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Thread: The seven year itch - Business Times, Property, March 2017

  1. #1

    Default The seven year itch - Business Times, Property, March 2017

    The seven year itch

    Friday, March 31, 2017

    by Kalpana Rashiwala

    The itch to invest in property seems to be in the DNA of Singaporeans. Many love attending new launches and aspire to get rich by investing in property. The attraction to property is deep rooted. Most people here, when they look at their wealthy friends and relatives, have long concluded that owning property is a big part of being rich.

    Moreover, they view buying property as a good discipline which forces them to save up to make monthly mortgage instalments. Eventually they end up owning a piece of real estate – a tangible asset that they can leave for the next generation.

    Yet, in the past seven years or so, this itch has largely faded – after successive rounds of cooling measures.

    But things are starting to change. On March 10, the government made the surprise announcement that it was tweaking the seller’s stamp duty (SSD) on residential property, reducing the holding period as well as the stamp duty rate. SSD has been a bugbear for investors.

    Another relaxation announced was that the total debt servicing ratio or TDSR – which has sapped the life out of property investors since its rollout in 2013 – will no longer apply to mortgage equity withdrawal loans with loan-to-value ratios of 50 per cent and below.

    Those itching to invest in property hope that these maiden tweaks are but a precursor to how the authorities could further relax other cooling measures such as the additional buyer’s stamp duty. That said, other factors are also in play that should keep investors grounded – such as rising interest rates and substantial private home completions.

    In this edition of The Business Times Property Supplement, we present the new paradigm for investing in residential property. There are also tips on buying landed homes and luxe condos. Another topic discussed is whether shorter tenures are the way to provide more affordable private homes.

    Find out the outlook for executive condos and HDB resale flats.

    Read about the implications of agile offices and co-working on office demand. We also present to you Knight Frank’s latest annual retailer sentiment survey, which revealed a progressive mindset in most Singapore-based retailers who view technology as “partner in crime” rather than an “enemy in waiting”.

    What opportunities beckon in post-Brexit UK and in Malaysia?

    It certainly looks like the seven-year property itch may be back.

  2. #2

    Default Time to rethink investment in residential property

    Time to rethink investment in residential property

    Friday, March 31, 2017


    Tay Kah Poh


    WITH Singapore’s economy still weak, and property cooling measures still largely in place, potential investors are rightly apprehensive about prospects for real estate. On March 10, 2017, the government made a surprise announcement that the seller’s stamp duty (SSD) and total debt servicing ratio (TDSR) measures will be relaxed beginning March 11, 2017.

    However, the same announcement also imposed what is known as the additional conveyance duty (ACD) – a de facto ABSD (additional buyer’s stamp duty) – on the purchase of shares in property-owning special purpose vehicles. The government’s stance on the measures remains largely unchanged and these tweaks are merely “calibrated adjustments”, widely believed to have minimum impact on the market.

    Taking a medium term view, Urban Redevelopment Authority’s (URA) All Residential Property Price Index (PPI) has fallen 11.3 per cent since its peak in the third quarter of 2013. Ultra-low interest rates, coupled with several rounds of quantitative easing across major markets such as USA, Japan and the EU, had driven property prices skyward since the global financial crisis ended in 2009.

    It was only when the Monetary Authority of Singapore introduced the by now “infamous” TSDR rule in June 2013 that property prices started to fall. Until March 10, 2017, it was believed that the government considered any relaxation to the cooling measures as premature.

    The widely anticipated interest rate hikes will help to normalise the rate environment but the pace for this could be slowed by the weak global economic environment. Yet, to put things in perspective, the 11.3 per cent decline seen in private home prices is only a fraction of the bull run witnessed prior to that when the index surged 62.2 per cent from the trough in Q2 2009 to its recent peak in Q3 2013.

