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Thread: Leasehold versus Freehold - the Comparison Continues (2016)

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    Default Leasehold versus Freehold - the Comparison Continues (2016)

    Decided to start a new thread for discussion.

    It's been cooked many times but we may have fresh perspectives after experiencing 3 years of cooling.

    Which situations would FH (and 999 LH) warrant the price premium?

    Which situations would LH99 (or LH60) be better bets?
    The three laws of Kelonguni:

    Where there is kelong, there is guni.
    No kelong no guni.
    More kelong = more guni.

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    This 99 LeaseHold finally reflect Market valuation.

    http://business.asiaone.com/property...e-the-new-norm

    Today, every HDB flat has an open market value which its owner can realise after staying in the flat for a minimum period. The values of HDB flats today reflect Singapore's growth and prosperity since the 1970s.

    However, in 2006, when the rapid population growth far exceeded supply and resale prices soared, both build-to-order (BTO) and resale prices raised the ire of Singaporeans, especially as resale prices surged more than 94 per cent in just a few years.

    People have been alarmed at the dramatic rise in public housing costs - particularly with reports of million-dollar resale flats surfacing. This has caused many to wonder if HDB flats will remain affordable for future generations.

    Here are some examples of million-dollar resale flats in Singapore:

    The first HDB flat to hit this dizzying price level was an executive apartment at Block 149 Mei Ling Street in Queenstown. The unit was sold for S$1 million in 2012 with a cash-over-valuation (COV) of S$195,000. On a high floor, the 1,615 square foot (sq ft) unit offers unblocked views of Queenstown stadium and is close to supermarkets and food centres.

    A 1,615-sq-ft executive maisonette near Bishan MRT station was sold for S$1.05 million at the end of 2013, translating to a COV of S$250,000. The unit is on the 20th floor of Block 190 at Bishan Street 13.

    In Oct 2014, a similar-sized executive maisonette also in Bishan Street 13 changed hands for nearly S$1.09 million. The 27-year-old two-storey unit is located at Block 194 near a 24-hour food centre and Junction 8 shopping centre.

    More recently in March this year, a top-floor unit at City View @ Boon Keng, a Design, Build and Sell Scheme (DBSS) development, was sold for S$1.028 million. On the 40th floor, the unit has higher ceilings in the balcony and living room, compared with units on the lower floors, and offers an unblocked vantage view and a spacious layout of 1,281 sq ft.

    Market forces in play

    It is good to know that compared to BTO flats, HDB resale prices are primarily determined by market forces. The government cannot simply manipulate prices as there would be many repercussions. On the one hand, artificially lowering prices would benefit those who cannot afford a home; on the other, it will cause much displeasure among those who have recently bought a resale flat, or even the majority of HDB flat owners who are sitting on a tidy paper profit.

    While the government has limited maneuverability in implementing policies to affect prices directly, several cooling measures were introduced to indirectly cool HDB resale prices. This includes the the Mortgage Servicing Ratio, Total Debt Servicing Ratio and the removal of COVs.

    Meanwhile, with the evolution of the resale market, buyers' tastes have changed and flats are now also valued differently - depending on factors such as location, view, and design. Now, buyers are more willing to pay more for a top-floor flat commanding the best view, compared to a lower-floor unit facing the bin centre.

    Appeal of million-dollar flats Buyers will always be willing to fork out huge amounts for homes located in "hot areas" such as Bishan, Toa Payoh, Queenstown and Clementi. The fact that fewer new flats are being launched in these mature estates definitely also helps boost their appeal.

    The Bishan maisonettes, for example, are a type of flats that was constructed in the 1980s, and construction of these flat types has stopped with the launch of executive condominiums (ECs) in 1995. Maisonettes are different from most regular flats, having a large floor space of around 150 square metres. Such homes usually command a premium. Pinnacle@Duxton - a famous producer of million-dollar flats - is also not a typical HDB development either. Its location in Tanjong Pagar is not something most flats are blessed with.

    One possible way to explain the million-dollar HDB flat trend could be that condo and EC sizes have shrunk. Some extended families need the larger space to have a more comfortable living environment and so they have had no choice but to purchase a HDB unit with the right size, even if they can buy a similar-priced condo with a smaller area. Such million-dollar flats are not many, and even if they are transacted, they do not fully represent the market as they form just a minority of HDB resale deals.

