Freehold Residential Property: The Advantages of Acquiring One

by SUSAN TEO

Homes in Singapore come with different lease periods:

30-year lease (HDB studio apartments) 60-year* lease (private housings) 99-year lease (executive condominiums, private housings, all HDB flats except for studio apartments) 103-year lease (private housings) (Theses houses sit on freehold land owned by private developers.) 999-year lease (private housings) Freehold (private housings)

*A land at Jalan Jurong Kechil is the first 60-year-lease plot to be sold (on 15 November 2012) for residential development; thus 60-year-lease homes will be available soon.

Most housings in Singapore either fall into freehold or 99-year lease, with the latter making up the bulk.

A 999-year lease is almost equivalent to freehold.

While 30-year-lease HDB studio apartments come in short supply and are only meant for elderly residents.

Private developments with a 103-year lease period (the lease period is determined by the developer) on freehold land are few and far between. At the expiry of the lease, the non-governmental land owner has the right to re-acquire the land (i.e. reversionary right), sell the freehold tenure or extend the lease for a price.

Residential properties with 60-year lease are not available yet, but will be in a few years' time when development on the first 60-year leasehold residential land plot at Jalan Jurong Kechil is completed.

Homes in Singapore are predominantly 99-year leasehold because the government sells most lands on 99-year tenure due to land scarcity in this country. At the end of the lease period, the state can acquire the land without any compensation to the home owners. Currently, the government does not offer freehold land parcels for sales anymore, except for the sale of remnant State land to the adjoining landowner whose existing private land is already held under a freehold title.

However, topping up of the lease of leasehold private housings is allowed.

Lessees may apply for a renewal of the lease with the SLA (Singapore Land Authority). The granting of extension is on a case-by-case basis and will be considered if the development is in line with Government's planning intentions, supported by relevant agencies, and results in land use intensification, mitigation of property decay and preservation of community (SLA, “Waiver of Building Premium”). If the extension is approved, a land premium, decided by the Chief Valuer, will be charged. The new lease will not exceed the original, and it will be the shorter of the original or the lease in line with URA's planning intention.

In addition, near the end of the lease period the State may require the land to be returned in its original conditions. If so, demolition of buildings, land fillings, etc. will have to be borne by the current lessees.

For HDB flats, legally the flat will be returned to HDB at the end of the lease. HDB does not have to make any monetary compensation, or offer a replacement flat to the owners. The owners may also be required to remove any fixtures fitting.

Advantages of buying a freehold or 999-year leasehold home

 

1. Loan Approval

Only a handful of banks will grant housing loans for properties with less than 60 years of remaining lease, and it is on a case-by-case basis. The loan if granted may have a shorter tenure or lower quantum. Thus, if you purchase a freehold property it will save you from the disappointment of loan rejections, or unfavourable loan terms, because of the lease of the property.

Further, you may have a easier time selling off the property since the potential buyer will have a higher probability of obtaining the necessary funding.

2. Use of CPF funds

For freehold residential properties, you do not have to fret about not being able to dip into your CPF saving, or to do so at a lower withdrawal limit, for your purchase because of the property's expiring lease.

This is because you are not allowed to use your CPF funds for the purchase of private houses with under 30 years of lease left.

For houses with remaining lease between 30 and 60 years, the withdrawal amount is tied to the buyer's age and the remaining lease.

Withdrawal Limit
= (The remaining lease of flat or property when the youngest owner is 55 years old / The lease of the flat or property at the point of purchase) x Valuation Limit*

Valuation Limit is the lower of the purchase price or the value of the flat/property at the time of purchase.

(Source: CPF Ask Us, “What are these additional conditions to use CPF for flats/properties with remaining lease of at least 30 years but below 60 years?” )

These CPF withdrawal rules and the attendant limits will affect HDB flats from 1 July 2013.

3. En bloc sales

Homeowners of freehold properties have higher chances of profiteering from collective sales.

Developers may prefer to acquire freehold over 99-year leasehold properties because they do not have to incur a hefty land premium to top up the lease (of which the approval is not even guaranteed), which eats into their profit margins.

Even if developers do acquire 99-year lease lands, they may offer a relatively lower price as they factor in the land premium they have to pay.

4. Long-term stability in value

Leasehold housings nearing the end of their tenure will always fall steeply in value. But you will never have to face this problem with a freehold.

However this is not saying a freehold property will not depreciate in value over time. This can also occur due to the decay of the building. When this happens, the redevelopment value of the land may exceed the value of the building; thus resulting in a collective sale.

In summary

 

Generally, freehold residential properties cost more than leasehold ones. But less clear-cut is which category enjoys a higher rate of price appreciation. If you are considering residential real estate as an investment vehicle to reap capital gain, you should be looking at the rate of price appreciation.

Another warning. If you are attracted to freehold because you are harbouring hopes of bequeathing the property to your descendants till perpetuity, you might want to perish that thought. En bloc sales could go through as long as there is a majority consent. Further, under the Land Acquisition Act, the State has the authority to acquire the freehold property “for public and certain other specified purposes”, with due compensation. This Act also applies to leasehold property.