    Singapore assets have always been perceived to provide safe returns, on the back of macroeconomic stability, solid fundamentals and a strong currency. Knight Frank’s Global Prime Residential Property Indices point to a strong international value proposition for Singapore residential property, especially since other international cities such as Sydney, London and Hong Kong have also introduced or raised property-related taxes that neutralise the disadvantage of Singapore’s ABSD, particularly for foreigners.

    From a macroeconomic perspective, the various cooling measures – even with the latest re-calibration – now offer a set of policy tools that enables the government to steer property prices in much the direction it wants.

    The Committee for the Future Economy’s report suggests that the government’s macroeconomic emphasis in the foreseeable future now rests on jobs, productivity, innovation and entrepreneurship. From this perspective, the money spent on buying “safe” property may be more productively deployed into “risky” innovation and enterprise.

    If that perspective is correct, there could be a gradual mood change as more and more – particularly younger – people no longer view property as a pathway to wealth accumulation, compared to the allure of minting the next Alibaba or Facebook. It follows that the magnitude of capital appreciation for real estate assets is unlikely to be as great as before. With the forecast of three hikes in the US federal funds rate in 2017, as well as the European Central Bank’s plan to taper quantitative easing from April 2017, liquidity will be further reduced.

    Singapore’s economy is projected to grow at only one per cent to 3 per cent in 2017 and the annual average overall unemployment rate in Singapore rose to 2.1 per cent in 2016 from 1.9 per cent in 2015. These factors will curtail property buying interest.

    All these considered, it may therefore make more sense to view real estate investment from a yield rather than a capital gains perspective.

    Hotspots for rental play

    Notwithstanding the fact that the rental market, as widely known, is still disquieted by the painful combination of rising completions and negative expatriate population growth, potential investors should still be more concerned with rentability and rent levels rather than place their hopes on uncertain capital gains. One fruitful approach is to consider buying residential property in integrated transit-linked developments – defined as developments with commercial components and direct access to MRT.

    Truly integrated transit-linked projects are rare, and one can think of only a few examples – Marina One, DUO and Paya Lebar Quarter. Each of these has elements that mutually support one another, such as retail to support occupiers and office users, and office users to provide tenants for the homes.

    A study of residential rental data in mixed-use developments (to be used as proxies for integrated developments, since most of them are uncompleted and thus lack rental data) and their respective comparables in pure residential developments over the past five years (2012 to 2016) reveals that the former commands a small but consistent rental premium (Chart 1). This is likely due to the value placed by tenants on the convenience offered by the adjacent amenities of these mixed-use developments, as well as the discounted value of savings in travel time and not owning a car from being close to the MRT.

    In addition to these characteristics, one should assess other qualitative factors that could affect the rental and rentability of developments. These include the quality of construction and finishing, standards of maintenance of the common areas, and the developer’s track record.

    Property investment as an attractive asset class

    If the earlier hypothesis of slower capital gains in the coming years is believed, does property as an investment still make sense? Undoubtedly so. Property is an asset class that constitutes part of a larger portfolio of both liquid and illiquid investments. Widely accepted investment theory posits that there is an optimal allocation across asset classes that maximises return for a given level of risk.

    Quite aside from a portfolio framework, Knight Frank’s analysis also indicates that the rental yield of private residential property compares favourably to the yield of bonds proxied by the Thomson Reuters/SGX Singapore Fixed Income Index. In fact, mid-tier and mass market private homes offer a rental yield close to the Straits Times Index’s (STI) dividend yield (Chart 2). The relatively less volatile nature of physical real estate, as compared to equities (including Real Estate Investment Trusts or Reits), also makes the former an enticing option for ultra high net worth individuals (UHNWIs).

    Going forward, real estate capital appreciation is likely to mirror the growth trajectory of GDP and household income. Against this backdrop, investors would need to adopt a disciplined approach, apply yield-based valuation methods to price their entry points into any deal and leverage wisely.

    Knight Frank’s 2017 Wealth Report revealed from a survey carried out late last year that private bankers and wealth advisers voted for wealth preservation as the most important factor to their clients when it comes to the management of their wealth and their investment decisions. Property, by virtue of its longevity, tends to be less volatile. In that sense, property remains close to the hearts of many UHNWIs, particularly wealthy Asians and will always have a place in their portfolios and in their hearts.

