The big leasehold debate

During the first half of 2017, discussions on leasehold properties dominated newspaper headlines. The debate came into limelight when Lawrence Wong, the National Development Minister, blogged about leasehold properties.  The blog post was published earlier in March. He wrote on how leasehold HDB apartments will be returning to the state when the leasing period ends. The blog mentions that for Selective En bloc Redevelopment Scheme, since 1995 only 4 percent HDB flats were considered eligible. “We have already discussed the repercussion of leasehold on HDB flats,” the minister wrote.

Recently, newspapers covered on the return of 191 private terraced houses to the State. The leasing period of houses on Geylang Lorong 3, near Upper Boon Keng Road, is soon ending. Geylang Lorong 3 was leased in 1960 for 60 years and the lease will end in 2020 After Geylang Lorong 3 will return to the State, it will be the first time when a residential plot of land will go back to the State.

Now that Geylang Lorong 3 is returning to the State, the owners and the residents will have to hand over their house to the State. So, why are the owners and residents making the fuss? Were they thinking that before the expiry they will be obtaining lease extension?

Freehold properties are 999 years leased property in the hands of private owners. However, leasehold properties have 99-year or shorter leasing period, which means they have expiry date. Usually, the land owned by the State is leased out for 99 years, and in the case of 2-room BTO flats, the leasing period is short. Once, the leasing period ends, the land will go back to the State. If the land is owned by a private owner, it will go back to the owner.

 

Choosing between leasehold and freehold

You need to consider various implications when you are buying either leasehold property freehold property.

Far East Organization (FEO), in 2009, built the Shore Residences, on the freehold land they owned. The Shore Residences was leased out for 103 years. After the leasing period ends, the land will automatically go back to FEO. As they continue to earn short term money by selling the units on leasehold basis, FEO saw profits in owning the land forever. This trend could be followed by more developers in future. This concludes that in the future, freehold land will be less available.

 

Leasehold properties in various locations including the Central Core Region

It is interesting to note that most of the leasehold properties are in prime location and they are built beautifully. Take an example of Sentosa. The condos and the landed houses on Sentosa have 99-year leasing period. You cannot buy freehold property in Sentosa even if you may have a lot of money. All over the districts 9, 10 and 11, you can find leasehold properties having 99-year leasing tenure.  The Tanjong Rhu area also has numerous leasehold condos. The Victoria Park Villas have semi detached homes, which have a price tag between $3.8 million and $4 million, is also 99-year leasehold development.

Likewise, you can also find many choices for leasehold in the outskirts. You can buy a two and half storey detached house in the Upper Bukit Timah area for just about $1.98 million. These houses have 4,500 square feet floor area and a pool. What’s so interesting about this? The property is leased for 99 years and 70 years have already passed.

 

Location is important

In the current scenario, is it profitable to purchase leasehold condos or landed properties, when only 4 percent HDB flats were chosen for Selective En bloc Redevelopment Scheme (SERS). Unlike the residents of these 4 percent HDB flats, who were moved to new HDB flats with the leasing period of 99, residents of Geylang Lorong 3 will have to hand over their properties to the State. The State cannot take the burden of offering SERS to everyone.

Even though some leasehold properties are not centrally located, they are still considered attractive since they in the proximity of MRT stations. Take example of Artra, the Metropolitan, Alex Residences Echelon and Ascentia Sky. These properties are near Redhill MRT stations.  The condos in this area have asking price of around $1,200-$1,800 per square feet.

If have bought the property as an investment, your tenants will never care whether your property is freehold or leasehold. This is the truth. The tenants will pay the same rental fees and live in your property as long as they like the location and property. There will be a problem only when the developments get older and fanciful developments sprouts in the nearby locations, until then you will be receiving good returns by renting your property in a good location.

 

Questions yourself

When you want to choose between a freehold property and leasehold property, ask yourself a question: what’s your age? The next question will be: will you be living in the leasehold property until your last days? If you believe that you need to live in your newly acquired leasehold property until end, make sure that the leasing period does not expire during your life.

You would not want to leave your home and search for money to buy a new home when you are 80. That’s for sure. Let us exemplify this. Say, currently you are 35 years of age. You should only buy a leasehold property that has still has leasing period of at least 55- 60 years. In that case, you will have your house until you are 95, and you don’t have to worry about moving out.

 

Older leasehold properties need lots of money for repairing

Repairing and maintenance cost gets higher when condos becomes 30-40 year. In the older condos, sewage pipes, roof gutter pipes, roofs and swimming pools may be leaking and they need to be fixed. In order to do this, you will have to cooperate with other owners because these pipes run through every unit.

This will require a lot of money and sinking funds may not be enough. In that case, there is no other option for the estate other than ask for donation from each unit. In short, each units will have to pay for repairing.

