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Thread: SLA to take over land at Lorong 3 Geylang when lease expires in 2020

  1. #61
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    What should happen to the land value of a 99LH private property over its lifespan?

    To illustrate a simple model, let's consider a property unit that cost the buyer $1.0 mil, for 1000 sf therefore $1000 psf GFA.

    Buyer bought it with the LTV of 80%, didn't matter if he bought to stay or for investment.

    For mass market, the typical ratio of the unit’s land share value and physical cost is (60:40). Therefore, the buyer paid $600 k for the unit’s land share value (60% of $1.0 mil).

    For example in the case of Stirling Road, if the selling price is $1850 psf GFA then the ratio becomes (57:43, $1050:$800).

    The depreciation rate to apply for the land share value should be 1% per year.

    At the end of 30 years the land share value will deprecate by 30% so it becomes $420 k.

    $180 k ($600 k minus $420 k) is deprecated over 30 years, therefore 90% of the initial capital deployed is wiped out.

    Now, what will happen if the surrounding land has an enbloc or GLS at the 30th year?

    Let's say after calculating what the developer has paid for the land plus DP etc, we arrive at the price of $1500 psf ppr.

    For the unit, the land share value should be re-rated to $630 k ($600 k x 1.5 x 70%). This is the reason why LH property has been retaining its nominal value so far.

    Now, what if the re-rating is done at the 60th year?

    The land share value should then be $360 k ($600 k x 1.5 x 40%) so the value is lower than the initial $600 k.

  2. #62
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    Quote Originally Posted by Hakuho View Post
    What should happen to the land value of a 99LH private property over its lifespan?

    To illustrate a simple model, let's consider a property unit that cost the buyer $1.0 mil, for 1000 sf therefore $1000 psf GFA.

    Buyer bought it with the LTV of 80%, didn't matter if he bought to stay or for investment.

    For mass market, the typical ratio of the unit’s land share value and physical cost is (60:40). Therefore, the buyer paid $600 k for the unit’s land share value (60% of $1.0 mil).

    For example in the case of Stirling Road, if the selling price is $1850 psf GFA then the ratio becomes (57:43, $1050:$800).

    The depreciation rate to apply for the land share value should be 1% per year.

    At the end of 30 years the land share value will deprecate by 30% so it becomes $420 k.

    $180 k ($600 k minus $420 k) is deprecated over 30 years, therefore 90% of the initial capital deployed is wiped out.

    Now, what will happen if the surrounding land has an enbloc or GLS at the 30th year?

    Let's say after calculating what the developer has paid for the land plus DP etc, we arrive at the price of $1500 psf ppr.

    For the unit, the land share value should be re-rated to $630 k ($600 k x 1.5 x 70%). This is the reason why LH property has been retaining its nominal value so far.

    Now, what if the re-rating is done at the 60th year?

    The land share value should then be $360 k ($600 k x 1.5 x 40%) so the value is lower than the initial $600 k.
    True if the Government is not doing anything to the Land.

    When the government use Tax payer money to improve the Land, money is transfer from the don't have to the have.

    Those with no land value get less, those who rent get nothing and get to pay more to those who have.

    Bring yourself back 50 years and you will be able to see the picture better.

    Money in the Bank can only depreciate, money in the property will attract more money when the government of the day improve the land.

  3. #63
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    Very insightful discourse with fair share of technicalities. I will go qualitative.

    For public housing, I would think the statements by Lawrence Wong is to ‘scare’ the Singaporeans at large as many ones are still buying HDB like FH property and never think about run out period. The crazy ones will pay ~$1m for HDB flats… like seriously?!!

    But think about it from political and social standpoints. There is no precedence of HDB taking back 99-yr expired flats yet. If you were the PM and head of ruling party, would you allow your Minister for National Development to really let the bulk of many hundreds and thousands of HDB flats not subject to SERS run to 99 years and then take back every single ones with zero value remaining? And sell land to private developers for bigger profits? Or redevelop and resell as brand new back to populace at full price? And let half of Singaporeans (figuratively speaking) be homeless or go squeeze in the homes of their reluctant children/relatives.

    Maybe my wishful thinking but not everything is dollars and cents. At some point, some areas may really be taken back just like Geylang Lor 3 but I think this could be the minority with way way advance notice to manage expectations. Singapore may really just be that unique.

  4. #64
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    Quote Originally Posted by frumnat View Post
    For public housing, I would think the statements by Lawrence Wong is to ‘scare’ the Singaporeans at large as many ones are still buying HDB like FH property and never think about run out period. The crazy ones will pay ~$1m for HDB flats… like seriously?!!
    If you remember the million dollar coffee shop, you will know the crazy ones may not be so.

    You need to know what calculator they use.

  5. #65
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    teddybear is offline Global recession is coming....
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    Your statements are contradictory if anybody bothers to delve into it..............
    "There is no precedence of HDB taking back 99-yr expired flats yet."
    contradicts
    "some areas may really be taken back just like Geylang Lor 3"..............

    Firstly, the government had taken back Geylang Lor 3 leasehold land and paid NOTHING to the owners..............

    Secondly HDB is just a statutory board of the Government under MND and MND Minister Lawrence Wong already said you can't expect Gov to extend the lease of your HDB flats when they expire.......

    If you insist that the gov won't take back HDB flats after they expire at end of 99-years and claiming that:
    "I would think the statements by Lawrence Wong is to ‘scare’ the Singaporeans",
    then are you claiming that the MND Minister Lawrence Wong is lying through his teeth?





    Quote Originally Posted by frumnat View Post
    Very insightful discourse with fair share of technicalities. I will go qualitative.

    For public housing, I would think the statements by Lawrence Wong is to ‘scare’ the Singaporeans at large as many ones are still buying HDB like FH property and never think about run out period. The crazy ones will pay ~$1m for HDB flats… like seriously?!!

    But think about it from political and social standpoints. There is no precedence of HDB taking back 99-yr expired flats yet. If you were the PM and head of ruling party, would you allow your Minister for National Development to really let the bulk of many hundreds and thousands of HDB flats not subject to SERS run to 99 years and then take back every single ones with zero value remaining? And sell land to private developers for bigger profits? Or redevelop and resell as brand new back to populace at full price? And let half of Singaporeans (figuratively speaking) be homeless or go squeeze in the homes of their reluctant children/relatives.

    Maybe my wishful thinking but not everything is dollars and cents. At some point, some areas may really be taken back just like Geylang Lor 3 but I think this could be the minority with way way advance notice to manage expectations. Singapore may really just be that unique.

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