When all said and done, leasehold homes will still remain attractive to buyers due to their affordable prices and proximity to amenities.


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Why Singapore Property Prices Go Crazy

By PROPERTY BUYER

“The measures that were announced by the Singapore government on February 19 do not address the root cause of the problem yet. The root cause of the problem is a short-term supply crunch at the lower end of the market, but it definitely helps mitigate the risk of bubbles being formed in the future.” (Channel NewsAsia, 2 Mar 2010, Asian property prices expected to continue to rise despite govt measures, Karamjit Singh)

We read Mr. Karamjit Singh’s comments and we did a bit more research. So here is what we found.

 

Singapore’s population according to the Singapore Department of Statistics are: -

Table 1: Singapore's Population 2000-2012

	Total Population ('000)	Resident Population (Citizen + PR) ('000)	Annual Increase in Resident Population + Local Citizens ('000)	Annual Increase in Total Population ('000)
2000	4,027.9	3,273.4
2001	4,138.0	3,325.9	52.5	110.1
2002	4,176.0	3,382.9	57.0	38.0
2003	4,114.8	3,366.9	-16.0	-61.2
2004	4,166.7	3,413.3	46.4	51.9
2005	4,265.8	3,467.8	54.5	99.1
2006	4,401.4	3,525.9	58.1	135.6
2007	4,588.6	3,583.1	57.2	187.2
2008	4,839.4	3,642.7	59.6	250.8
2009	4,987.6	3,733.9	91.2	148.2
2010	5,076.7	3,771.7	37.8	89.1
2011	5,183.7	3,789.3	17.6	107.0
2012	5,312.4	3,818.2	28.9	128.7

Figure 1: Detailed Statistical Table (Singstat)

There is a nice table at
http://tankinlian.blogspot.com/2010/01/hdb-flats-and-population-growth.html
which shows the relative growth rates of HDB.

We are not against importing talent, but we think Singapore had been over-doing it, without studying the strain the additional populace will make on the country's basic infrastructure like transportation and housing. The miscalculation by the Government resulted in an inadequate supply of HDB flats to meet demand. This, we believe, is one of the causes of Singapore's escalating property prices.

Table 2 shows the number of new HDB flats (Source: HDB Press Release) rolled out each year from 2006 -2012 and the estimated housing demand in those years.

Based on the latest Census of Population 2010, the average household size stands at 3.5 people (Source: Department of Statistics), we divide the Annual Increase in Total Population by 3.5 to obtain the Estimated Housing Demand, the latent demand (rental + purchase)

Since 80% of the Singapore's population lives in HDB flats, we estimate that the Estimated HDB Housing Demand from foreigners to follow the same trend as 80% of total demand.

Table 2: Singapore's Estimated Housing Demand and HDB Housing Supply

	Estimated Housing Demand (Annual Increase in Total Population / 3.5 per household)	Estimated HDB Housing Demand at 80% of Total Demand	HDB Supply of New Flats (estimated)
2006	38,743	30,994	2,733
2007	53,486	42,789	5,063
2008	71,657	57,326	7,793
2009	42,343	33,874	13,500
2010	25,457	20,366	17,713
2011	30,571	24,457	25,200
2012	36,771	29,417	34,237
Total		293,600	106,239

(Source: www.PropertyBuyer.com.sg, Singstat and HDB Press Release)

This is the total latent demand as all foreigners arriving into Singapore will need to have a place to stay. In other words, these form largely the total demand (Rental + Purchase).

ACTUAL DEMAND IMPACT ON HDB

Now let’s take a look at the number of immigrants eligible for HDB purchase. Only Singapore citizens can buy HDB flats directly from HDB. Permanent Residents (PRs) are allowed to buy HDB flats only from the resale market.

Figure 2: Singstat, popinbrief2012a.pdf

Annual increase in population based on Table 1 (in 000s), is 54.5 in 2005, 58.1 in 2006 and 57.2 in 2007, 59.6 in 2008, 91.2 in 2009 and 37.8 in 2010, 17.6 in 2011, 28.9 in 2012.

Using Table 1, 3,818,200 (2012) – 3,467,800 (2005), the total population increase is 350,400.

As can be seen, a large part of these increases are due to NEW Permanent Residents and new Singaporeans (naturalised citizens) (Figure 2) with a small part contributed from local born Singaporeans.

Assumption of HDB demand caused by population increase

The increase in population is largely due to New Permanent Residents and New Citizens (Figure 2), with a small part contributed by increase in local born Singaporeans.

Assumption 1: 80% of the 350,400 population increase buys HDB.

Let’s assume that 80% of these new population increase buys HDB, that is a total of 280,320 people.

Assumption 2: 3.5 people to a household

Let’s assume that there will be 3.5 people to a household. 280,320 / 3.5 = 80,091 units of HDB demand arising from Permanent Residents and new Singaporeans.

• 80,091 HDB units of NEW Demand of HDBs from 2005 to 2012!!!

From 2006 to 2012, total numbers of HDB built and those that is announced and not yet completed are 106,239. But, since Permanent Residents cannot buy directly from HDB they will be competing for these flats after the minimum occupancy period (MOP) of 5 years when these flats can be sold on the open market.

