Senin, 26 September 2011

Are you living in a 99-year leasehold condo that's nearing 30-year old? (Part 2)

Here is the second part of the cover story published in this week's THEEDGE SINGAPORE. We will post the third and final part tomorrow.

Collective sale hopefuls
The future isn’t all that bleak for ageing 99-year leasehold condos, even for places with just 30 or 40 years left on their lease. “If they are well maintained, they can still fetch good rental rates,” says Chuan Park’s Chan.

Mortgage financing for condos such as Chuan Park and The Arcadia is also not an issue for now. “DBS does finance properties with less than 60 years’ lease, as long as the remaining lease is at least 20 years at loan maturity,” says Liu Su Kian, managing director and head of deposits and secured lending at DBS Bank. “The key considerations for approving such loans, as with all mortgage loans, are the customer’s commitment and ability to make repayments.”

Chia Siew Cheng, head of loans division at United Overseas Bank, says: “We look into several factors when reviewing a loan application. The loan quantum that a borrower would qualify for does not only depend on the age of the property, but on other factors as well. These would include regulatory requirements and the profile and creditworthiness of the borrower.”

There is, however, a restriction on CPF usage for properties with less than 30 years remaining on the lease, which in turn may affect the resale value, notes DBS’s Lui.

It’s not just Chuan Park and Chiltern Park that are exploring the possibility of a collective sale. There are more than twenty 99-year leasehold condos that have crossed the 25-year mark, and these may be put up for collective sale, says Susie Mok, director of investment sales at Savills Singapore. In the east, Tampines Court is in the midst of a second collective-sale attempt, while Bayshore Park, Mandarin Garden and Loyang Valley are also some of the large 99-year leasehold condos that are potential collective-sale candidates, according to Mok. There’s also Thomson View at Sin Ming; Sherwood Tower above Bukit Timah Plaza in Upper Bukit Timah; and Lakepoint Condo, a five-minute walk from the Lakeside MRT station. In the prime districts, Mok says Orchard Bel-Air on Orchard Boulevard and Chancery Court on Dunearn Road are likely candidates.

Is this the right time?
“Most of the owners at the older, 99-year leasehold developments must be wondering what their options are,” says Karamjit Singh, managing director of Credo Real Estate. “Is it a good idea to spend more money in retrofitting or should they think of a collective sale? But even then, not all projects crossing 30 years may be ideal for a collective sale. You need certain market conditions to fall in place for a collective sale to be viable.”

In fact, owners of some of the older, 99-year leasehold condos have already approached property consultants with the intention of pursuing a collective sale. “But they have to form a collective-sale committee first,” says Knight Frank’s Loh.

Often, after setting up the committee, the sale could still be aborted because of various factors such as pricing and timing. “The timing must be ideal. Sentiment also plays a part and so does the health of the global economy, as well as developers’ appetite,” says Loh. Getting the 80% consensus to facilitate a collective sale is also a challenge for large sites, he adds.

“Currently, developers’ appetite for large leasehold en-bloc sites is weak,” says Jeremy Lake, executive director of investment properties at CB Richard Ellis (CBRE). “Large developers that still have an appetite for big sites will target 99-year leasehold sites in the GLS [Government Land Sales] programme as there is greater certainty of completion and they can launch the site far more quickly than buying a collective sale site.”

And the government has been injecting a lot of new supply of 99-year leasehold development sites through the Confirmed List of the GLS programme. In 1H2011, it released 17 sites on the Confirmed List that could yield 8,100 residential units. Including 13 sites on the Reserve List, a total of 30 sites that could generate 14,300 residential units were offered in 1H. In 2H2011, another 17 sites were offered on the Confirmed List, which could also yield 8,100 residential units. Together with those on the Reserve List for 2H, the total supply was 14,200 residential units.

That has not stopped large, 99-year leasehold collective-sale sites from being rolled out this year. The largest was Pine Grove, a privatised HUDC estate in Ulu Pandan that was put up for tender with a price tag of $1.7 billion in March. Laguna Park at Marine Parade Road was put on the market for $1.33 billion by Knight Frank in May. This was after a failed attempt in 2009, when its asking price was $1.2 billion.

Early this month, Park West Condo was put up for collective sale, with an asking price of $803 million. The differential premium and topping-up of the lease is estimated to be $230 million. This will bring the total price tag to about $1.033 billion. The existing project comprises a 432-unit condo and four commercial units and sits on a 99-year leasehold site measuring 633,644.39sqft. With a plot ratio of 2.1, 1,000 to 1,200 units can be built on the site, assuming an average size of 1,200sqft for the new units, says ERA Realty Network, the marketing agent for the development. The tender closes on Oct 20.

In April, Pearl bank Apartments, a high-rise residential block on Pearl’s Hill, near the Outram MRT station, was put up for en-bloc sale with a price tag of $750 million. The tender closed at end-May. Knight Frank will be re-launching the site for sale a second time next month at a slightly reduced price of “over $700 million”, says Loh.

In May, Vista Park, a large, 99-year leasehold condo located off Pasir Panjang Road was also put up for collective sale, with an indicative price of $338 million. The sale was also handled by Knight Frank.

Another collective-sale attempt was that at Peace Centre and Peace Mansion at 1 Sophia Road. Savills Singapore marketed the property a third time, at a reduced price of $675 million. The tender closed on Aug 3.
{To be continued}


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