Invest in Singapore Property: The Shore residences, Greenwood Terrace

Singapore Property buyer Investors Can buy Freehold land and sell as Leasehold

Contributed By www.PropertyBUYER.com.sg

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In the last issue http://www.propertybuyer.com.sg/articles/singapore-property-investor-buyer/singapore-property-developers-buys-free-hold-land-and-sells-as-103-years-lease-hold/,

we investigate the possible implications of Singapore Property developers buying freehold land, developing it and then selling it as 103 years leasehold strata titled Condominium.

The Recent Launches such as (but not limited to) Far East's "The Shore residences" in the east coast as well as "Greenwood Terrace" in the prestigious greenwood vicinity of District 10 are such examples of the Singapore property developer buying Freehold land and launching as 103 years leasehold strata titled land.

Why do Singapore Property Buyers and Investors need to know?

Singapore property buyers and Investors need to know this because the future value of their condominium and cluster landed properties with Strata titles will be affected some 20 to 30 years down the road when the development becomes run-down.

What about Singapore property owners with Freehold or 999 Leasehold land titles?
For current Singapore property owners who owned landed properties with freehold or 999 leaasehold land titles, this means a potential future bonanza. Please read on, we have got the reply from Singapore land authority.

Reply from Singapore Land Authority (SLA) On Freehold land being sold as Leasehold strata titled developments.

"www.PropertyBUYER.com.sg:
We are doing a research for the benefit of our readers. Our website is
at
www.PropertyBUYER.com.sg and our readers have been urging us to enquire
about how Far East and numerous others have been able to acquire FREE
HOLD
land from the government (could be SLA) and then develop and sell the
properties as a 99 years property.

Could you please help us understand under what circumstances are
Developers
allowed to buy Free Hold land and re-sell as Lease hold land?

 We appreciate if you could point us to any such literature, web link,
 sites
 which explains these in greater details.


Singapore Land Authority:
Developers can buy freehold land through the private market. You 
should
 approach the developers for details on your queries as these are all
 private transactions.


"www.PropertyBUYER.com.sg:
Thank you for your reply.
We understand that developers can buy from the private market. But having
 said that, our readers would like to understand under what statute does 
it
 allow the developer to buy Free Hold land and then sell it as a 99 years
lease? 
Hope you can point us in the right direction.


Singapore Land Authority:
We refer to your enquiry dated 11 Jan 2010.
Common Law provides that a smaller interest in land can be carved out
 from 
a
 larger interest in land, with the registered proprietor/developer
 retaining
 a 
reversionary interest.

The duration of this smaller interest is not
 governed by 
any statutory provision.

 Hence it is acceptable for a developer to retain the reversionary
 Freehold 
title in a development and merely sell the strata lots in the development 
with 
a 103-year lease or any determinate number of years out of the Freehold 
title.

"

Good News for Singapore Property Owners with Freehold land
Singapore land authority has clarified that "Common Law provides that a smaller interest in land can be carved out from a larger interest in land, with the registered propietor/develop retaining a reversionary interest."

This means that you can possibly sell your landed property on a 99 years lease or any numbers of years lease as you deem fit if you sort out the legal paperwork.
This would mean that you will be able to pass on wealth to your descendants while selling properties while retaining the reversionary rights to freehold land.
Maybe you are stting on 3 or 4 Semi-detaches or Bungalows, you can't really lease it out to get a good cashflow and yet you don't want to sell it as you may not be able to buy another property in a similar good location and you need to grow your business.
What could you do?


Perhaps you can sell one or two of your Semi-detaches as leasehold while you maximise and free up capital and at the same time share in the upside the land can possibly provide.

Sad day for Singapore Property buyers


For Singapore property buyers, it means that more and more property developers will likely get in on the strategy to retain the freehold title while selling developments as Strata title leasehold. Freehold land may gradually disappear into the hands of the well funded and rich property developers.

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Buying property is a serious affair, we do NOT advocate a Greed or fear based buying approach, we emphasize that you need to check your property home loan affordability. Check out the mortgage calculators or call us so as to do your sums right.


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BUYING A PROPERTY IN GEYLANG

"Success is a thought process"

Recently in 2007, a friend of mine bought a property in Geylang. The property is in decent condition, it's Freehold and it is about 1000 square feet. With all the promises of KALLANG Expansion and being near to the city, etc. It seemed too good to be true at S$400,000. She was planning to lease it out for S$1500/- per month.

So here is the calculation: -

Rental revenue --- S$1500 x 12 months = S$18,000
Downpayment 20% --- S$80,000
Cost of Financing S$320,000 @ 2.5% --- S$8,000
So the Return of Investment --- (18,000 - 8,000) / 80,000 = 12.5%

So 12.5% gains is quite OKAY right?

So she went to the bank and tried to borrow money, the banks told her, sorry you have to pay 30% to 35% downpayment.

NOW, new calculation: -

Rental revenue --- S$1500 x 12 months = S$18,000

Down payment 30% of 400k --- S$120,000

Cost of Financing S$320,000 @ 2.5% = S$8,000

So the Return of Investment = (18,000 - 8,000) / 120,000 = 8.3%

Where are you going to get that extra S$40,000 all of a sudden.

People can avoid these pains if they get a PRE-APPROVED LOAN. Just provide the unit number, development name, the banks can usually reply to you in 1-2 days to give you a YES/NO answer. Do bear in mind that some banks may say NO and you have to go check with some other banks and wait some more days. So it is a tedious process. A Independent mortgage consultant such as

http://www.propertybuyer.com.sg
can quickly help you get a loan pre-approval (and subsequently get you the best fit loan). So you can put your heart at ease to buy the investment property/home of your dreams.

This is just a simple calculation which does not YET include the Rental property tax of 10% p/a. Conservancy charges, maintenance and depreciation of property as most tenants will want you to re-furbish it, and it can cost $$$. Don't forget stamp duty, lawyer's fees, fire insurance, surveying cost, etc.

DON'T RISK IT, get pre-approved loans first before signing the option to purchase.