    Tay Kah Poh is head of residential services, and Lim Mian is senior analyst, consultancy & research at Knight Frank

  3. #3

    Default Unearthing the gems in landed homes

    Unearthing the gems in landed homes

    Friday, March 31, 2017

    by LEE NAI JIA

    LANDED homes are some of the most coveted real estate assets in Singapore, due to their scarcity and exclusivity. As at Q4 2016, there were only an estimated 1,352 landed residential properties slated to be completed over a stretch of five years, between 2017 and 2021. There are a handful of landed residential projects with units yet to be launched (Figure 1), including a future development on a site along Lorong 1 Realty Park that is slated to be launched in April through the confirmed list of the Government Land Sales Programme.

    The subset of homes with a freehold or 999-year lease tenure among landed properties is even more scarce. The recent quarter-on-quarter (q-o-q) uptick of 0.8 per cent in the Q4 2016 URA residential property price index for landed properties, and higher sales volume in 2016 further fuel optimism that the landed residential market is bottoming up.

    The prevalent view is that landed real estate is recovering faster than other property types, and this sentiment is supported by the sales figures. The number of landed homes transacted in 2016 was 1,380 units, close to the level in 2013. In contrast, the total number of private home sales concluded in 2016 was 30 per cent less than that in 2013.

    Should we invest in landed homes amid the uncertain external environment?

    Since the government implemented the total debt servicing ratio framework in 2013, the URA price index for landed residential properties has fallen by 14.1 per cent, a bigger drop than the 10.1 per cent decline for non-landed properties.

    The various cooling measures and substantially higher price quantum that landed homes command translated into higher stamp duties payable by buyers, hence the larger decline for landed properties. Additionally, based on Edmund Tie & Company’s research, the price decline largely emanated from lower transacted prices for leasehold terraces in non-prime districts in the secondary market. Notwithstanding that, prices for freehold landed properties in prime districts remained resilient, falling by only 6.6 per cent from Q3 2013 to Q4 2016.

    Given the uncertain environment and the risks it entails for other asset classes like equity, debt and commodities, it is an ideal time to invest in freehold landed residential real estate, given its remarkable resilience to short-term fluctuations.

    During the global financial crisis, the URA price index for non-landed properties declined by about 26 per cent from Q2 2008 to Q2 2009. In contrast, landed properties slid by a relatively lower 19.1 per cent over the same period (Figure 2). Additionally, prices for landed residential properties enjoy greater capital appreciation over the long term compared to other property types. The URA price index of landed properties rose by 68.2 per cent from Q4 2006 to Q4 2016, higher than the 42.6 per cent increase for non-landed properties over the same period.

    Where to buy in current market conditions

    Properties that are freehold and near the Central Region are popular due to their scarcity and accessibility to other activity-generating nodes. These properties also tend to generate high capital returns. By analysing the appreciation in prices of properties from 2006 and 2007 respectively to 2016 and 2017, we found freehold landed properties in the Central Region recording higher returns. Freehold landed properties in Tanglin have the highest compounded annual return (12.7 per cent), followed by landed properties in Geylang (12.5 per cent), Toa Payoh (11.4 per cent) and Bishan (10.3 per cent). Separately, freehold landed properties have the highest compounded annual return at about 8.3 per cent, which is significantly higher than the 5.4 per cent for leasehold landed properties (Figure 3).

    Nevertheless, the return on freehold properties may have been inflated as the costs of construction and refurbishment were not factored in. The construction cost of a landed home ranges from S$2,450 to S$2,750 per square metre (psm) of construction floor area for terrace houses, S$2,650 to S$3,100 psm for semi-detached houses and S$3,100 to S$4,100 psm for detached houses (Langdon and Seah, 2016). In other words, the total construction cost is likely to be at least S$1 million.

