton of psf ppr?
i am damn worried i am getting old, mixing up definitions.

Don't worry, I am the one getting old and didn't verify with the data before commenting. Haha.

So sorry!

This is a Landed enbloc, URA used the land's $psf in all its reporting. $psf ppr for all other enblocs.

[Hakuho]

from this article:
https://kopitiambot.com/2017/05/05/l...eal-this-year/
72.8mio is the asking price, 65mio is the transacted price, so why do you take the baseline as 72.8mio ?

the psf paid is 65000000/39063 = ~1664psf
if plot ratio is 1.4, the psf ppr = 1664/1.4 = ~ 1188psf ppr
if plot ratio is 2.1, the psf ppr = 1664/2.1 = ~792psf ppr
if plot ratio is 2.8, the psf ppr = 1664/2.8 = ~594psf ppr
(i did not find out the plot ratio of the land)

am i or are you mixed up in the definiton of psf ppr?
i am damn worried i am getting old, mixing up definitions.

So, if we are able to conclude this topic.

The costing done is ALL for OTH Mansion, an APARTMENT estate. The (hypothentical) enbloc pricing should be in $psf PPR.

The costing process is correct; the guessing part is baseline cost for the developer.

$72 mil is calculated by 48 units x $1.5 mil (the rounded last sales transaction recorded in URA Caveat.

(the asking price of OTH Garden was $72.6 mil, it has caused a confusion)

OTH Garden was LANDED estate, the sales price transacted should be in $psf and not $psf PPR.

[Hakuho]

For those who looked at the resale market exclusively, it might not be a bad idea to look at the FH market over LH. However, given the micro-location of where it sits, connectivity and the unique design of the building itself, even FH properties nearby might not command that kind of pricing even over time. If its prime land, its prime land, plain and simple. The nearby amenities like MRT interchange is not going to shift anytime soon. Given the perceivable difference in price (subjective since its perceived value is gauge by you and the bank at that point in time) and just looking at the downside risk is simply playing it safe. The investor might end up buying something sub par just because it is FH sitting at a secondary prime location which is fairly matured. What is prime is of course subjective. What some see as trash but be picked up as gold. Works both ways.

I look for future upside in any given location first be it LH or FH. What is the potential for this piece of property and where it will become in the next few years. I believe those who made the most money are those who see 'yet-to-be reality upon current emptiness'. Just like developers who bought land parcels and waiting for developments to happen first. Far East is one of them. Hence, those who buy new properties need to see future upside to surroundings. It must of course meet 2 conditions; Is it a Transformational Project and at right Entry Price (Developer discount). That one and only location (FH or LH does not really matter) where it sits is supremely important coupled with risk mitigation from mentions in the MasterPlan so there is no self imagined reality.

2 cents,
PropVestor

Indeed. Value is the main consideration in a purchase.

https://www.theedgeproperty.com.sg/c...pments-command

Not all FH are valuable, similarly not all LH are to be avoided. If there is no underlying value, currently realisable or to be realised (prospect), no point looking further on the price.

So, pricing is basically a process of finding out if the the underlying value matches the asking price.

If underlying value < price, then we have a mis-priced item.

If underlying value > price, then we have a bargain in front of us.

[Kelonguni]

Just to add on, what's of great value to some may be mediocre to others, and vice versa.

For example, via the TDSR, the government has managed to segregate the market (bettet than before) in such a way that different segments of buyers exist. What's of great value in one segment may be unattainable by the other segment. When it's unattainable, it may not command the value that people actually place on it. This is because demand is an aggregate of willingness and ability. And most of our CMs arrest ability rather than willingness to buy.

The same picture exists in car prices and values as well.

[Hakuho]

Question: With the recent high bids will we see nearby resale condo price up too? Let's say new launch condo plan to sell at $1300psf and is 40% higher than nearby resale condo, will nearby condo prices increase too? If yes by how many percent?

What is the influence of an enbloc to the value of neighbouring properties?

The direct influence is the pricing of the land.

Taken Rio Casa as an example.

The total land cost is $783 mil. If the immediate neighbour's land plot is similar (in size, shape and quality of soil etc) to Rio Casa, the value of that land should be re-rated close to $783 mil also. Then from here we apply the discount based on the lease lifespan to arrive at the residual value. (I am not getting into the detailed calculation, haha)

The enbloc has no influence to the pricing of the neighbour's physical building. How to price that building is another subject requiring a WOT, haha.

[Arcachon]

Indeed. Value is the main consideration in a purchase.

https://www.theedgeproperty.com.sg/c...pments-command

Not all FH are valuable, similarly not all LH are to be avoided. If there is no underlying value, currently realisable or to be realised (prospect), no point looking further on the price.

So, pricing is basically a process of finding out if the the underlying value matches the asking price.

If underlying value < price, then we have a mis-priced item.

If underlying value > price, then we have a bargain in front of us.

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.