Developers prefer leasehold properties in current en bloc boom

Keshia Faculin30 Oct 2017

The current en bloc frenzy has bucked the trend as developers favoured leasehold properties over freehold ones, reported the Business Times.

A Cushman & Wakefield study showed that the proportion of leasehold residential properties sold en bloc – by number of units – has risen to 92 percent in 2016 and 83 percent so far this year.

The figures mark a shift from the 2008 to 2013 en bloc boom when almost all residential units sold en bloc were freehold.

Freehold properties also accounted for over 70 percent of the total deals during the 2005 to 2007 en bloc fever, said Christine Li, Cushman & Wakefield’s research director.

Industry players have attributed the swing to the strong demand for mass-market private homes and lack of supply from government land sales (GLS).

Developers also prefer bigger leasehold sites as they could achieve greater economies of scale and eventually generate substantial revenue, said Ong Teck Hui, national director for research and consultancy at JLL.

Aside from being large, former HUDC estates are also relatively cheaper in terms of land rate on a per square foot per plot ratio basis.

This comes as most of the owners of HUDC estates are in their 60s who want to cash out of their properties, which have depleting leases, said Tan Hong Boon, regional director of investments at JLL.

Freehold properties’ 10 to 15 percent price premium over leasehold properties also proved to be a stumbling block to quantum-sensitive investors and buyers, given that the total debt servicing ratio (TDSR) remains in place, added Li.

In concurring, Ian Loh, head of investment and capital markets at Knight Frank, said: “Affordability has got a big part to play in a product that can sell in Singapore’s highly regulated real estate market.”


This article was edited by Keshia Faculin.


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