LOCAL HDB Demand

There is also the annual household formation of 19,000 to 22,000 per year. Assume that 80% of these households would want to buy HDBs. So let’s say 80% of 20,000 would buy HDB, that would equate to 16,000 a year. 2005 to 2012, there would be a 128,000 of demand of HDB units.

• 128,000 HDB units of Local Demand of HDBs from 2006 to 2012!!!

Therefore, the total demand is estimated to be 208,091 units of HDB.

And HDB has only built or announced to build 106,239 units. There is an estimated shortage of over 100,000 units.

MASS MARKET HDB BEING PROPPED UP

Many of these new supplies were “Built-to-order” flats which can take 3 to 4 years to complete adding to acute shortages of HDB flats, further adding to the demand.

Demand from household formation (marriages) comes in at a range of 19,761 to 22,840.

These newly married couples surely need somewhere to stay.

Why didn’t HDB anticipate the demand?

Marriage rates is something which is very easy to estimate and very consistent over the years. Why didn’t HDB anticipate the demand?

WHAT IS THE LIKELY EFFECT OF MASSIVE IMMIGRATION?

Rental rates are being pushed up.

HDB property prices are being pushed up.

Faced with a lack of choices, Singaporeans will be forced to choose HDB flats in previously less desirable locations such as Punggol or Sengkang which has excess units. Not only that, some Singaporeans may choose not to wait and instead buy private housing directly if they can afford to.

For HDB flat owners whose property valuations have risen, they may consider selling their flats. After the sale, they will find buying another HDB flat too expensive; hence they may opt for private housing instead.
There is currently no shortage of total private properties in pipeline, which stands at 83,975 (Source: URA Release of 3rd Quarter 2012 Real Estate Statistics). This is easily 7 to 8 years of supply based on the average consumption trend.

The end effect is that a greater proportion of people will end up living in condominiums and private apartments. This will gradually deplete supplies and bring smiles to property developers in Singapore.

The Singapore government on the other hand will be happy that prices of land will rise and reach the land’s minimum reserve price to trigger a bidding process. More land sales equal more revenues for the government. And more developers bidding for land means higher prices. These higher prices are then translated into higher priced condominiums. Singaporeans will have to work even harder and hopefully earn more to pay for such private apartments or condominiums of which the major price component is the land price.

PERFECTING THE ART OF MICRO MANAGEMENT

Although it is a market driven economy, various policy levers which the government has access to means that it is not a 100% market driven economy. Though many countries are also similar.

Singapore has perfected the art of micro-management.

At $10,000 household income, HDB income ceiling, you cannot buy HDB flats.

At $12,000 you reach the Executive Condominium ceiling, you are not eligible to buy Executive condominium anymore.

At a household income of $12,000 onwards, the Singapore government strongly encourage you to move upwards in consumption.

Consumptions helps increase tax revenues (annual property tax, stamp duty, transaction fees for property agents which translate into taxes, sale of furniture, construction, work for lawyers, etc.), and helps the economy in creating jobs.

WHAT THIS MEANS FOR THE SINGAPORE PROPERTY BUYERS AND THEIR HOUSING LOANS?

If you are a Singapore Property Buyer, you have to be mindful that there is a gradual shift in Singapore Government policy in play. The government is the largest land-owner, it can regulate supply to influence prices. Being an honest and efficient Singapore government bent on maximising land productivity, hence the Singapore government is now releasing a lot of HDB land with these elevated prices to maximize revenues. If you already own land, good for you, if you do not own any property, you could be price out.

These subtle or not so subtle policy directions will either enrich or impoverish you. And when you consider your Singapore home loans, you ought also to take care to choose the right structure to capitalize on these unwritten government policies or mis-calculations.

We do not support or reject any government policies, we only highlight such policies to the attention of our readers so that they can find ways to benefit from these policies or outcomes of government’s miscalculations.  

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WILL RAISING OF HDB INCOME CEILINGS AFFECT HOME PRICES? Part 5

WILL RAISING OF HDB INCOME CEILINGS AFFECT HOME PRICES?

Part Five

PROPERTY BUYER’s PROPOSAL

We do NOT agree with PM Lee’s statement that people are marrying later and hence allowing a high income ceiling helps them to own a house. Happy pictures or interviews (as shown in Straits Times) showing people being happy for this new policy change may be taken from a skewed sample.

Instead, we strongly recommend that PM Lee looks into why people are marrying later.

Many people we have spoken to mentioned the high cost of living (Not high standard of living) and high cost of HDB flats as major contributing factors for delays in getting married. Not only that, having to wait for 2 to 3 years for an over-priced BTO flat (in their opinion) further adds to hesitation of getting married.

How to Make HDB more affordable?

Rather than raise income ceiling for new HDB flats, the government could instead impose an income eligibility ceiling of say $12,000 (for Singaporeans) and $15,000 (for Foreigners with Singapore PR) on resale HDB.

This would immediate cut off demand from the high income earners from competing in HDB resale flat.

(Currently Resale HDB has no income ceiling - this means that the very high income earners can compete in the HDB resale market, driving up prices of resale HDB)

This would nudge PR into private properties and retain HDB resale flats for Singaporeans.