    Hence, buyers need to choose between buying land for redevelopment or buying new, built-up properties. While redevelopment enables owners to construct a house based on their individual needs, it requires a commitment to negotiate with the contractor, project manager and the architect. Buying a new landed property, alternatively, reduces the hassle.

    Beyond “location, location and location”, buyers should also consider other aspects such as the growth prospects of the area and whether the development potential has been reflected in the prices. For instance, prices of landed properties in Tanglin are also the highest in terms of quantum and per square foot basis.

    A potential area where the prices of landed homes have yet to reflect the development potential are the landed homes near Sembawang Park. It is part of the region earmarked as the North Coast Innovation Corridor, which stretches from Woodlands Regional Centre, across the future Seletar Regional Centre to the Punggol Creative Cluster. The North Coast Innovation Corridor will be a hotbed of ideas and offers additional land for the expansion of enterprises.

    Watercove is an upcoming cluster housing development near Sembawang Park. It is a rare landed housing project with freehold tenure near the waterfront. There is a strong rental catchment in the area. Professionals working in the Seletar Aerospace Park and the innovative growth clusters along the northern corridor will be attracted to the area given its amenities.

    The writer is head of South-east Asia Research at Edmund Tie & Company (SEA)

  4. #4

    Default Promising 2017 for luxury condo market

    Promising 2017 for luxury condo market

    2016 was probably the turnaround year for the Core Central Region.

    Friday, March 31, 2017

    by Alan Cheong

    The one deal that turned heads and we believe also marked the recent high point of the CCR non-landed private residential market was the purchase of the remaining 45 units at The Nassim by banker Wee Cho Yaw. The deal size of S$411.6 million translates to a price of about S$2,300 psf.

    EVER since the marketing of OUE Twin Peaks was refreshed by the deferred payment scheme in late first quarter 2016, the high end non-landed segment of the private residential property market sprung back to life. Initially treated with scepticism, the overwhelming acceptance of this payment plan ultimately surprised even seasoned marketing professionals. The success of this scheme was subsequently modified in parts by other developers in the Core Central Region (CCR) and they too were met with good response by the market.

    Thereafter, with a falling number of projects in the high-end segment of the market having the ability to offer such schemes, the market entered the next phase – that of bulk sales, structured and unstructured. The structured transactions began simply with a plain-vanilla purchase of the development company holding the remaining 23 units of Starlight Suites at River Valley Close and then rose in complexity to the Profit Participation Securities (PPS) scheme for Nouvel 18 on Anderson Road. These structured deals continued to keep interest in the high-end market at strong levels and the market was on edge with talk of which deal would be next.

    The one deal that turned heads and we believe also marked the recent high point of the CCR non-landed private residential market was the purchase of the remaining 45 units at The Nassim by banker Wee Cho Yaw. The deal size of S$411.6 million translates into a price of about S$2,300 psf. Prima facie, the price appeared on the low side, but if one tops back the bulk discount of 18 percent, the price is a fair reflection of value in the area.

    Although the authorities have closed the avenue whereby residential properties could be sold with minimal stamp duty payable via the sale of shares in a corporate entity holding residential property, the market sentiment in the high-end sector had already turned positive following the series of bulk sales.

    While market watchers have been busy bantering over the direction of the high-end non-landed market, they have failed to, or at least not openly discussed, why ultra-sophisticated buyers are taking a fresh position in the high-end residential market here.

    Figure 1 shows the average price taken from Savills’ basket of high-end properties. In the price chart are enumerated, though by no means exhaustive, what we believe to be the five major kickers that catalysed the market in the past one year. The first was the relaunch of OUE Twin Peaks with the deferred payment scheme. The second was the date of the bulk purchase of Starlight Suites; third was the sale of iLiv@Grange to a group of high net worth individuals; fourth was the PPS transaction for Nouvel 18 and fifth was the sale of the 45 units at The Nassim. When these transactions were sequentially laid out on the price chart, coincidentally or not, it appears that prices have stabilised and inched up marginally.

