With the Singapore Land Authority on Tuesday (20 June) affirming the policy that no compensation will be given to owners of residential properties upon lease expiry, property experts called on private home buyers and sellers to be realistic with their expectations, reported Today Online.
This comes as thousands of apartment and condominium owners will soon find their properties become undesirable over the coming decade due to shorter leases of not more than 50 years.
Notably, 13 condominiums and mixed-used developments in Singapore will have leases of not more than 50 years by 2027 – or the point when values of the property would generally plummet, said the experts.
Urban Redevelopment Authority data compiled by National University of Singapore School of Design and Environment, Department of Real Estate associate professor Sing Tien Foo showed there are currently 48 developments across the island that are more than 30 years old.
Shorter leases leave private property owners with limited options – either to sell at a loss or rent out the units.
Given that Singapore is a land-scarce country, the experts believe that there will always be takers for these type of properties, much like a second-hand cars with only a few years left on their Certificates of Entitlement (COEs) – sellers will only have to be realistic with their asking prices.
“There will be a segment of buyers who don’t have a large sum of money upfront, or don’t wish to take up a big mortgage. And paying S$300,000 for a place with 10 years left, for instance, could be a viable option.”
“There is no investment potential … (but) it is just like paying for COE, which runs out after 10 years, and that’s it … or buying cars with just two to three years left, but you’re able to get it cheap.”
In concurring, Suntec Real Estate Consultants director of research and consultancy Colin Tan said sellers with realistic expectations will be able to move their properties, no matter how short the lease.
Another viable option for these owners is to rent out their homes, said SingCapital chief executive Alfred Chia. “As long as the properties are of good quality and location, homeowners in Singapore will always be able to rent them out.”
Meanwhile, property buyers will have to adjust their mindset and consider property acquisition as less of an investment.
“Property value in Singapore … will not appreciate as much as it did in the past. Homeowners should aim to pay off their housing loans before they are 60 or 65 years old,” said Chia.
“Then, they can focus on building their retirement funds, and even have options such as renting out their rooms, or downsizing (their homes).”
This article was edited by Denise Djong.