New HDB flat income ceiling should NOT be raised!!!



Although there is a price differential of 20 to 30% (According to PMO) between Resale and new HDB prices, raising Income ceiling on the new HDB flats will allow new HDB flats to rise in price, rather than for resale prices to come down.



At the same time, HDB must double up it’s speed on building cost effective HDB flats, not BTO and not DBSS. It is the Shortage of Supply that is driving up prices.

Do away with DBSS, as there is too much froth built into the price by these private developers and they will pay too much for government land (in expectation of future profits), involuntarily ending up as "tax collectors" for the Singapore Government. Since they may corner the market forming some form of a cartel, a monopoly or duopoly or tri-poly, they can effectively pass on the higher land cost to the new HDB property buyers.

Do away with BTO as supply is in the catch up phase. Price new HDB flats lower and impose more restrictions if required (to create fairness), to make it more affordable for newly weds.

When the gap of the HDB resale and New HDB prices closes, this will lead to a more orderly market. And we don't mean for HDB new prices to go up to HDB resale level to close the gap. We prefer for resale prices to come down so as to close the price gap between HDB resale and New HDB prices.

Once a balance is reached, HDB should NOT indulge in BOOM and BUST supply cycles of HDB ever again.

Because from 2006 to 2010, the supply has been badly managed. There is absolutely no excuse.

DO AWAY WITH CASH OVER VALUATION

Last but not least, REMOVE the Cash-Over-Valuation system. A Valuation that is not really a valuation makes a mockery of the valuation professionals. If you use the benchmark method, then surely the price increase should be reflected in the price and hence the valuation, and not in the "Cash over Valuation".

We see the Cash Over Valuation as a means to help HDB home owners upgrade to Private properties if they sell their HDB flats (this is a form of social engineering).

We have no objections to helping people upgrade from HDB to a more comfortable Condominium living (now that they can pay the downpayment) , the only question is,

Can their incomes afford it?

If they can, how many years of loan tenor do they need? Have they really checked through in a home loan calculator?

What will happen to these hapless buyers when they lose their jobs in a recession?

Property Buyer spins off home loan consultancy to www.SingaporeHomeLoan.net

Property Buyer, a Singapore based property portal is soft launching its revamped site with additional search engine application dedicated to finding real estate properties within Singapore. The company also is transferring its home loan functions to its sister website SingaporeHomeLoan dot net while maintaining a mortgage section at http://www.propertyBuyer.com.sg/mortgage for continuity.

The same team of home loan consultants will continue to service loan inquiries from both websites (the change over will be transparent for users) and will continue to be branded, “Property Buyer Mortgage Consultants,” with expertise on property buying loan consulting activities for high net worth individuals as well as the generic property loan refinancing activities.

This split will allow the two websites to be more focused in developing their own growth path while maintaining a symbiotic inter-dependence on each other as people who need home loans may need to look at properties and vice-versa.

Focus Of Singapore Home Loan Website

The new focus of SingaporeHomeLoan dot net (Property Buyer Mortgage Consultants) will be around providing better tools and data around loan comparisons to facilitate buyers to make an informed financing decision.
After the re-organization, the brand “Property Buyer Mortgage Consultants” will be used by http://www.SingaporeHomeLoan.net to ensure continuity. Property Buyer is a research focused mortgage consultant that does research into property economics as well as issues and regulations affecting property prices.

Focus Of Property Buyer Website

Property Buyer website continues to be the flagship website for the company and will continue to have a loans consultancy section within it’s website at Property Buyer Mortgage. The split will enable Property Buyer to break free from having to work around a home loans focus and to concentrate on providing tools, developing products as well as functionality that helps buyers to make the property buying process simpler and less risky. With the re-organization, the website will develop more revenue sources for the website around the property and wealth related segment.

The Managing Director of Property Buyer says, “We are pleased with our increased market presence so far. Currently “Propertybuyer.com.sg has a three-month global Alexa traffic rank of 1,091,767. The site is relatively popular among users in the city of Singapore (where it is ranked #4,876).” (Alexa, 21st July 2011) The split is more psychological in nature, as it frees up creative space to develop tools, products and services that is relevant to each website’s needs. And therefore we can better meet customers and readers expectations. We can develop more business successes only if and when we provide what the market is looking for.”

About Property Buyer

Property Buyer Mortgage Consultants is a research-focused mortgage advisory that helps property buyers look through hundreds of loan packages to find the best package that fits their financial circumstances, not simply some cheap loan packages. Property Buyer (CoreConcept Systems Pte Ltd) is a registered mortgage broker in Singapore. (Business registration 200618162C) with it’s office at No. 8 Liang Seah Street, #02-01 Liang Seah Court, Singapore 189029. Property buyer is also probably the only mortgage consultant in Singapore that produces research, not simply FAQs.

About The Company

All the websites and brands belong to CoreConcept Systems Pte Ltd. The company is focused on using technology to innovate traditional business segments and to use web technologies to bring to market, products and services. The company’s other divisions provides Search Engine Optimization (both English language as well as Chinese languages), Social media marketing and consulting, management consulting as well as professional career coaching and entrepreneurial start-up programs.