    There is no reason to be alarmed because it is uncommon for people to pay such high prices for a HDB resale flat. And with the numerous cooling measures in place, it is even rarer that a buyer can afford to pay such a large quantum for a HDB flat.

    What type of property in Singapore should you buy

    Buying property is a long term investment. When you're thinking of diving into real estate investment, it's better gather as much information on it as possible.Just like in any part of the world, having a private property is a good decision as there are many benefits. For instance, the property cycle in Singapore over the last years indicates that there is a steady rise in real estate's value. Alternatively, real estate investment can be a source of passive income. You can purchase a property and rent it out. When it comes to investing in real estate, you should ask whether there is easy access to MRT stations, schools, and other essential facilities; the property can be easily resold; and affordability.What are the costs involved in buying a property in Singapore? First, you have to check your stamp duty rate. Based on the market value of the property, you can compute for your Buyer's Stamp Duty (BSD).
    Differing value of flats

    Today, we have built a unique public housing system that is based on home ownership. It offers Singaporeans not only shelter but also a store of value.

    However, Singaporeans have to understand that there are always people who are prepared to pay more for a flat's inherent value - good location, high floor, proximity to good schools, and so on. And these flats usually command a premium that buyers are always willing to pay more for.

    But flats with such qualities are few - and we should stop seeing these flats as an indicator of our public housing prices skyrocketing. They are not in fact "warning signs" of uncontrolled housing prices.

    The writer is PropNex Realty CEO.

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    Quote Originally Posted by Kelonguni View Post
    Decided to start a new thread for discussion.

    It's been cooked many times but we may have fresh perspectives after experiencing 3 years of cooling.

    Which situations would FH (and 999 LH) warrant the price premium?

    Which situations would LH99 (or LH60) be better bets?
    Be prepare for LH60 or less for Marina Bay Area.

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    Quote Originally Posted by Arcachon View Post
    Be prepare for LH60 or less for Marina Bay Area.
    So HDB and downtown LH better or good enough.

    How about private in the different regions CCR, RCR and OCR?
    The three laws of Kelonguni:

    Where there is kelong, there is guni.
    No kelong no guni.
    More kelong = more guni.

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    Quote Originally Posted by Kelonguni View Post
    So HDB and downtown LH better or good enough.

    How about private in the different regions CCR, RCR and OCR?
    Depend on what the buyer buy the property for.

    For Capital appreciation, now already history.

    For the Long term, Capital appreciation now is the best time to buy CCR FH.

    For self-stay who care, only the buyer care.

    HDB and downtown LH is already at its peak.

    They most likely going for 60 years LH then suddenly everything looks so cheap.

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    If people are buying property to burn their money, they can do anything with it!

    Other than that, you should just remember about our discussion below about Raintree Gardens enbloc, and how you would have been short-changed for owning 99-years leasehold properties!

    And yes, you should ignore what minority claimed because he is just making up a BUNCH of BULLSHITS and LIES! (and he has demonstrated to be a FINANCIAL IDIOT, and would you take financial planning and investment advice from a FINANCIAL IDIOT, or even believe what he claimed about financial matters - like on CPF Life having "BETROTH" and CPF Life buys insurance from insurance company?!)

    Quote Originally Posted by teddybear View Post
    minority,

    As usual, more nonsense and bullshit and lies about financial investment from you, a PROVEN FINANCIAL IDIOT, who claimed CPF Life has "BETROTH" and that CPF Life buys insurance from insurance company.......
    So, what more except BULLSHIT and LIES can we expect from you??????????

    Again, better to show what BUNCH of LIES and BULLSHIT you are sprouting with numbers (otherwise people may think I am making empty talk):

    You claimed: "The 175-unit estate, known as Raintree Gardens, was launched for collective sale in September. The purchase price roughly works out to about S$1.89 million per unit."

    Wow! Looks great, until we dived deeper into the details!

    "The 201,405 sq ft plot, next to Kallang River and near Potong Pasir MRT station, has just over 70 years of lease left. It is zoned for residential use with a 2.8 plot ratio."

