URA puts up housing plot with 60-yr lease

[reporter2]

http://www.businesstimes.com.sg/spec...lease-20120906

Published September 06, 2012

URA puts up housing plot with 60-yr lease

URA will also launch site for first hotel in Jurong lake district

By zeinab yusuf saiwalla


The government yesterday announced two firsts in its land sales programme - a residential site in Jurong which comes with an unusual 60-year leasehold term, and another plot that will see the first-ever hotel being built in Jurong.

URA said the 1.02-ha residential site in Jurong Jurong Kechil will have a maximum GFA of 153,267.17 sq ft and can be developed into a condominium, flats or retirement housing.

While short-term industrial, commercial and hotel sites are nothing new under the Government Land Sales Programme, this is believed to be the first time a private housing site is being sold on such short tenure under the GLS. Typically, the sites are released on 99-year lease.

Developers have options for a 30, 45 or 60-year-lease period for the plot, URA said. The development conditions for the site cap the maximum number of units at 203 units and can be built up to part five storeys and part eight storeys.

URA said the tender will be launched in about two weeks along with a hotel site, also in Jurong.

The land parcel at Jurong Town Hall Road will be the first hotel site in the Jurong Lake district. The parcel sits on a 0.9-ha plot and has a maximum gross floor area (GFA) of about 204,051.25 sq ft.

A developer has committed to pay at least $102 million or $499.82 per square foot per plot ratio (psf ppr) for the 99-year hotel site.

Commenting on the residential plot, Jones Lang LaSalle's national director of research Ong Teck Hui said: "The site is a popular suburban housing area supported by ample amenities and public transportation, so there should be good interest in this site."

The developer's trigger price for the residential land parcel which was made available through the Reserve List system in November 2006 was $24 million or $156.36 psf ppr for a 60-year lease term.

"As URA offers three options of different land tenures, the price of the land will be relatively cheaper as compared to the normal 99-year-leasehold land parcels from Government Land Sale Programme," said Nicholas Mak, SLP International's head of research.

He expects the tender to attract about five to 10 bids and added that most bidders are likely to select to bid for the 60-year land tenure because it will be more attractive to homebuyers and the longer land tenure will be easier for the homebuyer to obtain a mortgage.

Lee Sze Teck, senior manager of Dennis Wee Group (DWG), is looking at a top bid of between $200 and $250 psf ppr, an estimated breakeven cost between $450 and $500 psf, and an estimated sale price of between $550 and $600 psf.

"This is relatively affordable compared to freehold developments in the area which are going for around $1,000 psf," Mr Lee said.

As for the hotel development, Mr Mak said that although this is the first hotel site in the Jurong area, developers can however be expected to bid with a hint of caution, as the Jurong Lake locality is an untested hotel micromarket.

"In today's market, the estimated land price for this hotel site is expected to be $750 to $833 psf ppr, possibly attracting 5-10 interested bidders," Mr Mak added.

DWG's Mr Lee added: "The successful bidder for the site is likely to build a four-star 700-room business hotel to cater to the growing commercial hub at Jurong East."

He estimates that based on these assumptions, the estimated top bid for the site could be between $650 and $700 psf ppr while the breakeven price is between $1,050 and $1,100 psf.

Furthermore, as Jones Lang LaSalle's Mr Ong explained: "In December the URA is scheduled to release another large commercial site at Venture Avenue so it is going all out to create Jurong Gateway as the biggest commercial hub outside the city. The huge critical mass would warrant a hotel to complement the other business uses and it is timely to provide a hotel site for development."

[radha08]

i think the 60 year leasehold site will e a SELLout...

[CondoWE]

i think the 60 year leasehold site will e a SELLout...

If price is attractive & location is good, I may consider too .

[2824]

i think the 60 year leasehold site will e a SELLout...

60 year will lead to smaller quantum for bigger units, as well as even smaller quantum for smaller units. At the end of the day, again another option to park $.

[ikan bilis]

i do not think there will be much meat....

first, the locations will be suckz,... secondly, both developers and govt will still be greedy for big profit....


my guess...
let says... a LH99 private condo at certain location is 900psf...
then LH60 at same location will be about 85% price of LH99, i.e. 765psf, compact/MM sizes
and LH30 at same location will be about 70% price of LH99, i.e. 630psf, compact/MM sizes

still... it will be hot selling bcoz lots of foreigners/EP-holders/Single-PR have affordability problems with pte condos... the attractiveness is low quantum & paying instalment+maintenance is lower than rent (can use cpf somemore)...


and for LH30 think the govt might sweeten it to 30+optional 30 (which means you can/might be allowed to extend another 30yrs after LH30 expires)


me small fish will still prefer buying ~10yr old LH99....

[indomie]

Renters would be interested. Instead of paying 1500 dollars in rental monthly, why not pay 1000-1200 dollars in mortgage payment. Some more, they don't need to worry about rent increase for the next 60 years.

[focus]

Rental definitely is independent of the LH/FH status since tenants are just comparing prices across old and new development in a area irregardless of the tenure.

So, if btw new 60yr LH, 99LH, FH, I think the rental will be the same for all the units as tenants don't find any difference ceteris paribus.