PropertyBuyer Mortgage Consultant
Home Loan Calculator
+65-9782-8606

loans@propertybuyer.com.sg

HDB home owners - Agents partner with Rogue Lawyers to jack up rates

HDB home owners - Agents partner with Rogue Lawyers to jack up rates

April 2011

Amidst many complaints against property agents, the Singapore government has set up the Council of Estate agencies to regulate the property agency business as well as to issue each property agent with a license number, and measures such as NO dual representation do not go far enough.

If you have discovered that you have paid more than a certain rate for your legal conveyancing, you should raise a suspicion and make a NOTE (though not necessarily a complaint) to Council of Estate Agencies (CEA).

There is also a rule in which agents cannot refer home owners to money lenders. Shouldn’t CEA ban agents from striking deals with bankers and lawyers and pocketing illegal kick backs?

Agents are still happily making referrals to lawyers and banks. This is a serious problem and we should highlight here so that in case you are a victim, you could raise this issue with Council of Estate Agencies.

Agents like to strike deals with lawyers to give them kick back. So where is the extra fees coming from? The lawyer (those bad ones) will go about charging the home buyer more in order to pay out the commission. Not only that, agents also work with companies that have pre-arranged ELEVATED legal fees with some law firms. This extra cost is passed on the home buyer. These illegal companies then pass on this extra commission gained as a result of illegal legal fee kick back to the agents. This is illegal under current law as lawyers cannot give out commission from their law fee.

Property agents also push you towards unattractive home loan rates just so as to benefit from the legal fees kick back.

It is always useful to note down the time, date of communication with the property agent. And try to communicate more with Emails and get them to confirm their facts via email. Do not rely too much on verbal conversation.

Attached here is a property agent complaint form which we downloaded from the CEA website. (Please note, you should always check the CEA website to ensure that the form is up to date, we only provide a convenience and are not liable to any losses whatsoever from using the form)A property agent complaint form is available at property buyer. You can contact them at loans (at) propertybuyer.com.sg

CEA Property Agent Complaint Form is available upon request.

Reasonable conveyancing rates guide

For HDB buyers - Buying a HDB in the resale market
$500 mortgage stamp fee is around $1900 to $2300. In fact, $2300 is already at the higher range, you should already start to open your eyes and raise a complaint or lodge a check with CEA if it is at above $2000.

Conveyancing rates for HDB home loan refinance
The estimated legal fees inclusive of Mortgage stamp fee is from $1900 to $2300.

For Private Property Loan- Buying a New Condo under construction
Total (Inclusive of Mortgage Stamp fee) is $2500 (for near to TOP) to $3500 (for those many years later)

Some law firms claim that it will cost them more resources to keep things on file and track condos which are still under construction. And indeed if the completion is far away, the law firm’s responsibility is dragged out longer. If they did not execute according to the letter of instructions from banks, they may become black listed by the banks and be kicked out of the bank’s panel. The cost is also more.

Legal conveyancing for buying Private residential – completed condominium
Total (Include of mortgage stamp fee) is $2500 to $3210.

The price varies a bit, depending on the law firm and the banks. Some banks are deemed more troublesome at the back end, therefore some law firms charge more. But there is a limit to it, so the above prices can be used as a guide.

Conveyance fees for Private Residential Refinance
The legal conveyance fees (including mortgage stamp fee) ranges from $2500 to $2800.

Why do legal conveyance rates differ?

Basically it is up to the law firms when to charge you higher. Perhaps sometimes, we feel it depends on their mood, other times, it depends on whether they are in cahoots with the Dishonest property agents.

Law firms can charge you extra under these situations: -

Last minute appointments such as 1 day before the exercising of option date, law firms may charge more.
Exercise dates falling into public holidays (maybe)
Faster that the normal legal completion date.
Liaising with CPF on expediting payment.
Multiple parties involved in the property.
Involving bridging loans or construction loan.
In illegal partnership with property agents.
Not corrupt, but legal conveyancing is not their core business and hence they charge a higher price.
Some property, usually those above 3m may face higher legal conveyancing fees, due to more potential complexity. (But not always the case)
Involving probate cases and estate issues.
What can you do if you get charged higher fees than normal?

If you have discovered that you get charged a higher fee than what we have described, it is possible that you have been cheated by the property agents, if you have not been cheated by the agents (in that they did not receive a commission), it is possible that you have over-paid.

Although the law society fee recommendation stipulates a higher fee, the free market has stabilized on the above fees which we have highlighted and hardly anyone uses the recommended fee.

In case you have paid higher than the highest range there, you can take down your property agent's license number and raise a complaint in case the bank and/or the law firm was referred to you by the property agent.

CEA Property Agent Complaint Form

These guideline fees are what we understand to be correct market rates as at April 2011

In case you do not know if you are cheated, you can tell us your story, we will be able to guesstimate whether you have been cheated.


write to loans at propertybuyer.com.sg perhaps we can go through your case to let us know if you have been cheated.