    "UVD is looking to develop the 201,405 sq ft site to house about 750 units. Overall, it is paying about $797 per sq ft per plot ratio (psf ppr), including the premium paid to top up the lease to a fresh 99 years and for redevelopment of the site to a gross plot ratio of 2.8."

    So, total costs of buying the Raintree Gardens land and topping up to 99-years land lease = S$797 * 201405 * 2.8 = S$449.45 Millions!

    Now, we know that the 175 owners of Raintree Gardens were only paid a total of $334.2 million!

    That means, if Raintree Gardens is a FH property instead of 99-years LH property with only 70 years land lease left, the owners will get additional = $449.45M - $334.2M = $115.25 Millions!

    In other words, if Raintree Gardens is a FH property instead of 99-years LH property with only 70 years land lease left, the owners would have gotten average S$2.57 MILLIONS (instead of just S$1.90 Million)!

    In other words, if Raintree Gardens is a FH property instead of 99-years LH property with only 70 years land lease left, the owners would have gotten about +34.48% (or +S$670k) MORE!

    Wow! FACTs show that: Like that I better buy FH and get paid $2.57M or +34.48% MORE for enbloc than just $1.90M !

    minority,
    The above FACT just shows that 99-years LH property will keep dropping in value as their lease runs down to 0!!!

    Raintree Gardens owners are lucky! They managed to sell NOW before the value of their property fall more as their land lease runs down! And the price fall will just accelerate the closer the land lease is to 99-years deadline!

    minority,
    FACT! Please talk FACT! Don't just BULLSHIT and LIE whatever way you LIKE!

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    Another key difference between LH and FH emerged from the Shunfu Ville Enbloc.

    When a property reaches or exceeds 30 years old, especially for LH where the land starts to depreciate faster, enbloc becomes ever so much likelier. This is especially so for small sites that are pocket-friendly for developers. It's good if you are a buyer of a new or relatively new property (say below 15-20 years old) in avoiding SSD, but it is a risk if you are a buyer when the property is more than 25 years old.

    FH property - in view of the owner's internal estimation of the value of land, and the slower/non depreciation of land, en bloc is much less likely even at 30 years old. The risk however, grows when it is 40 or 50 years old when maintenance costs might be much higher?
    The three laws of Kelonguni:

    Where there is kelong, there is guni.
    No kelong no guni.
    More kelong = more guni.

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    In UK, where manpower costs are much much higher than Singapore, there are many properties even >100 years old! They don't seem to have maintenance cost issues, what more in Singapore?
    Furthermore, maintenance costs is only an issue for small estates, those much less than 100 units. So, in such case, NEVER EVER buy a property in SMALL ESTATE!

    Actually, FACT is, when you enbloc, on the surface, you seem to get good money and save on some maintenance fees, but you can't even buy a similar property at the same location!

    Many of these disputes and many dissenting owners on ENBLOC seem to centre around LH property estate whose lease are running down to less than 70 years old and many owners are anxious to quickly flip before they can't even find any buyers!
    No wonder they are so anxious to sell when price and market sentiment is bad
    , like now!


    Quote Originally Posted by Kelonguni View Post
    Another key difference between LH and FH emerged from the Shunfu Ville Enbloc.

    When a property reaches or exceeds 30 years old, especially for LH where the land starts to depreciate faster, enbloc becomes ever so much likelier. This is especially so for small sites that are pocket-friendly for developers. It's good if you are a buyer of a new or relatively new property (say below 15-20 years old) in avoiding SSD, but it is a risk if you are a buyer when the property is more than 25 years old.

    FH property - in view of the owner's internal estimation of the value of land, and the slower/non depreciation of land, en bloc is much less likely even at 30 years old. The risk however, grows when it is 40 or 50 years old when maintenance costs might be much higher?

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    Quote Originally Posted by teddybear View Post
    In UK, where manpower costs are much much higher than Singapore, there are many properties even >100 years old! They don't seem to have maintenance cost issues, what more in Singapore?
    Furthermore, maintenance costs is only an issue for small estates, those much less than 100 units. So, in such case, NEVER EVER buy a property in SMALL ESTATE!

    Actually, FACT is, when you enbloc, on the surface, you seem to get good money and save on some maintenance fees, but you can't even buy a similar property at the same location!

