Buying a 99 year lease condominium

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FaeLLe
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Buying a 99 year lease condominium

Post by FaeLLe » Wed, 07 Jul 2010 9:58 pm

Hi all,

Am considering buying a property on 99 year lease that was TOP in 1998.
Very good price and condition. Just next to an MRT that is 13 minutes from City Hall. Under 1 million for a 3 bed room condo - Superb price. Gym, huge pool etc etc, the works.

All conditions are perfect for me.

But what is the downside of picking up one? It is 12 years old and dont care about the expiry of lease because 87 years from now I am surely not alive.

Would it be a wise decision to go for this property?
Should I have any considerations like en-bloc etc to worry about?

Your thoughts would be good on this front.

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Post by sundaymorningstaple » Wed, 07 Jul 2010 10:06 pm

As long as you don't hold it too long you should be okay. The problem with resale 99 year leases is that after a point the cost you paid for it will be impossible to retain due to ROI being less & less. Sure an en-block could save your butt but that's a gamble. It's the same with buying resale HDB flats as they are 99 year leases as well. I reckon though, if it's only 12 or 13 years old you still got a good 20 years before you need to think about unloading it while it's got some life left and can still fetch a decent price.
SOME PEOPLE TRY TO TURN BACK THEIR ODOMETERS. NOT ME. I WANT PEOPLE TO KNOW WHY I LOOK THIS WAY. I'VE TRAVELED A LONG WAY, AND SOME OF THE ROADS WEREN'T PAVED. ~ Will Rogers

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Post by FaeLLe » Wed, 07 Jul 2010 10:12 pm

Or we could give it out on rent till the sodden thing falls right....... or keep staying in it?

What would the chances be of an enblock of a property with a profile like this right next to an MRT? Or would it be completely unpredictable?

SMS would you also happen to know about Visa regulations?
If I take it up on ownership and after 50 am no longer in Singapore (assuming have not taken up PR) would it be possible to get an LTSVP provided I can provide sufficient sources of funds?

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Post by sundaymorningstaple » Wed, 07 Jul 2010 10:28 pm

FaeLLe wrote: SMS would you also happen to know about Visa regulations?
If I take it up on ownership and after 50 am no longer in Singapore (assuming have not taken up PR) would it be possible to get an LTSVP provided I can provide sufficient sources of funds?
Yes, provided all the pre-requisites are met, it's doable.

http://www.ica.gov.sg/page.aspx?pageid=238&secid=171
SOME PEOPLE TRY TO TURN BACK THEIR ODOMETERS. NOT ME. I WANT PEOPLE TO KNOW WHY I LOOK THIS WAY. I'VE TRAVELED A LONG WAY, AND SOME OF THE ROADS WEREN'T PAVED. ~ Will Rogers

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Post by raden888 » Wed, 07 Jul 2010 10:53 pm

Another issue I can think of is that when the leasehold period expires ,the area might be rezoned and you could loose the property. Of course, this is of concern only if you're planning on passing on the property to the next generation.

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Post by teck21 » Thu, 08 Jul 2010 9:55 am

I would think a bigger concern would be whether or not to buy property at this time.

Enbloc, considering this development is only 12 years old, and I would assume fully built up to its permissible plot ratio, would be a very very long way off.

Plenty of land in Singapore to build on and upgrade for a long time before our non-landed housing has to look like Hong Kong's.

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Post by FaeLLe » Thu, 08 Jul 2010 10:11 am

teck21 wrote: Enbloc, considering this development is only 12 years old, and I would assume fully built up to its permissible plot ratio, would be a very very long way off.
Can you please help clarify what would happen if the existing building was built to its max permissible plot ratio?

Does enbloc usually take place only if the building has been underdeveloped?

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Post by carteki » Thu, 08 Jul 2010 10:35 am

In a perfect world, the levies would include an amount for the "usage" of that property that year and would mean that the owners at year 99 are not stuck with this massive payment. They're pretty good about estimating long term maintenance costs and including a proportion of those in the levies, this just needs to be extended to leasehold properties.

But then again, global warming might mean that in 90 years there is no land left to rent - who knows!

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Post by teck21 » Fri, 09 Jul 2010 11:23 am

FaeLLe wrote:Can you please help clarify what would happen if the existing building was built to its max permissible plot ratio?
Nothing would happen to it, just that the chance of any kind of redevelopment (at a windfall for existing owners that is) would be very unlikely in the near future. Unless URA revises plot ratios upwards, which is probably not likely soon.
FaeLLe wrote:Does enbloc usually take place only if the building has been underdeveloped?
Not exclusively, but almost always. To make money, one minimizes the cost of the input, and maximises the price of the output, and an under developed piece of land helps to ensure this.

Assume 2 pieces of land, side by side, therefore somewhat similar in value. Both 100,000 sqft, for simplification purposes, mirror images. Plot ratio for both 2.8, no height restriction issues (ie not near Oxley road).

First one is a high rise condominium, total 280 units, about 1,000sqft in size. So the plot ratio allowance is pretty much maxed out at 280,000sqft. Transactions for this development going at say $1,000psf.

Second one is a low rise development built long ago. 50units, 2,000sqft each for a total built-up of approx 100,000sqft. Not many transactions happening.

The developer could then buy the first piece of land for $280,000,000 assuming all owners were willing to sell at $1,000psf (ie no premium to selling on their own on the open market). Effectively the cost of the land alone for the developer here is $1,000psf, so the developer would have to build and sell the finished product for alot more than $1,000psf just to break even.

Assuming prices in that area are in fact about $1,000psf, it would be impossible for the developer to make any money at all.

For the second peice of land, the developer could comfortably pay each of the 50 homeowners $1,500psf for their property and still get the land for only $150m. In this case, $150m for 280,000 sqft means the developer paid only about $540psf as opposed to $1,000psf. So the developer can still market and sell a development built on the second piece of land at about $1,000psf and still come out ahead even after factoring in development charges payable etc.

This would then probably count as a win-win situation for both the seller and the buyer, but only on a strict financial basis.

Of course this is a very simply illustration, and variables (like developement charges payable have been conveniently left out) but the principle is there.

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Post by ancientmariner » Thu, 22 Jul 2010 2:11 pm

Excellent analysis by Teck21. Thanks!
Nobody knows about future!

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Post by FaeLLe » Thu, 22 Jul 2010 2:17 pm

Yea though it seems from OCBC site that government seems to be coming up with a way to allow people whose lease on properties are ending to renew their lease for another extended period.

Not sure what the reality on this is though.

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