SMS Property Buyer mortgage consultants at: +65 9782 8606

Master Lynn Yap predictions for Year of rabbit 2011

With permission from Property Buyer mortgage consultants

Feng Shui for property buying in Singapore - Rabbit year 2011

View more presentations from Property Buyer Singapore.

Once again, we at www.PropertyBuyer.com.sg are honoured to receive Master Lynn Yap’s Feng Shui Prediction. In life, there’s economics, there’s finance, there’s statistics and there’s fate.

All these don’t always explain every phenomenon. Therefore Feng Shui (the harmonious way of natural living) plays an important part in helping to make sense of the complex world.

In the year of the Tiger, Master Lynn has given many predictions and most have come true. These included the drop of the US dollar, the rise of the price of gold, numerous calamities as well as political calamities. For those who wanted to check, you can review last year’s prediction.

Here is the prediction for 2011 year of the rabbit for property buyers, investors as well as general public.

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

Our blog is happy to receive articles and materials and publish them for you. In return, we will acknowledge your article with a working link back to your site.


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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Invest in THE SHORE residence and Greenwood terrace

Singapore Property Buyer

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In view of the recent few launches such as that of “The Shore residence” and the “Greenwood terraces”, both of which are bought as Free hold land, redeveloped and sold as 103 years lease hold strata title. These are 2 Far East developments which have been launched recently.

Singapore government can release land in various forms, but more likely than not, most land parcels being released are 99 years leasehold land, while very few are freehold or 999 lease hold land. This means that the supply of perpetual land (FH, 999 lease hold) are diminishing all the time.

In land scarce Singapore, this means that in the coming years, Freehold land may become even more scarce.

The recent developments where developers who bought Free Hold land, develop and then subsequently sell it as 99 years lease hold could further accelerate the depletion of Free Hold land to the public.

We look at the implications of such developments

IMPLICATIONS OF DEVELOPERS RETAINING A REVERSIONARY LEASE

Developers may now bid for many Freehold land parcels or take over existing free hold property through en-bloc sales. The Singapore economy is still weak, if you look at the salary census, Singapore’s salary growth has been slower than that of growth of property prices.

In other words, affordability is an issue. Say for instance a couple earning a combined income of $10,000 a month with no financial commitment on a 30 years loan repayment tenure can only afford a $987,000 Singapore property loan with a threshold interest rate of 4.5%.

At 20% downpayment, and a loan of $987,000, the property price that such a property buyer can afford is $1,233,750.

If the property developer who wants to market his property at $1300 psf for a 1,100 sq feet property, the Singapore property developer would need to either reduce prices or reduce size to meet that affordability figure.

Singapore property developer's goal

The developer’s goal is always to maximize profit (There is nothing wrong with it).

Trend of Smaller singapore condominium units

In this scenario, the property developer can choose to reduce the size of unit, thereby meeting the affordability price quantum and achieve superior price per sq feet per plot ratio (psfppr). This could lead to a trend of smaller size condominium units in the future.

FH land becomes Leasehold 99 years land

In another scenario, the property developer opt to maintain the size of the unit, but converts the Free hold land to a 99 years leasehold land. The developer owns the Free Hold land title. This could lead to the gradual disappearance of the Free Hold land titles available to the public.


Overtime, if the law permits, developers could even sell properties on 70 years lease, 50 years and lesser.

Singapore hands power over to the large property developers?

If developers are allowed to hold on to the free hold land titles while developing properties and selling it as a 99 years lease, then this will over a period of time dilute the effectiveness of Singapore Land authority to regulate the market.


Say for instance when the building is 20 years old and run down, the residents opt for selling en-bloc, they can sell en-bloc for the remaining lease of 79 years. Whoever buys this piece of land en-bloc would find it hard to redevelop and sell it again as there is not much lease remaining.

Supposedly in any potential en-bloc deals, the residents are only selling the remainder 79 years lease of the land to another developer.

In order to make this development attractive, a top up of the lease by 20 to 30 years would be required. In the case of topping up of this lease, the property developer that owns the land has the final say on setting the rates. (Not SLA’s Development charge).


So whether you can en-bloc or not depends solely on the goodwill of the property developer. If the property developer sets a high price for the top-up, then that would mean that no other developer would want to bid for it, leading to lower market value for that property.


The final rights then remains in the hands of the developer who owns the master title of the free hold land.

In this case, Far east wold retain the rights and option to develop the land should the residents want to go en-bloc. Far East having a right to set development charges or extract additional fees, will have the first right of refusal in any land parcel development.


As more and more developers do this in the near future, the authority of Singapore land authority could become eroded. There is always a worry that such developers will eventually wield too much power.

DEPRECIATION OF THE CONDOMINIUM BUILDING

Let’s say the building is poorly maintained, the condition becomes worse, over time the value of the building drops. So in such a scenario, even if Far east makes an offer for the land that is giving only a slight premium, the residents will have no choice but to accept the offer and sell back the remaining lease to the developer and lose any potential upside.

WHAT IS PROPERTYBUYER.com.sg STAND ON THIS?

PropertyBuyer.com.sg is a Singapore mortgage consultants that is research focused, so what we do are to merely to inform the public of these matters. Whether such deals are good deals or not, it is a matter between the buyer and seller. We only state it as it is, the way we understand it.