    Many of these disputes and many dissenting owners on ENBLOC seem to centre around LH property estate whose lease are running down to less than 70 years old and many owners are anxious to quickly flip before they can't even find any buyers!
    No wonder they are so anxious to sell when price and market sentiment is bad
    , like now!
    Singapore environment do not permit building more than 50 years old, the deterioration is very bad.

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    Do not permit? Is there such thing?
    If do not permit, government should sell HDB flats and land with 50 years lease, not 99 years.........

    Deterioration is bad? That is an issue of maintenance (and not because of being old)......

    Ardmore Park is already passed 20 years old, but it's transacted price is even higher than the other condos nearby - Reason?
    Very simple, it is MUCH OLDER, but it was built with MUCH HIGHER QUALITY, and MUCH BETTER MAINTAINED!

    If people want to pay CHEAP and LOW Maintenance fund (like those living in Mass Market Condos), there is no way you can keep the estate well maintained!

    Just like CIRCLE Line MRT only a few years already keep having breakdown problem.... NEW doesn't mean no problem........


    Quote Originally Posted by Arcachon View Post
    Singapore environment do not permit building more than 50 years old, the deterioration is very bad.

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    Freehold property has the poorest rental yield when compare to leasehold. If u are hoping for developer enbloc your condo it is still very long way maybe 40years. 40yrs is such a long time. During this time u r earning low yield. Not a smart choice for investment. Most freehold r far from Mrt.
    When buying most important is affordability so u can meet monthly payment without stress. Buy what is affordable.

    Below link r the disadvantages of freehold:
    http://blog.moneysmart.sg/property/f...t-as-it-seems/

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    Lower yield because of slightly higher price, but you get to prevent asset depreciation because of your 99-years land lease running down (since once less than 70 years, there will be very few buyers)......

    Is it any wonder why all those 99-years LH property owners are trying to quickly flip to others when their property is past 20 years old;

    and other owners trying desperately to en-bloc their estate quickest possible when approaching 30 years old, even when market sentiment and hence price is bad, like now?!


    Quote Originally Posted by star View Post
    Freehold property has the poorest rental yield when compare to leasehold. If u are hoping for developer enbloc your condo it is still very long way maybe 40years. 40yrs is such a long time. During this time u r earning low yield. Not a smart choice for investment. Most freehold r far from Mrt.
    When buying most important is affordability so u can meet monthly payment without stress. Buy what is affordable.

    Below link r the disadvantages of freehold:
    http://blog.moneysmart.sg/property/f...t-as-it-seems/

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    LH next to mrt and amenities will be no different from FH in the first 20-25 years
    Cheaper for own stay and higher yield for investment

    Quote Originally Posted by Kelonguni View Post
    Decided to start a new thread for discussion.

    It's been cooked many times but we may have fresh perspectives after experiencing 3 years of cooling.

    Which situations would FH (and 999 LH) warrant the price premium?

    Which situations would LH99 (or LH60) be better bets?

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    Higher yield???
    Cheaper for own stay???
    No true lah!

    You can only collect rents for 99 years for 99-years LH property,
    vs collect rental FOREVER for Freehold property,
    so if you compute over long-term, which has much higher cash flow and hence MUCH HIGHER GAIN (considering MUCH HIGHER cash flow and property asset value will not drop to ZERO at end of 99 years)?

    Simple math only lah, why people don't understand it can only be FH property?!
    On the surface, 99-years LH property has higher yield and cheaper for own stay,
    but in reality people are worst off over long-term..........

    The only reason to buy 99-years LH property is because they can't afford Freehold (at same locality), that is all (and hence have to bear with lower cash flow and asset depreciation drop to ZERO over long term)..........


    Quote Originally Posted by Singleton View Post
    LH next to mrt and amenities will be no different from FH in the first 20-25 years
    Cheaper for own stay and higher yield for investment

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    Agree with you
    But if horizon is just over 20 years, that is sell,
    yield is higher

    Quote Originally Posted by teddybear View Post
    Higher yield???
    Cheaper for own stay???
    No true lah!