    The asterisk in the price chart would be the 11th hour entry of bulk sales (the days running up to March 10, 2017) at TwentyOne Angullia Park to Tower Capital, the sale of The Lumos to a group of Singaporeans and the purchase of Robin Residences by personalities linked to Evia Real Estate. The sale of Cityvista Residences by Alpha Investment Partners to an Indonesian was probably also inked between point 5 and the asterisk.

    When you look at the transaction numbers for the CCR, 2016 probably represented the turnaround in the market with data extracted from Realis showing a 54.5 per cent year-on-year (y-o-y) increase.

    Setting aside the attractive pricing reason, one other possible factor as to why ultra-sophisticated investors are looking at the non-landed segment of the CCR is that fundamentally, things are rapidly improving for the CCR. On the supply side, URA statistics show a sharp fall in pipeline supply after 2017.

    Using Realis as the source of data for non-landed transactions, in 2016, new sales were 667 units. If this demand is maintained for the next five years, it means that there is a relatively good match between demand and supply.

    The road map for a sustained recovery

    To galvanise the market further, a continuation of momentum built up from 2016 is necessary. As the market’s direction in terms of prices and volume is hanging in the balance, marketing strategies have an important role to play. Without going into the various marketing angles, we shall focus on just one – that is to prioritise the targeting of buyers by their nationality in terms of price range.

    For our analysis, we have left out companies as a subgroup of buyers. Generally for the CCR, in the past one year, as Singaporeans made up 66 per cent of the total transactions in the non-landed segment of the market, the local population base should naturally be the starting point of any relaunch or new marketing campaign as it is an easier and more cost-effective segment to go after (one saves on the cost of holding overseas road shows).

    For this group of individuals, with the total debt servicing ratio (TDSR) and cooling measures still in place, mild y-o-y price adjustments, preferably to the point of a continuous creep, is congenial to sustaining healthy market demand as any sudden spike in prices may easily lead to buyers forfeiting the game once they are priced out due to possible breaches to their debt service ratios. In other words, unlike in the past, these days when it comes to pricing strategy, casting the lynyard too far can be counterproductive. The market today is extremely price sensitive.

    Also, as Singaporeans pay lower additional buyer’s stamp duty (ABSD) for purchases subsequent to their first, the deadweight loss due to these duties is lower. This is also another reason why they could be the subgroup that is likely to keep sales momentum going for the market to recover.

    The ability of overseas buyers to kickstart or maintain the sales momentum for the CCR non-landed market is however not that straightforward as their constituent in the various stratas of the market by price quantum varies significantly. In general, for new sales in the CCR, it is only in the more than S$2 million strata that we see the dominant presence of overseas buyers.

    However, once we delve further into the district level, we discover a totally different picture. Owing to space constraints, we shall segregate new sale transactions for Districts 9, 10 and 11 but for districts 1, 2 and 4 we shall treat them as one subgroup.

    For the past year, overseas buyers have dominated in District 9 once prices are more than S$2 million. For Districts 10 and 11, Singaporeans dominate in almost all price stratas except for the S$2 million to S$3 million range in District 11 and the more than S$5 million category in District 10. For districts 1, 2 and 4, overseas buyers are the majority in the more than S$2 million to S$3 million strata.


    From March 2016 to February 2017, the high-end non-landed segment of the private residential market was revived through a sequence of events from developers offering alternative payment schemes to ultra-sophisticated investors taking large positions either directly or through structured arrangements in the bulk sale market. For individuals, feedback from the ground hints that they are still keen to commit but somewhat still concerned about the cooling measures and TDSR still in place.

    Although returns from a sample of developers’ weekend sales suggest that market sentiment improved after the government’s surprising tweak to the seller’s stamp duty and recent enhanced deferred payment schemes offered by developers may have uplifted sales in certain projects, in general, buyers may still need some convincing for them to overcome their inertia. After all, many who buy into the luxury end of the market are either overseas nationals or locals buying for investment, for whom the main stumbling block to a transaction is the high additional buyer’s stamp duty. As this raises the cost of entry, marketing strategies are becoming even more important; without a focused and sustained marketing effort, activity will fall back into slumber.