We have already got in touch with Singapore land authority to enquire about under what circumstances are developers allowed to buy Free Hold land and release it back as 99 years lease hold land.

We are not against property developers maximizing profit. Ultimately it is a matter of buyer power versus seller power. If the seller has the pricing power, it is very obvious that buyers will have to do so on the seller’s terms and the reverse is true as well. Ultimately all profit seeking enterprises are there to make money, and rightly so.

What does this mean for you if you own a FREE HOLD properties?

We are checking with SLA under what statute or circumstances are such arrangements allowed. If this is allowed, wouldn’t you then be able to offer your Free Hold landed property for sale at a slight discount as a 99 years lease hold property?


Imagine, this is really a unique way of passing money and assets to the next generation while retaining a vested option in the land value of the property.
I would say, it has all the UPSIDE and none of the downside.


Stay tuned while we wait for a reply from Singapore land Authority.

Singapore Property Investor and Buyer update June 2009

Singapore Property Investor and Buyer update June 2009
Courtesy of www.PropertyBUYER.com.sg

The property market has woken up remarkably from late Feb to now. Credit

has also eased considerably. In April and May we have started to see

property sellers becoming greedy by withdrawing their properties from the

market.


Contacts: -
Tel: 6100 - 0608 sms: 9782 - 8606
Email: loans@propertyBUYER.com.sg
http://www.propertybuyer.com.sg/contactus.php

Remember we wrote in an earlier article about herd mentality, that when the market rises, everyone wants to go in. And sellers

withdraw. And when the market drops, suddenly every seller wants to come into the market and sell to add on to selling

pressure. This is the typical BUY HIGH, SELL LOW syndrome driven by 2 factors. Excessive greed and excessive fear, both are

bad for your financial health.


Obama's plan to stimulate the market to the tune of more than US$1 trillion dollars have finally sunk in, and the market

believes it will alleviate credit and share market has rallied in expectation that the recovery is coming. We emphasize the word,

"expectation". House prices have however continue to fall although it has fallen at a smaller rate which the market considers a

win!

Jobs are still being lost, although at a smaller rate which the market again consider a positive sign.

So these days, it seems that the market will take whatever slightly positive news and hope for the best.

The worst of the credit crisis looks over, however is consumption returning?


That is the doubtful part as US unemployment rate has broken through 9% as we write and will continue to worsen. (Although it

is worsening at a slower rate) We are hopeful that a recovery is coming. Americans consumers are losing wealth in the billions

as we speak, so it is expected that they will not be able to resume fully to their spending patterns of previous years.


Singapore Market Liquidity


There is enough liquidity (i.e. Money) in the Singapore financial system. In Jan 2009, Singapore's M1 money supply increased

by around 6 billion. There is also sufficient liquidity in the hands of the population (though it is not evenly distributed),

reduction in property prices tend to be able to draw out latent pent-up demand.


But is the recovery sustainable?

We seriously doubt that.

The Singapore GDP is still falling at a projected 6 to 9% annualised rate for 2009. Q1, 2009 GDP annualised fall is around -14%

and in order to reach our goal of a -9%, this means Q2 should come in around -10 to -12% and Q3 should be better than -9%

and Q4 should at least come in at -4 to -5%. And that will enable us to achieve a -9% GDP.


The large chip off our GDP is caused by our over-dependence on exports.

Demand overseas have fallen, factories have shut their gates, therefore, this

segment of the economy will continue to suffer.


Our exports depended a large part on the USA.

So while our Singapore GDP languish and unemployment continue to rise, it

is very hard to see how this recent property rally can be sustained after the

pent-up latent demand has been exhausted. A more stable market yes, but a

rising market? We doubt.


After August when the quieter property volume months resume, together

with reality of job losses, more property launches. So by August and

September we should get a clearer picture of the market.


Developers are clearing stock

The market is getting hot now, developers are launching 99 years properties

again to "CLEAR stock", so unless you really like these properties, there is a

reason why they clear the 99 years and not the 999 or FH properties in their

portfolio.


EN-BLOC developers Leasing out their properties on 2 year leases

Some developers who had bought en-bloc developments and who have

been lucky enough NOT TO TEAR down the development yet, have begun

leasing their properties out on 1 year and 2 years leases. This also indicate

that these developers who have been caught out cold are expecting that the

economy will NOT RECOVER ENOUGH for them to tear down and launch their

properties for sale at the prices they want. So rather than tear it the property

down, they are leasing it out on 2 year leases and tying themselves in.


Exercise Caution

There are always good deals and bad deals in any property cycle. People

buy property for various reasons. We are not advocating whether to buy or

not to buy, but rather that you should exercise caution when buying (if you

buy).


Dishonest Property agents are on the loose again when market hots up

Property agents are again out on the loose and here is one on Singapore

Management University (SMU). Do not buy on impulse or greed and do NOT

bring your cheque books when going for a viewing. It's okay we lose a Home

loan deal, but it's not okay if you over-pay by too much.

we strongly encourage you to do your home work.

http://www.propertybuyer.com.sg/viewnews.php?article=107

But if you still decide to buy after reading our articles, please consider to use

our services for Getitng your HOME LOAN or to refinance your home loan. The service is free to you as we receive a fee from

the banks.