    You can only collect rents for 99 years for 99-years LH property,
    vs collect rental FOREVER for Freehold property,
    so if you compute over long-term, which has much higher cash flow and hence MUCH HIGHER GAIN (considering MUCH HIGHER cash flow and property asset value will not drop to ZERO at end of 99 years)?

    Simple math only lah, why people don't understand it can only be FH property?!
    On the surface, 99-years LH property has higher yield and cheaper for own stay,
    but in reality people are worst off over long-term..........

    The only reason to buy 99-years LH property is because they can't afford Freehold (at same locality), that is all (and hence have to bear with lower cash flow and asset depreciation drop to ZERO over long term)..........

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    Even fh can get rental 'forever', the rental income will need to discounted into present value. I have not really calculated it, so cant comment which one has better return.

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    I was wondering. If i am a person looking for rental income.

    Shall i go for a fh or use the money to buy 2 small lh.
    Beside cost, 2 small lh can probably diverse the risk caused by location, fire, bad tenant.. ..

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    Quote Originally Posted by ccreporter View Post
    I was wondering. If i am a person looking for rental income.

    Shall i go for a fh or use the money to buy 2 small lh.
    Beside cost, 2 small lh can probably diverse the risk caused by location, fire, bad tenant.. ..
    But it also entails double the work to manage two tenants. Quite a hassle if too many.

    It is the lower risk method somewhat, but the taxes paid are also higher if these are your first 1-2 properties.
    The three laws of Kelonguni:

    Where there is kelong, there is guni.
    No kelong no guni.
    More kelong = more guni.

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    Your scenario cannot be considered as well thought of and can't possibly be realistic, because 1 FH cannot buy 2 LH (as of now, though it may become possible in future).....

    Quote Originally Posted by ccreporter View Post
    I was wondering. If i am a person looking for rental income.

    Shall i go for a fh or use the money to buy 2 small lh.
    Beside cost, 2 small lh can probably diverse the risk caused by location, fire, bad tenant.. ..

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    Quote Originally Posted by teddybear View Post
    Your scenario cannot be considered as well thought of and can't possibly be realistic, because 1 FH cannot buy 2 LH (as of now, though it may become possible in future).....
    It has been a reality for some time if he meant CCR FH with OCR LH.
    The three laws of Kelonguni:

    Where there is kelong, there is guni.
    No kelong no guni.
    More kelong = more guni.

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    Well, novice property investors will need to go another recession then they will learn that during bad recession, they will have no tenants in OCR (regardless of OCR FH or LH) at a sustainable rent (that can cover their mortgage instalment and all other costs)...........


    Quote Originally Posted by Kelonguni View Post
    It has been a reality for some time if he meant CCR FH with OCR LH.

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    Cost recovery for the OCR MMs is 1,500 thereabout if one can buy below 500K. Cost recovery for CCR FH MM also minimum 3k I think. It's a fair asituation.

    Quote Originally Posted by teddybear View Post
    Well, novice property investors will need to go another recession then they will learn that during bad recession, they will have no tenants in OCR (regardless of OCR FH or LH) at a sustainable rent (that can cover their mortgage instalment and all other costs)...........
    The three laws of Kelonguni:

    Where there is kelong, there is guni.
    No kelong no guni.
    More kelong = more guni.

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    When there is NO TENANT, you can consider your cost recovery to be ZERO, and basically what matters is how long you can last without rental income (and I doubt there are a large number who can last like from 1998-2005 without tenant or even half of the time).....

    The past 1 year of even OCR MMs being forced sold at rock bottom price already tells us what we know.......

    Quote Originally Posted by Kelonguni View Post
    Cost recovery for the OCR MMs is 1,500 thereabout if one can buy below 500K. Cost recovery for CCR FH MM also minimum 3k I think. It's a fair asituation.

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    Quote Originally Posted by teddybear View Post
    When there is NO TENANT, you can consider your cost recovery to be ZERO, and basically what matters is how long you can last without rental income (and I doubt there are a large number who can last like from 1998-2005 without tenant or even half of the time).....

    The past 1 year of even OCR MMs being forced sold at rock bottom price already tells us what we know.......
    There is already a tenant, it whether you want to rent or not and at what rental.

    http://www.straitstimes.com/singapor...wo-condo-units

    https://sharonanngoh.com/2009/08/01/...reign-workers/

    PRIVATE apartments cannot be used as workers’ dormitories. However, to be classified as a dormitory, a unit needs to accommodate more than eight workers. So it is perfectly legal for a private apartment owner to rent to foreign workers, as long as there are no more than eight of them.