    Ultimately, assuming that developers and agents play their roles well this year, which we believe they will, we are of the opinion that overall prices for non-landed properties in the CCR may still eke out a return. Not high, but still a good enough turnaround of a 1-3 per cent price gain.

    The writer is head of Singapore research at Savills Singapore

  5. #5

    Default Shorter tenures for more affordable private homes?

    Shorter tenures for more affordable private homes?

    Friday, March 31, 2017



    Desmond Sim

    The jury is still out on the impact of recent tweaks to the seller’s stamp duty (SSD) and the total debt servicing ratio (TDSR) framework on residential home prices and volumes. What we do know is that Singapore’s private home prices have headed south for 13 consecutive quarters since peaking in Q3 2013, declining by about 11 per cent, the cumulative effect of a series of cooling measures introduced since September 2009, and more recently, the looming prospect of rising interest rates and a slowing economy. This is a relatively milder correction compared to the sharper 25 per cent fall over four quarters during the sub-prime crisis in Q2 2008.

    So far, market watchers widely agree that the recent announcement has lifted sentiment going by the apparent strong showing at showflats. However, buyers will still need time to assess exactly how the changes might affect their decision to purchase or sell. The fact remains that the majority of buyers are subject to the TDSR and that the SSD applies, albeit the holding period has been shortened and the rate reduced. Prices of mass market homes located in the Outside Central Region (OCR) are still high, mainly driven by too many developers chasing after a limited number of development sites. At the end of the day, affordability remains a key concern of home buyers.

    Historically, the rationale for providing 99-year leasehold homes is to offer a more affordable housing option compared to freehold homes. Not surprisingly, there is always a price gap between the two classes of properties (Charts 1 and 2).

    Based on caveats lodged for new non-landed private homes sold in OCR for the whole year of 2016, the median price quantum for a freehold unit was S$1.1 million while a 99-year leasehold home was priced at S$973,000, a difference of 13 per cent. Comparing the unit rate on strata area, the difference was 18 per cent between the price of S$1,476 psf for freehold and S$1,251 psf for 99-year leasehold homes.

    Developers responded to higher costs as well as loan curbs with quantum play. For the period 2013-16, the median price per unit of 99-year leasehold non-landed private homes has remained below S$1 million. They adopted the strategy of rejigging unit sizes to keep prices of mass market homes below this affordability threshold. The bulk of these units ranged from 550 sq ft to 750 sq ft in size.

    There is, however, a limit to how much smaller the units can get and still remain a decent liveable space. Perhaps it is time to consider another strategy to keep homes affordable.

    In November 2012, URA sold a residential land parcel at Jalan Jurong Kechil with a 60-year leasehold tenure. The residential project developed onsite is called The Hillford. Comparing the prices of residential land sold around the same time period, the site cost some 40 per cent less than the freehold site of The Creek @ Bukit (Toh Tuck Road) and over 20 per cent less than the 99-year leasehold site of The Skywoods (Dairy Farm Road). The lower land price of The Hillford reflected the adjustment for the shorter tenure.

    Furthermore, when the three projects were launched for sale from late 2013 onwards, the median price of The Hillford was 31 per cent below The Creek @ Bukit and 12 per cent below The Skywoods. With sizes ranging from 398 sq ft to 657 sq ft, all 281 residential units of The Hillford were sold in a few days. The price range of S$388,000 to S$770,000 was perceived as very affordable due to its “Upper Bukit Timah” location despite the small unit sizes.

    The case for shorter tenure

    In Singapore, many people still prefer freehold properties to leasehold ones. The reasons revolve around notions of ownership, inheritability and the stigma attached to a shorter tenure. This stigma stems from a few reasons, mainly the uncertainty following the expiry of the 99 years. There has been limited precedent cases on what happens after the expiry of a leasehold tenure. At the same time, the renewal of the tenure of the property remains unknown as well as the level of compensation offered upon expiry.

