Straits Times: Sat, May 14
IT MIGHT seem like a long time, but 60 years can be a worryingly short time for a property lease.
The 60-year mark is a key milestone for private properties: go under that, and values often depreciate quicker as there are fewer interested buyers and banks can be reluctant to lend.
Owners of ageing properties, it seems, have little choice as the clock ticks on, other than to watch their homes fall in value or try to offload their homes in a collective sale.
Actually, things are not quite that bad. Banks can be flexible with mortgages on older homes, while the Central Provident Fund (CPF) can also accommodate buyers eyeing mature properties.
The plight of owners of older properties made headlines last month when the Singapore Land Authority (SLA) refused to grant The Arcadia condo a lease top-up.
The decision came despite The Arcadia obtaining 100 per cent support from owners, who also agreed to foot the bill if permission was given to top up the project's lease to 99 years. There are 67 years left on the lease of the 164-unit condo.
The SLA decision has turned the spotlight on other ageing condos such as Hollandswood Court, One Tree Hill Mansions and Lutheran Towers. The Peace Centre and Peace Mansions complex, which has 58 years left on its lease, has turned to the collective sale market, but others like Hillcrest Arcadia have resisted that option.
While collective sales have been the main way for owners to unlock the value of their homes, experts say there are other ways to stem the slide in value.
Cushman & Wakefield's senior manager of Asia-Pacific research, Mr Ong Kah Seng, said owners who want to stay put should keep the property in good condition. This is especially so if it has historic features that enhance its value and make it a candidate for preservation, he added.
Even if a lease top-up request is denied, there are still resale opportunities if the development is well maintained and the infrastructure and amenities are enhanced. 'Owners of some aged prime developments may be able to expect better buying interest from purchasers who are cash-rich and do not require home loans.'
Mr Colin Tan, research and consultancy director at real estate firm Chesterton Suntec International, said owner-occupiers are often less concerned about leases.
'When the green movement gets stronger, we might also see fewer en blocs. Instead of tearing down older buildings, which is a blatant wastage, they can be refurbished like in other countries,' he added.
Banks can help out as well. While they are reluctant to finance loans for older properties, they told The Straits Times that other factors, such as location, the tenor of the loan and the borrower's profile, are also taken into consideration.
Ms Lui Su Kian, DBS managing director and head of deposits and secured lending, said that while most banks do not finance homes with fewer than 30 years left on the lease, applications are reviewed on a case-by-case basis.
OCBC Bank head of consumer secured lending Phang Lah Wah added that banks generally reduce the loan tenor or quantum of financing if the remaining lease falls below 40 years on loan maturity.
The CPF has specific policies regarding older homes. In 2005, it reduced the minimum outstanding lease of qualifying homes to 30 years from 60 years for Singaporeans and permanent residents looking to buy a private home.
But the remaining lease must be long enough so that the youngest owner using CPF savings to buy the property can live in the home until he or she turns 80. The buyer will also be subject to lower CPF withdrawal limits. So, a 45-year-old buyer has to buy a home that has at least 35 years left on the lease.