For landed leasehold properties, this will be slightly different. Since you have full control over your property, it will be easier for you to collect funds for repairing.  The problem is when the property has few years left. You will find yourself in confusion whether it is appropriate to do the repairing on your property that will be expiring in few years time and you have to hand over the property to the owner when the lease ends. Will it be a good idea to do the repairing when the leasing period is anon, or continue to live in a house where there are numerous problems?

 

Older leasehold properties could have problems with CPF payments and bank loans

When the leasehold properties becomes 40 years or more, banks will not be financing these properties  If the leasing period of the property will be ending in 30 years or less, the new buyers cannot use their CPF to purchase the property. What does this mean to you a buyer? When your property is old, it is less likely that there will be buyers for your property. If you are thinking to live in this property until end, that’s is fine. However, if your primary idea is to sell your prioperty, then sell it before it gets too old.

Having said that there might still be potential for older leasehold properties. If the older properties are sold out collectively, for example all the residents of the condo sell their units to the developers, you can make good profits from your old property. The developer after acquiring the units en bloc will tear down the property and make room for a new property, and sell will added leasing period.

Rio Casa and Eunosville and some of the properties with 99 year lease that were sold en bloc .

Selling en bloc depends on various factors though. One of the factors is the location of the property. Another is the revised plot ratio. Some older HDB flats residents were chosen for SERS, but this will not happen to all older leasehold properties.

 

Life span for leasehold properties is limited, make no mistake

How much money you have and what are your needs are some of the factors that determine whether the leasehold property will be appropriate for you or not. For some buyers, a posh 99-year leasehold property having a parking lot packed with exotic cars will be attractive. For others, a bigger freehold property, that costs same money, having more outdoor space where children and oldies can relax will be better option. Other may consider having a convenience such as MRT station will be the main consideration, and they would never care whether it is freehold or leasehold.

Since many leasehold properties are still new, owners may not give a damn on the expiration of lease date. However, make no mistake. Irrespective of location or condition, just like the residents and owners of Geylang Lorong 3 homes, you will have to abandon your property when the leasehold period ends.

“I lived in this house all of my life,” says 57 years old Madam Ng old, a longtime Geylang Lorong 3 resident. “We are very sad to leave this place. But we do not have a choice, do we? We have to find a new home before 2020.”

 

The big leasehold debate

During the first half of 2017, discussions on leasehold properties dominated newspaper headlines. The debate came into limelight when Lawrence Wong, the National Development Minister, blogged about leashold properties.  The blog post was published earlier in March. He wrote on how leasehold HDB apartments will be returning to the state when the leasing period ends. The blog mentions that for Selective En bloc Redevelopment Scheme, since 1995 only 4 percent HDB flats were considered eligible. “We have already discussed the repercussion of leasehold on HDB flats,” the minister wrote.

Recently, newspapers covered on the return of 191 private terraced houses to the State. The leasing period of houses on Geylang Lorong 3, near Upper Boon Keng Road, is soon ending. Geylang Lorong 3 was leased in 1960 for 60 years and the lease will end in 2020 After Geylang Lorong 3 will return to the State, it will be the first time when a residential plot of land will go back to the State.

Now that Geylang Lorong 3 is returning to the State, the owners and the residents will have to hand over their house to the State. So, why are the owners and residents making the fuss? Were they thinking that before the expiry they will be obtaining lease extension?

Freehold properties are 999 years leased property in the hands of private owners. However, leasehold properties have 99-year or shorter leasing period, which means they have expiry date. Usually, the land owned by the State is leased out for 99 years, and in the case of 2-room BTO flats, the leasing period is short. Once, the leasing period ends, the land will go back to the State. If the land is owned by a private owner, it will go back to the owner.

 

Choosing between leasehold and freehold

You need to consider various implications when you are buying either leasehold property freehold property.

Far East Organization (FEO), in 2009, built the Shore Residences, on the freehold land they owned. The Shore Residences was leased out for 103 years. After the leasing period ends, the land will automatically go back to FEO. As they continue to earn short term money by selling the units on leasehold basis, FEO saw profits in owning the land forever. This trend could be followed by more developers in future. This concludes that in the future, freehold land will be less available.

 

Leasehold properties in various locations including the Central Core Region

It is interesting to note that most of the leasehold properties are in prime location and they are built beautifully. Take an example of Sentosa. The condos and the landed houses on Sentosa have 99-year leasing period. You cannot buy freehold property in Sentosa even if you may have a lot of money. All over the districts 9, 10 and 11, you can find leasehold properties having 99-year leasing tenure.  The Tanjong Rhu area also has numerous leasehold condos. The Victoria Park Villas have semi detached homes, which have a price tag between $3.8 million and $4 million, is also 99-year leasehold development.

Likewise, you can also find many choices for leasehold in the outskirts. You can buy a two and half storey detached house in the Upper Bukit Timah area for just about $1.98 million. These houses have 4,500 square feet floor area and a pool. What’s so interesting about this? The property is leased for 99 years and 70 years have already passed.

