Is buying 99yrs leasehold private condo a bad investment?

[Sabian]

The lease is too short unless there is a guarantee that you are able to extend it and have the financial means to do so...

[Duckduck]

Sorry to tag on condo thread for my question related to leasehold landed. I wished to start a new thread but couldn't as I'm new here.

 

I recently got an offer for a single-storey leasehold landed property at a price of $300k. But the remaining lease is only 25 years. The historical market price for similar property I found online (sometime Oct 2014) was about $550k. Only thing is I have to pay cash.

 

2 scenarios that run through my mind:

 

a) $300k for 25 year. Say I fork out $25k to touch up, total is $325k. That work out to be only $1.1k per month, which is even cheaper than renting a whole unit either HDB or condo. That seems not bad.

 

b) For $300k, I can pay 20% downpayment for a $950k private condo and after legal fees, stamping fees etc still have maybe $10-20k left.

 

However, I was made to know leasehold once expired the government will take back without compensation and the owner (become tenant then) will have to find alternative premise at own accord.

 

Honestly, I skew towards landed, hence my question really.

 

My friends from Malaysia got to stay in landed for much cheaper cost but they have to bear with dilemma that some day after their groceries shopping they find a stranger sitting in the kitchen waiting for them, or even at night when wanted to take a drink from kitchen and switch on the light only to find a stranger there. So I thought if one wants to stay in landed, Singapore is the place to be.

 

I like to ask folks here that would you even bother to put in your time to consider this offer because it has so little life left that makes it so unattractive? Would it be a waste of money in such a case?

 

Welcome your thoughts and comments.

 

Thank you!

 

 

Regards,

Dino

 

how much reno cost? dont tell me u gona stay as is condition? after add reno confirm u dun wanna buy lah

[2824]

some random thoughts:

 

The price appears too good to be true ... almost 50% discount ...

 

Need to ask yourself whether you can see yourself staying there for a substantial portion of the lease as it would probably be very difficult to find another buyer.

 

Any restrictions on renting out?

 

[Enye]

Sorry to tag on condo thread for my question related to leasehold landed. I wished to start a new thread but couldn't as I'm new here.

 

I recently got an offer for a single-storey leasehold landed property at a price of $300k. But the remaining lease is only 25 years. The historical market price for similar property I found online (sometime Oct 2014) was about $550k. Only thing is I have to pay cash.

 

2 scenarios that run through my mind:

 

a) $300k for 25 year. Say I fork out $25k to touch up, total is $325k. That work out to be only $1.1k per month, which is even cheaper than renting a whole unit either HDB or condo. That seems not bad.

 

b) For $300k, I can pay 20% downpayment for a $950k private condo and after legal fees, stamping fees etc still have maybe $10-20k left.

 

However, I was made to know leasehold once expired the government will take back without compensation and the owner (become tenant then) will have to find alternative premise at own accord.

 

Honestly, I skew towards landed, hence my question really.

 

My friends from Malaysia got to stay in landed for much cheaper cost but they have to bear with dilemma that some day after their groceries shopping they find a stranger sitting in the kitchen waiting for them, or even at night when wanted to take a drink from kitchen and switch on the light only to find a stranger there. So I thought if one wants to stay in landed, Singapore is the place to be.

 

I like to ask folks here that would you even bother to put in your time to consider this offer because it has so little life left that makes it so unattractive? Would it be a waste of money in such a case?

 

Welcome your thoughts and comments.

 

Thank you!

 

 

Regards,

Dino

 

do you anticipate to be still alive after 25 years?

 

if so, what are your plans when you are left homeless then?

 

otherwise, its a good deal

 

[dinotune]

Thanks for comments. The offer came from reliable party, let's not doubt that part.

 

I have no alternative residence, i.e. no property from parents and no own property yet. Currently renting.

 

So is either continue to rent or buy. It will be 100% own stay, as such rental yield is not really a concern.

 

I guess my main concern is buying a short-life leasehold landed would equate to renting, but worse off because have to bear upkeep and maintenance. End point is the same, don't own anything.

 

Only attraction are the compound for car park and small little garden (for kid), open roof kitchen (for wife).

[Kangadrool]

if as is where is condition is tahanable, go for it.

 

But, still need to bear in mind that maintenance for this type of housing isn't cheap. Leaky roof, chocked pipes........

 

Even simple things like replacing basin tap will incur 3x the price compared to same job the handyman will charge for a HDB flat.

 

[Throttle2]

Thanks for comments. The offer came from reliable party, let's not doubt that part.

 

I have no alternative residence, i.e. no property from parents and no own property yet. Currently renting.

 

So is either continue to rent or buy. It will be 100% own stay, as such rental yield is not really a concern.

 

I guess my main concern is buying a short-life leasehold landed would equate to renting, but worse off because have to bear upkeep and maintenance. End point is the same, don't own anything.

 

Only attraction are the compound for car park and small little garden (for kid), open roof kitchen (for wife).