    While the topping up of the tenure back to 99 years may present an option for some developments, this is not guaranteed. For example, owners of The Arcadia, whose 99-year lease commenced in 1979, applied to extend its lease in 2011 but was rejected by the Singapore Land Authority. In any case, topping up the lease means extra costs for developers who would then pass the costs to buyers.

    Nevertheless, in view of limited land resources and affordability, it is worthwhile to explore the option of shorter tenures. If regulatory changes can provide more certainty on what happens when the lease expires, it may help to reduce the price gap between freehold and leasehold properties. With the predominant supply of 99-year leasehold residential sites from the Government Land Sale Programme, such sites are close to becoming the norm. Freehold sites are a bonus.

    On the demand side, going forward, attitudes towards longevity in tenure have changed. The millennials may be more open to leasehold properties compared to their parents and grandparents. Most of them are already living in leasehold properties now and are probably more concerned with location and accessibility rather than tenure. Being well travelled, they are aware that homes in some densely populated countries such as China have shorter tenures of 50 years.

    A shorter tenure is one of the effective tools to lower land prices. In the case of industrial land, from mid-2012 onwards, industrial landlord JTC has been observed to have stopped offering land on 60-year leasehold tenure, possibly to help end users contain land prices. From mid-2015 onwards, only sites with 20-year tenure are offered on the confirmed list of the Industrial Government Land Sales Programme so far. Smaller plot sizes were also offered to target owner-occupiers. In the end, the shorter tenures reflected lower land prices.

    The provision of homes with shorter tenures has already been tested by the Housing & Development Board (HDB). In August 2015, HDB introduced the “two-room flexi scheme”, which allows home buyers aged 55 years and above to choose between the full 99-year lease or shorter leases ranging from 15 to 45 years. The flats are priced according to the lease tenure. Of the 6,070 such flats offered so far, 2,101 flats were booked by the elderly on shorter leases, while 366 elderly citizens opted for the full 99-year lease.

    As this housing option works for public housing, it is possible to provide shorter leasehold tenures for private housing, especially when the ageing population (65 years and above) is expected to reach 900,000 by 2030.

    HDB’s eligibility criteria ensure that only the right target group can buy the flats with shorter leases. The setback for private housing is that there is currently no regulation to ensure that affordable homes are bought by the target groups and not by opportunistic investors. In the case of The Hillford, the 281 one- and two-bedroom units were intentionally built as housing for retirees as allowed in the tender document. However, it was reported that the buyers are not only made up of elderly end-users but also younger buyers who saw this as an investment opportunity because of the attractive pricing and good location.

    There is also a need to look into the financial system to allow buyers to fund the purchase of properties of shorter tenure.

    Currently, CPF (Central Provident Fund) savings can be used to finance the purchase of properties with a remaining tenure of between 30 and 60 years, on the condition that the age of the buyer using CPF savings plus the remaining tenure of the property must be at least 80 years. If the youngest buyer using CPF savings is aged below 55, the shorter the tenure, the lesser the amount of CPF savings all owners can use, and thus, they will have to fork out more cash.

    Once the Central Provident Fund Board sets the tone, financial institutions will likely follow suit.

    It is not possible to depend on market mechanisms alone to ensure unbiased results. Government involvement and regulations are needed to find the middle ground between keeping housing liveable and affordable, while maintaining economic growth in a competitive global economy, as the recent tweaks in the property measures have shown yet again.

    Cooling measures are one of the many levers that the government can use to keep home prices affordable, to rein in rising prices and instil prudence in making a property purchase. The introduction of a shorter tenure may be one of the levers that the government can pull in the midto long-term to complement the existing measures to give buyers another option for affordable housing.

    Han Huan Mei is associate director and Desmond Sim is head of Singapore & South-east Asia at CBRE Research

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