 

Location is important

In the current scenario, is it profitable to purchase leasehold condos or landed properties, when only 4 percent HDB flats were chosen for Selective En bloc Redevelopment Scheme (SERS). Unlike the residents of these 4 percent HDB flats, who were moved to new HDB flats with the leasing period of 99, residents of Geylang Lorong 3 will have to hand over their properties to the State. The State cannot take the burden of offering SERS to everyone.

Even though some leasehold properties are not centrally located, they are still considered attractive since they in the proximity of MRT stations. Take example of Artra, the Metropolitan, Alex Residences Echelon and Ascentia Sky. These properties are near Redhill MRT stations.  The condos in this area have asking price of around $1,200-$1,800 per square feet.

If have bought the property as an investment, your tenants will never care whether your property is freehold or leasehold. This is the truth. The tenants will pay the same rental fees and live in your property as long as they like the location and property. There will be a problem only when the developments get older and fanciful developments sprouts in the nearby locations, until then you will be receiving good returns by renting your property in a good location.

 

Questions yourself

When you want to choose between a freehold property and leasehold property, ask yourself a question: what’s your age? The next question will be: will you be living in the leasehold property until your last days?

If you believe that you need to live in your newly acquired leasehold property until end, make sure that the leasing period does not expire during your life. You would not want to leave your home and search for money to buy a new home when you are 80. That’s for sure. Let us exemplify this. Say, currently you are 35 years of age. You should only buy a leasehold property that has still has leasing period of at least 55- 60 years. In that case, you will have your house until you are 95, and you don’t have to worry about moving out.

 

Older leasehold properties need lots of money for repairing

Repairing and maintenance cost gets higher when condos becomes 30-40 year. In the older condos, sewage pipes, roof gutter pipes, roofs and swimming pools may be leaking and they need to be fixed. In order to do this, you will have to cooperate with other owners because these pipes run through every unit. This will require a lot of money and sinking funds may not be enough. In that case, there is no other option for the estate other than ask for donation from each unit. In short, each units will have to pay for repairing.

For landed leasehold properties, this will be slightly different. Since you have full control over your property, it will be easier for you to collect funds for repairing.  The problem is when the property has few years left. You will find yourself in confusion whether it is appropriate to do the repairing on your property that will be expiring in few years time and you have to hand over the property to the owner when the lease ends. Will it be a good idea to do the repairing when the leasing period is anon, or continue to live in a house where there are numerous problems?

 

Older leasehold properties could have problems with CPF payments and bank loans

When the leasehold properties becomes 40 years or more, banks will not be financing these properties  If the leasing period of the property will be ending in 30 years or less, the new buyers cannot use their CPF to purchase the property. What does this mean to you a buyer? When your property is old, it is less likely that there will be buyers for your property. If you are thinking to live in this property until end, that’s is fine. However, if your primary idea is to sell your prioperty, then sell it before it gets too old.

Having said that there might still be potential for older leasehold properties. If the older properties are sold out collectively, for example all the residents of the condo sell their units to the developers, you can make good profits from your old property. The developer after acquiring the units en bloc will tear down the property and make room for a new property, and sell will added leasing period.

Rio Casa and Eunosville and some of the properties with 99 year lease that were sold en bloc .

Selling en bloc depends on various factors though. One of the factors is the location of the property. Another is the revised plot ratio. Some older HDB flats residents were chosen for SERS, but this will not happen to all older leasehold properties.

 

Life span for leasehold properties is limited, make no mistake

How much money you have and what are your needs are some of the factors that determine whether the leasehold property will be appropriate for you or not. For some buyers, a posh 99-year leasehold property having a parking lot packed with exotic cars will be attractive. For others, a bigger freehold property, that costs same money, having more outdoor space where children and oldies can relax will be better option. Other may consider having a convenience such as MRT station will be the main consideration, and they would never care whether it is freehold or leasehold.

Since many leasehold properties are still new, owners may not give a damn on the expiration of lease date. However, make no mistake. Irrespective of location or condition, just like the residents and owners of Geylang Lorong 3 homes, you will have to abandon your property when the leasehold period ends.

“I lived in this house all of my life,” says 57 years old Madam Ng old, a longtime Geylang Lorong 3 resident. “We are very sad to leave this place. But we do not have a choice, do we? We have to find a new home before 2020.”

A great investment for you to grab is the Cairnhill 9 located at Cairnhill under Capitaland. It is the newest condo development under the developerCapital Residential Singapore Pte, Ltd. This sophisticated development provides serviced residence and condo comprising 280 units in a 30-storey high rise building.

Another development worth consideration is Victoria Park Villas which is also by Capitaland. This is a new landed development located at Victoria Park Grove in the midst of Good Class Bungalows (GCBs) enclave.