Contact them at: -
Tel: 6100 - 0608 sms: 9782 - 8606

Email: loans@propertyBUYER.com.sg

http://www.propertybuyer.com.sg/contactus.php


Property Checklist / Guide (Kiasu one)

http://www.propertybuyer.com.sg/viewnews.php?article=39

Read More of their articles

http://www.propertyBUYER.com.sg/articlesnews.php

Invest in Singapore: Risks of Dollar Cost Averaging

Singapore investment: Risks of Dollar-cost-averaging
Contributed by
www.PropertyBUYER.com.sg

(Authors or websites, if you would like us to post your articles, please drop us a note)

Contact them:
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sms: 9782 - 8606

Email: loans@propertyBUYER.com.sg

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What is dollar-cost-averaging?

Many people mistake investing in Singapore as naturally given them safety. In fact, no

matter where you invest in, you will still need to do your home work.


In shares, dollar-cost-averaging is used to lower the average cost of your

purchase.
Just as an illustration using shares: -

Jan 2009 - 1000 shares at $5.00

Feb 2009 - 1000 shares at $4.00

Mar 2009 - 1000 shares at $2.00

The average cost of the above share = ($5.00 + $4.00 + $2.00 )/ 3 = $3.67

The aim of dollar-cost-averaging is to mitigate a wrong timing of purchase. If

you purchased something at $5.00, the prices have now fallen, in order to

lower your overall average cost of purchase, you will have to buy more at

the lowered prices.


RISKS of dollar-cost-averaging

When the shares have fallen, people who blindly believe in dollar-

cost-averaging will put more money into the company whose shares have

fallen.


Then the shares fall further, he/she buys more, it falls further, he/she buys

even more. So much so that the cost of the shares is very cheap. If the

share price rebounds, the person can become very rich.


INFORMATION ASSYMMETRY

However, in many cases, there is a reason why the share prices have fallen.

We almost always have to assume that the insiders know better than we do.

It can mean that the company is seriously in trouble.

Despite years of making the market more transparent, efficient and with

timely dissemination of information, it is still the insiders and their inner circle

that knows what is going on in a company best.

Buying the shares when insiders are dumping is the easiest way for a

person to loose an entire fortune.


SO WHAT SHOULD WE DO?

The best way to do is to re-assess the company's financial fundamentals,

macro and micro economic fundamentals to establish a NEW fair value for

the company's shares and it's potential.


Once you have established that, you can then decide whether to throw more

money into the company.


If you have thrown in money in the past and it is lost, you must be able to let

go. So the key thing to do is: -

When markets rise, do not greed. (Do not rush to buy more without proper homework)

When markets fall, do not fear. (But do not become a "rambo" either)

In both cases, do your homework, then act on it. And when we say ACT on

it, we don't just mean, BUY or SELL. It could also mean do Nothing.


Some people emphasize and quote Warren Buffet, "When others are greedy, be fearful,

when others are fearful, be greedy" this is simply a contrarian style of investing. Do

not go into it blindly. Because what you didn't know is, Warren Buffet's been watching

and observing certain shares for YEARS waiting for the right moment. These shares may

have been consistently over-priced, but are nonetheless good companies. When these

shares suddenly and without reason are being dumped because people are fearful of the

general market, that is when Warren Buffet acts.


Do not use Warren Buffet's maxim when you only know half the story and didn't do your

homework. You will BET YOUR FARM and LOSE IT.


The key thing is, never take one or two simple concepts and treat it as

universal truth and apply it indiscriminately to all situations. There is no free

lunch!


Luckily physical properties have less the the problems associated with shares when

applying Dollar cost averaging.


www.PropertyBuyer.com.sg

is a Researched Focused Mortgage Advisory that helps individuals

refinance or obtain the best fit home loans. We do not simply emphasize

cheap rates, but rather focus on a risk versus savings approach.

You can approach us to evaluate refinancing of your home loan. The service

is free to you as banks pay us separately. You can click on "About us" to

know more about us.

You have nothing to lose and everything to gain.

www.PropertyBuyer.com.sg

also focuses on helping property buyers get the right property investment by checking

checking and ensuring a fair valuation so that they do not overpay or get excited when

an agent tells them the property is hotly in demand.

Find the right home loan package that fits the needs of the home property buyer,

process the loan till approval.


When the loan is finally approved, www.PropertyBUYER.com.sg helps you to check the

letter of offer to make sure the terms are exactly as agreed prior to the offer and

spot major mistakes and omissions.

(Some home owners were promised some terms and pricing, but when the offer came, there were some mismatch. One of the home owners signed on it and only to realize months later that instead of a No-lock in period, he was locked-in for 3 years, with a penalty of 1.5% on FULL redemption. His property was 700k and his loan was only 400k. In case he were to get an offer to sell his property within 3 years, he would incur a $6,000 loss)


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Understand Property Investing and Sub-prime

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Refinance and Mortgages DIY steps

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