By guest contributor AK
When I was told that residential properties in Hong Kong generally come with a 50 years lease, I was amazed. Imagine that someone in his thirties bought a condo in Hong Kong and he lived to be 90 years old. This effectively means that he could be kicked out of the property, as there is no guarantee that the lease would be extended!
To someone from Hong Kong, a 99 years leasehold property in Singapore is probably a steal! The lease is twice as long, and the prices are probably lower too, like for like. However, things could change for the next generation. Shorter land leases are beginning to become more popular in Singapore.
60 years leasehold condo in Singapore
A 1.02 hectare residential site in Jurong Kechil comes with an unusual 60 years leasehold term. This is believed to be the first time a private housing site is being sold on such short tenure under the Government Land Sales (GLS).
Developers have options for a 30, 45 or 60-year lease period for the plot, the Urban Redevelopment Authority (URA) said. The development conditions for the site cap the maximum number of units at 203 units and can be built up to part five storeys and part eight storeys.
Industry experts are expecting a top bid of between $200 to $250 per square foot (psf) per plot ratio (ppr) and a sale price of $550 to $600 psf. In comparison, freehold developments in the area go for about $1,000 psf.
The government has mentioned that it would explore offering residential sites with shorter leases to bring down the cost of home ownership in Singapore.
Do shorter lease terms make sense?
Maybe I am out of touch with the reality on the ground. Foreigners, new citizens, and younger Singaporeans are probably less concerned with shorter land leases. They might just want a home to live in for the short-term, or to reap as much rental returns as possible. A project that is freehold or 999 years leasehold and selling at a premium might only be attractive to older Singaporeans.
Now, if I were in my forties, I might consider buying a new private residential property with a 60 years lease if I could save 40% to 50% compared to buying a similar freehold or longer-lease property. This would only be for my personal residence, as the property could be hard to resell as its lease gets progressively shorter. I just have to pray that I do not live to be a hundred.
However, would someone in his twenties or thirties buy a new private residential property that comes with a 60 years lease? By the time the project gets its Temporary Occupation Permit (TOP), the property would only have 55 years left to the lease…
By guest contributor AK, an experienced investor who blogs at A Singaporean Stock Market Investor.