$300K is like a car with 10yrs coe

This has 25 yrs

If it suits your need , grab!

[Showster]

What is your age group? Do you have children? These make a difference to how the options should be evaluated.

 

 

Sorry to tag on condo thread for my question related to leasehold landed. I wished to start a new thread but couldn't as I'm new here.

 

I recently got an offer for a single-storey leasehold landed property at a price of $300k. But the remaining lease is only 25 years. The historical market price for similar property I found online (sometime Oct 2014) was about $550k. Only thing is I have to pay cash.

 

2 scenarios that run through my mind:

 

a) $300k for 25 year. Say I fork out $25k to touch up, total is $325k. That work out to be only $1.1k per month, which is even cheaper than renting a whole unit either HDB or condo. That seems not bad.

 

b) For $300k, I can pay 20% downpayment for a $950k private condo and after legal fees, stamping fees etc still have maybe $10-20k left.

 

However, I was made to know leasehold once expired the government will take back without compensation and the owner (become tenant then) will have to find alternative premise at own accord.

 

Honestly, I skew towards landed, hence my question really.

 

My friends from Malaysia got to stay in landed for much cheaper cost but they have to bear with dilemma that some day after their groceries shopping they find a stranger sitting in the kitchen waiting for them, or even at night when wanted to take a drink from kitchen and switch on the light only to find a stranger there. So I thought if one wants to stay in landed, Singapore is the place to be.

 

I like to ask folks here that would you even bother to put in your time to consider this offer because it has so little life left that makes it so unattractive? Would it be a waste of money in such a case?

 

Welcome your thoughts and comments.

 

Thank you!

 

 

Regards,

Dino

 

Edited July 7, 2015 by Seohster

[LoverofCar]

Thanks for reply. Condo ownership in Spore have gone up the past decade. What's going to happen to these 99 years condos when they get older and older? What's going to happen to the owners who owns old condos?

 

HDB is also 99years, but we see almost 20years old flats bought $70K new from HDB, few years ago selling for 200K, now selling for 300K. And they are selling like hotcakes, even the old HDB flats. Why can't the same thing that happen to HDB falts happen to condos, where prices become 3x or 4x even when it gets older and older? Why is everyone saying condo price gets lower with time?

In my view. indeed for 99 years leasehold. It make sense to have a good location and nothing but a good location. Once the property aged. It has the potential to be en-blocked for new development.

[Old-driver]

I think its a no-brainer.

 

Why pay $300k upfront when you know at the end of the day it will be zero value when the lease expires. Put the 300k to better use.

 

Since you are already renting just continue to do so or look for a better investment. Don't buy just because its cheap.

[SuPerBoRed]

iirc... only 3 areas have this type of houses...

 

geylang, sembawang.and bedok

 

latter 2 location sound good deal... if its the first... dont bother la

 

ps.... im guessing you are a malaysian working near woodlands area ya?

Edited July 7, 2015 by SuPerBoRed

[Hamburger]

I think its a no-brainer.

 

Why pay $300k upfront when you know at the end of the day it will be zero value when the lease expires. Put the 300k to better use.

 

Since you are already renting just continue to do so or look for a better investment. Don't buy just because its cheap.

The appreciation is limited and future buyers in future are also restrained by the 0 loan tenure.

Not for me if its my choice.

[Throttle2]

The appreciation is limited and future buyers in future are also restrained by the 0 loan tenure.

Not for me if its my choice.

Buying such property is not for appreciation.

Its like a car , an expense.

 

If its cheap enough to expense off, then its ok.

Treat it as long term rent.

[Showster]

Agree with T2. But generally depends on the TS age and the horizon in view as well.

 

Many people, in trying to avoid the expense (depreciation), ends up incurring more expenses, or loses in opportunity costs foregone instead. The difficult part is actually in figuring out what happens to the money that is not spent (the amount that is saved and reinvested).

 

Assuming he takes up option 1, after factoring in possible renovation, the depreciation of about 15K annually to live in a landed space appears quite feasible. However, I am also tempted to ask why not consider resale HDBs as the first property (unless can't meet criteria) with easily 80-90 years lease and above. Note that if buying a house with 25 years lease, you are unlikely to be able to use CPF and must most likely use full cash.

 

https://mycpf.cpf.gov.sg/Members/Schemes/schemes/housing/private-properties-scheme

 

If you have 300K in CPF plus cash, it is roughly enough to buy many 3-rm HDBs here. So do consider carefully the fate of your CPF for first property.

 

Private condo based on loan, must see your appetite for risk and whether having facilities is important or useful for you, as well as what you intend to do with it over the long term. The days of huge gains are likely over, and nobody knows how long it takes to tide over to the next cycle. Worst case projection for the next three years have to be factored in. Over a longer time horizon (definitely over 10 years), based on history of housing price movements and long term strategies of SG, I believe (not guaranteed) that prices will continue to grow, but there are various complications like rental situations and interest rates that you have to consider once you are in.

