pros and cons of buying a 99-lease condo in singapore ?

[newcomer2005]

Hi, I am seeking everyone's opinion on this.
I'm interested in buying a new condo in a prime location. However, it's a 99-year lease (starting from 2001). Well, because it's a 99-leasehold, it's cheaper than others. but i don't want to throw $$$k just as a big rent (for the 99 years). I intend to buy it for investment (i.e. to rent it out). however, it'll be geat if i can get some idea from everyone on board on the 99 lease hold. and the usual price curve (e.g. will it go decline from day1, the usual pattern). any input is welcome.
thank you

[jhkim]

I think its super good.....because most country I know has 25 years lease instead of 99. Plus even if the price doesn't increase, rent you recieved in Singapore currency is good in many other countries.

[yoongf]

The biggest issue is that .... if the balance of the lease is less than 60 years, ppl can't use their CPF (Retirement fund) or get a bank loan to buy it from u. And not many ppl have that kind of cash hoard.

Typically, the buying pool shrinks, resulting in lowered valuations.

Thus.. advisable not to hold on to such property when it gets that old.

[PhantomX]

better still dont buy

[fang84]

For a starter, of course 99 year properties are more affordable and lower priced than freehold properties.

BUT, if you do buy a 99 year leasehold proeprty, make sure that the property is not over 15-20 years, taking up a loan would be more difficult and resale opportunities may also hamper the potential buyer, unless he has hard cash and is able to take minimal loan.

But I think people should alaso bear in mind that well-sited properties (Orchard Road, River Valley) with 99 leasehold also has its opportunities for en-bloc- developers can redevelop and top up the lease. And your get back your full 99 years.

[guest 21]

It's a bad idea under normal circumstances. If a person really wants to live in sg, then why not get a proper fee-simple house, real ownership instead of just a long lease? If you can't afford it, but just to rent a cheap place while you're here.

[newcomer2005]

Just curious, for a primary location (disctrict 9), new condo about 930 sq.ft (with a balcany), what's the chance/affordability of getting a rental S$3800 /month ? will that be a lot to ask ? thanks

[newcomer2005]

what i want to know is, in singapore, how many /what kind of people are willing to sepend 3800+ S$ for a monthly rental, in exchange of living in a primary area with pool , a 2 bed room condo about 920 sq.ft (with a balcany) ? other than expats, will the local singaporeans pay this rental ? the condo may cost 780k+ if one wants to buy it.
thank you

[bizcatalyst]

what i want to know is, in singapore, how many /what kind of people are willing to sepend 3800+ S$ for a monthly rental, in exchange of living in a primary area with pool , a 2 bed room condo about 920 sq.ft (with a balcany) ? other than expats, will the local singaporeans pay this rental ? the condo may cost 780k+ if one wants to buy it.
thank you

The kind of ppl who R not Singaporean or the kind of ppl who can afford to buy the same apt (but think it's not a safe investment) or some corporation/MNC who needs to cater accomodation to expats employees.

Honestly, property is not a good investment in Singapore. Easy to buy when u hv CA$H, hard to SELL when u want yr CA$H back.

[newcomer2005]

thanks for everyone's input.
the intention of buying this 730k+ 930sq.ft in district 9 is for investment, the price is cheaper because of the 99-yr lease. but the draw back is the price may not go up at all (the 99-year lease started in 2002, still have penty of time in a sense, but not sure how others view this 99-yr lease). The projected rental is 3800/monthly (as i was told). but i'm a bit suspicious on the rental income. don't think it's easy to get 3800 per month. Unless many young (couples) people want to live near by the center in a condo and willing to pay 3800+ for monthly rental. but all the singaporens i know are not willing to throw away anything more than 2500 /month on the rental. Don't know if anyone here has had the similar experience (for real estate investment in singapore).

[CNA]

thanks for everyone's input.
the intention of buying this 730k+ 930sq.ft in district 9 is for investment, the price is cheaper because of the 99-yr lease. but the draw back is the price may not go up at all (the 99-year lease started in 2002, still have penty of time in a sense, but not sure how others view this 99-yr lease). The projected rental is 3800/monthly (as i was told). but i'm a bit suspicious on the rental income. don't think it's easy to get 3800 per month. Unless many young (couples) people want to live near by the center in a condo and willing to pay 3800+ for monthly rental. but all the singaporens i know are not willing to throw away anything more than 2500 /month on the rental. Don't know if anyone here has had the similar experience (for real estate investment in singapore).

i think you're correct in your intuition...
leasehold properties are good and have potential for appreciation up to their 40th year (don't flame me on this, i am quoting a research i've read) and thereafter, the resale value drops steadily and functions like an economic rent.

in fact, depending on cost of funds (interbank wholesale rates) the current yield for a leasehold property currently stand at around 4-4.5% gross. So your property would probably fetch 2,400 rental pm.
freehold property yield is lower at around 3%.

if inflation rises and the yield curve shoots up with a corresponding increase in real interest rates, then yes, rental and property values can be expected to appreciate, however, the yield curve is looking very flat now so does not look that promising.......

hope this helps

[yoongf]

Realistically, I believe .. 4% is really gross rental income.

Factor in MCST charges (common property maintenance), as well as property tax, the yield is more like 0-1% these days.

[Guest 11]

Realistically, I believe .. 4% is really gross rental income.

Factor in MCST charges (common property maintenance), as well as property tax, the yield is more like 0-1% these days.

How does one compute the MCST charge and property tax? When property is advertised for sale at a certain price, how can one figure out what monthly common property maitenance charge and what property tax will be assessed?

[yoongf]

Each condo has an elected mgt council that comprises of residents. They determine the MCST charges, depending on the operating cost of the property. Typical monthly charges range from $190 to $300, depending on the size of the communual facilities and provision of sinking fund. It is a legal requirement to set aside some $$ for a sinking fund.

Property tax is assessed at either 4% (Owner Occupation) or 10% (non owner occupation) of annual value. Annual Value meaning the typical annual rent that could be collected for that neighbourhood. For example, if the tax authorities believes that annual rent is around $24K, the tax assessed would be $2.4K for non owner occupied properties. $2.4K will be assessed even though the actual rent collected is $20K.

MCST charges and property taxes are not typically made known at the advertisements. But is very important for ROI calculations. Another major cost component would be whether any major upgrading is being planned in the near future. This may mean a one time top of of $10-20K for replacement of lifts, new landscaping, etc. Replacing lifts doesn't increase the valuation of the property.

[newcomer2005]

thank you all for your precious opinions.

Here is the details of the new condo "Leoni Studio" (the one that i'm interested to buy for investment). Guocco started the sale in the weekend. Any comment on this 99-year lease Leoni Studio in district 9 ?

thank you again