But this is a short-term and myopic solution. The introduction of a new class of leasehold for the residential market might mean a period of short-term repricing of tenures in the asset class. However, long-term, when it becomes a norm to own a 60lh, the prices will be bidded up again and you end up with the same problem. So, yes, you might get good results for the next 5yrs for RE-ELECTION into parliament. But after that, when people accepts 60yrs as a way of life, people will be repricing 60lh as the NORM(means 60LH should be priced like 99LH) and 99LH have then been elevated to the class of 999/FH status(the premium you have now for 999/FH to 99) and the FH/999 will then elevate to the NEXT Realm.

So as an investor, i think if you can accept lower yield, the 999/FH is still the best.

[carbuncle]

all would be simple if people have simple needs. eg buy for capital appreciation. or buy for rental yield. or buy for own stay.

its when objectives are mixed or undecided that wrong or suboptimal decisions are made.

[cnud]

Thought the 60 year lease location for hotel development?

[radha08]

Thought the 60 year lease location for hotel development?

nope info here...

http://www.ura.gov.sg/sales/SitesCurrent.html

[richwang]

Amazing! The lease in China is 70 years. People are already complaining:

1) With life span getting longer, human might out live his property;
2) The building quality drops (Old Day china buildings were designed for at least 100 years), now they may not even last for 70 years;
3) Asset is turning into Expense as we shorten the lease.

If Singapore is moving into the direction of 60 years, or even 30 years lease, lots of "owners" will eventually find out they don't really "own" anything.

Thanks,
Richard

[Regulators]

If you go to a recent exhibition for chengdu property, lease is only 40 years, heard many hong kong buyers bought

[cnud]

nope info here...

http://www.ura.gov.sg/sales/SitesCurrent.html

Thanks bro. But why 3 options? 30, 45, 60 years?

[Kelonguni]

Thanks bro. But why 3 options? 30, 45, 60 years?

I think is for the developer to bid and for Govt to gauge feasibility? When developer proposes ingenious ways that appears to be win-win for all, the proposed number of years of lease will be accepted.

30 years might be too low for bank loans though, as most banks only allow loan for leases on top of 30 years.

That being said, the goalpost might be shifted pretty soon. The profitability of real estate might cause authorities and banks to take a new stand, maybe allow loans for leases longer than 10 years.

That will create a whole new meaning to how people understand freehold, leasehold and affordability (especially old properties), again creating support for property prices to hold. I suspect this stance might be taken when there is a decline in prices or when interests start to rise.

[hyenergix]

With 60 years lease for residential land, the government is looking for trouble.

[samuelk]

With 60 years lease for residential land, the government is looking for trouble.

if it works for other country, why won't it work here?

[cnud]

Test bed for retirement village? 30 years lease that cost 60% cheaper?

Say a normal studio for 99LH is about $1400 psf, works out to be about $840,000 for a 600 sf unit.

So if 60 years, it would be $280,000. People would bit man. With full facilities, etc. Why not?

[carbuncle]

Something wrong with the maths I am not catching it

[cnud]

Something wrong with the maths I am not catching it

A normal OCR 99LH studio of size about 600 sf at $1400psf would cost $840,000.

A proposed retirement unit of same size at 30LH should be about $280,000.

With full facilities, people will bite.

[carbuncle]

got it.......

[eng81157]

A normal OCR 99LH studio of size about 600 sf at $1400psf would cost $840,000.

A proposed retirement unit of same size at 30LH should be about $280,000.

With full facilities, people will bite.

let's do a poll check. if each unit is that cheap, how many of us will buy 4 or 5 units at one go?

i am one for sure, for the rental yield.

what's likely to happen? demand up, supply limited. viola, prices chiong ah!

[cnud]

They will place limit on who can purchase? Unlikely unless it's HDB. So this one very interesting to see what happens.

Likely to sell out in few hours.

[Rosy]

let's do a poll check. if each unit is that cheap, how many of us will buy 4 or 5 units at one go?

i am one for sure, for the rental yield.

what's likely to happen? demand up, supply limited. viola, prices chiong ah!

It is not possible given construction and breakeven cost remains the same for developers. The only thing has changed is the value of the land.

It is not a simple discount based on the lease.

I think our land cost has not reach an astronomical value to warrant for a 30year lease. In fact i think 60lh do not have significant savings over 99lh.

[cnud]

Typically construction and marketing cost adds to about 200psf. If developer is contractor, will be lower.

The rest is land cost and PROFIT.

Say land cost $200psf + $200psf construction/marketing + $200psf profit = $600 psf. So a 600sf unit would cost $360,000...?

Can bite??

[carbuncle]

i read somewhere land cost is avg 50% of total costs only...

[Rosy]

Typically construction and marketing cost adds to about 200psf. If developer is contractor, will be lower.

The rest is land cost and PROFIT.

Say land cost $200psf + $200psf construction/marketing + $200psf profit = $600 psf. So a 600sf unit would cost $360,000...?

Can bite??

Analyst have been stating 300-350psf for developer breakeven cost

Anyway, land cost is 300-400psf for 99lh. So perhaps the savings will only be 200-250psf for 30lh?

99lh 500sqft studio cost let say 900psf translate to 450k.
Whereas 30lh 500sqft studio will cost 650psf translate to 325k.

Sorry i will not bite unless it is 650psf for 60lh. It is still on the high side.