 

Ultimately, it is a highly individualised call you have to make. Nobody knows your situation better than yourself. Have fun and best of luck!

 

 

Buying such property is not for appreciation.
Its like a car , an expense.

If its cheap enough to expense off, then its ok.
Treat it as long term rent.

 

[dinotune]

Really appreciate the inputs guys! Very helpful.

 

T2, I like your viewpoint using the car analogy.

In fact my skewing towards landed is also partly due to my car interest. Having your loved car parked at the porch area and able to pamper it anytime (wash, wax, detailing) and have my kid wash my 18" rims since he has the right height and once done spray him with water until the wife grab away and dry off the kid! Then I'll grab a cup of hot tea, sipping while circling round and admire newly clean buddy with the microfibre cloth on one hand and the other hand with the the tea already turn cold.

 

Sorry gotta stop on car!

 

Back to Property, under the 3 scenarios below, #1 is most certain.

1) Revert to the government without compensation

2) Given an option to either revert to government or pay for renewal

3) Automatically renewed with a cost (like it or not) and no option to return to government

 

In the remote chance of getting lease renewed, what's your guess* on the renewal fee/cost? 100% of prevailing market price?

 

* I use guess since I'm guessing none of current Singapore leasehold cross 100 years yet, I may be wrong.

 

 

Regards,

Dino

[Volvobrick]

Sorry to tag on condo thread for my question related to leasehold landed. I wished to start a new thread but couldn't as I'm new here.

 

I recently got an offer for a single-storey leasehold landed property at a price of $300k. But the remaining lease is only 25 years. The historical market price for similar property I found online (sometime Oct 2014) was about $550k. Only thing is I have to pay cash.

 

2 scenarios that run through my mind:

 

a) $300k for 25 year. Say I fork out $25k to touch up, total is $325k. That work out to be only $1.1k per month, which is even cheaper than renting a whole unit either HDB or condo. That seems not bad.

 

b) For $300k, I can pay 20% downpayment for a $950k private condo and after legal fees, stamping fees etc still have maybe $10-20k left.

 

However, I was made to know leasehold once expired the government will take back without compensation and the owner (become tenant then) will have to find alternative premise at own accord.

 

Honestly, I skew towards landed, hence my question really.

 

I like to ask folks here that would you even bother to put in your time to consider this offer because it has so little life left that makes it so unattractive? Would it be a waste of money in such a case?

 

Welcome your thoughts and comments.

 

Thank you!

 

 

Regards,

Dino

 

This is a very interesting question. If no emotions involved, you should analyse using Net Present Value of the cash flow. I did a simple model to compare the 2 options just out of curiosity:

 

Landed with 25 years left, assuming 250k up front and 10k, 12k, 14k, 16k repairs every 5 years. At long term 4% discount(interest) rate, you will be negative 270K NPV.

 

Condo - major factor is how much you think the condo will be worth 25 years down the road.

Assuming 20% down payment, 48K instalment per year for 25 year loan at 4% long term rate, the NPVs would be:

 

selling price in 25 years NPV

1.5M negative 362K

1.9M negative 218K

950K negative 561K

1.7M negative 272K

 

So technically you will be better off buying the condo if you think it wil be worth at least 1.7M 25 years from now!

 

Assuming property taxes, condo maintenance (3-4K a year) and cash flow no issues! And do note they are all NEGATIVE NPV, unless you sells the condo for more than 2.5M!

 

Good luck hunting! Best option is to bunk in at parents' place.....

[Showster]

One difference is 25 years later a fully paid condo with 70 years lease left versus expired landed. And also likely need a replacement 25 years later since he sounds very young. So get another property with 25 years lease then?

 

 

This is a very interesting question. If no emotions involved, you should analyse using Net Present Value of the cash flow. I did a simple model to compare the 2 options just out of curiosity:

 

Landed with 25 years left, assuming 250k up front and 10k, 12k, 14k, 16k repairs every 5 years. At long term 4% discount(interest) rate, you will be negative 270K NPV.

 

Condo - major factor is how much you think the condo will be worth 25 years down the road.

Assuming 20% down payment, 48K instalment per year for 25 year loan at 4% long term rate, the NPVs would be:

 

selling price in 25 years NPV

1.5M negative 362K

1.9M negative 218K

950K negative 561K

1.7M negative 272K

 

So technically you will be better off buying the condo if you think it wil be worth at least 1.7M 25 years from now!

 

Assuming property taxes, condo maintenance (3-4K a year) and cash flow no issues! And do note they are all NEGATIVE NPV, unless you sells the condo for more than 2.5M!

 

Good luck hunting! Best option is to bunk in at parents' place.....

 

[Passat57]

i think if the location and condition of the place is acceptable, and with 3 bedrooms, I will buy. Even if I rent it out for $2K/month, I still make a decent sum for 25 years. Some companies may be able to squeeze 10 or 20 foreign workers in it.

Edited July 7, 2015 by Passat57