    The management corporation, says Mr Chan Kok Hong, managing director of CKH Strata Management, cannot restrict owners from doing this.

    But Mr Teo Poh Siang, who runs estate management firm Wisely 98, says: ‘Units rented to foreign workers are usually very badly maintained and overcrowding is a prevailing issue.’

    Common property may be damaged as a result. ‘The value of the property may be affected if foreign workers occupy more and more units,’ he says.

    A recent case involving the illegal partitioning of apartments at The Grangeford condo in Leonie Hill has raised questions about this contentious issue. The estate was sold en bloc in 2007, but leased out by its buyer to a company called Ideal Accommodation. The master tenant illegally partitioned the 140 apartments into 600 smaller units to earn more rent from tenants, who included expatriates, local professionals and students.

    The authorities are clear on this, however, and draw the line at partitions put up for commercial purposes in condos. Ideal has been told to remove its partitions.
    Last edited by Arcachon; 16-10-16 at 17:50.

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    After you rent your unit to foreign workers, not only that your unit cannot find buyer in future, your estate's other units difficult to find buyers, and your selling price and rent will go down the drain.........
    Short-term gain will be followed by long-term pain........

    Quote Originally Posted by Arcachon View Post
    There is already a tenant, it whether you want to rent or not and at what rental.

    http://www.straitstimes.com/singapor...wo-condo-units

    https://sharonanngoh.com/2009/08/01/...reign-workers/

    PRIVATE apartments cannot be used as workers’ dormitories. However, to be classified as a dormitory, a unit needs to accommodate more than eight workers. So it is perfectly legal for a private apartment owner to rent to foreign workers, as long as there are no more than eight of them.

    The management corporation, says Mr Chan Kok Hong, managing director of CKH Strata Management, cannot restrict owners from doing this.

    But Mr Teo Poh Siang, who runs estate management firm Wisely 98, says: ‘Units rented to foreign workers are usually very badly maintained and overcrowding is a prevailing issue.’

    Common property may be damaged as a result. ‘The value of the property may be affected if foreign workers occupy more and more units,’ he says.

    A recent case involving the illegal partitioning of apartments at The Grangeford condo in Leonie Hill has raised questions about this contentious issue. The estate was sold en bloc in 2007, but leased out by its buyer to a company called Ideal Accommodation. The master tenant illegally partitioned the 140 apartments into 600 smaller units to earn more rent from tenants, who included expatriates, local professionals and students.

    The authorities are clear on this, however, and draw the line at partitions put up for commercial purposes in condos. Ideal has been told to remove its partitions.

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    Long term rent till mortgage serviced. After that renovate and retire.

    What is the issue?



    Quote Originally Posted by teddybear View Post
    After you rent your unit to foreign workers, not only that your unit cannot find buyer in future, your estate's other units difficult to find buyers, and your selling price and rent will go down the drain.........
    Short-term gain will be followed by long-term pain........
    The three laws of Kelonguni:

    Where there is kelong, there is guni.
    No kelong no guni.
    More kelong = more guni.

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    Quote Originally Posted by Kelonguni View Post
    Long term rent till mortgage serviced. After that renovate and retire.

    What is the issue?
    But have to qualify to say that I don't recommend renting to that many. Rent to 3 or 4 persons per unit, what is the issue?
    The three laws of Kelonguni:

    Where there is kelong, there is guni.
    No kelong no guni.
    More kelong = more guni.

  28. #28
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    teddybear is offline Global recession is coming....
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    How much can you get from renting to 3 to 4 foreign workers per unit?

    Quote Originally Posted by Kelonguni View Post
    But have to qualify to say that I don't recommend renting to that many. Rent to 3 or 4 persons per unit, what is the issue?

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    Quote Originally Posted by teddybear View Post
    How much can you get from renting to 3 to 4 foreign workers per unit?
    Define foreign workers.
    The three laws of Kelonguni:

    Where there is kelong, there is guni.
    No kelong no guni.
    More kelong = more guni.

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