Realistic Prices for 99 Year Lease Homes

[Cecil Lee]

Dear All,
1. Often, when a developer borrows financing from a bank to fund a condominium project; the bank does it's own calculations for each unit to be sold by the developer.
2. In fact, the banker will normally calculate out the cost of bidding/tender for the site and advises the developer; what is the mininum selling price for each unit.
3. To safe-guard the bank, often, the bank will require the developer to maintain the minimium price - so that the bank will not make a loss on the funding.
4. Sometimes, if one is fast enough; one can seek out bargains. But often, unfortunately, the bargains are for smaller units e.g. 2 rooms or studio ones where often the p.s.f can be as low as $385 of $395. This is the level of bargain one can get 4 to 5 years ago.
5. However, for a 99 year lease property; at today's rate - very good bargains are at pricing of $420 to $430 p.s.f. for sites away from MRT/LRT.
For sites, next to MRT; one can still expect somewhat a value of $430 to $550 (depending on the location and distance to MRT or ease of transport/schools).
6. Paying anything more than this amount for any type of apartment e.g. 3, 4 or more rooms often translate to making a loss if one needs to sell the property.
7. For example, lets take Eastpoint Green condominium at Simei :-
(Previously, I had done a review of this property in this conference - do a search for it).
In short, this is a 99 year lease property, TOP in 1999.
Then, little, did anyone know that there is a glut in condominium properties.
People then, pay crazy prices for this property. Many pay on average over $600 to $670 p.s.f.
This year, some units were resold for $470 p.s.f.
8. Take for example another condo, which a user recently had requested for advice: Regentville condo, at Hougang.
8.1 Due to the high cost for the developer to bid for the land at that time, the selling price for first owners is something in the region of $600 to $620 p.s.f. Here, we can say that people are paying crazy prices for a 99 year old lease apartment.
8.2 And, it would be silly to think that, the clock starts ticking, such 99 lease propery prices will defintely depreciate, as each 5 year period passes.
8.3 In 2002, many of the units in Regentville condo were sold ranging from $385 p.s.f to $450 and only one unit was sold for $511 p.s.f.
8.4 In 2003, some units at this condo were sold at as low as $318 p.s.f to $380 p.s.f. Only few units were sold at $410.
8.5 Just imagine the huge lost and for many who are now staying there; indeed a large paper loss.
9. Therefore, the most realistic method of looking at the financial value of a property is to calculate ot the p.s.f value.
Warmest Regards,
Cecil