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AsiaOne
4 days ago
- Business
- AsiaOne
Why These Buyers Chose Older Leasehold Condos—And Have No Regrets, Money News
"Old" and "leasehold" are Singaporeans' least favourite combination of words. We ourselves have seen that, despite numerous presentations on how leasehold can outdo freehold, there's just a strong reluctance to accept it: on some visceral level, many like to feel that they're paying for 25+ years of their lives for something permanent. So why did three of these homeowners we speak to decide to purchase not only leasehold condos, but older leasehold condos? Here are their stories: 1. Affordability issues when both spouses are self-employed CH is Malaysian but works in Singapore, and his wife is a Singaporean; he's currently awaiting a change in his citizenship status. The couple's main worry, when choosing their property, was twofold: First, qualifying for a loan was tougher for both of them. Banks apply a haircut of 30 per cent to variable sources of income, for Total Debt Servicing Ratio (TDSR) purposes. The TDSR, in turn, limits home loan repayments to 55 per cent of monthly income, inclusive of other debts. Because CH and his wife are both self-employed, their maximum loan amount was cut by a third; and this required them to put down a larger down payment. The second reason was the fear of losing clients, late-paying clients, and other cash flow issues faced by the self-employed. CH says that: "If one of us has a salary it's not so bad, but when it's both of us, it's possible both of us go through a dry spell at the same time." The affordability concern was such that, for a time, the couple even considered buying a condo in Malaysia instead. But this idea was eventually scrapped, as the couples' clients were all Singaporeans, and even CH's father happens to live in Singapore. The two had a difficult time finding a unit large enough, but at the same time cheap enough to meet tighter affordability limits. CH says they viewed five or six different projects, but were unimpressed until they found their unit on the East Coast. While they don't want to divulge the name, the couple says the condo dates back to 1986, and is close to East Coast Beach (in fact they can walk there). CH says: "At first we were surprised the agent wanted to bring up this condo, because it was leasehold and quite old. Also there are over 1,000 units, which we had specified we didn't prefer as we prefer privacy. But when we visited the view of the sea, along with the area being very private despite the condo's size, won us over. Furthermore the unit was around 937 sq ft, and it was around $1,279 psf. Our agent warned us that we were unlikely to find such a large unit with a sea view at that price, even though it was leasehold. After we tossed and turned for about a week, we couldn't get it out of our heads. So we went ahead with it, even though it was an older leasehold." The total cost, according to the couple, was under $1.2 million, leaving them more than sufficient funds to renovate and furnish without a loan. Even better, CH says it became possible to place the condo entirely under his wife's name, due to the lower cost. This leaves him with the possibility of buying another property, if it comes up in the future. Still, for the long term, CH says he's not really worried: 60 years is a long remaining lease for a couple already in their early forties. The two have no long-term plans to upgrade or move, and they may hold the condo to the end. 2. The privilege of living in the heart of Chinatown, until the en-bloc came SY is one of the few Singaporeans who has no qualms about older leasehold properties, because he has owned one and come out on top from it. When he was in his mid-thirties, SY and his spouse purchased a unit at Pearl Bank Apartment in Chinatown — today redeveloped as One Pearl Bank. At the time he made his purchase, he was given numerous warnings by his family and friends not to go ahead. The original Pearl Bank Apartment was built back in 1976; and by the time SY moved in (sometime in the 1990s) it already had a bad reputation: it was known that some vice workers rented out units there, and some of the common areas were not in good condition. SY says that: "We chose to stay because it was close to the temple which we frequent, so it was very convenient. Any time, day or night, there was all kinds of wonderful food to eat. I could just cross one road to buy anything I wanted, or to reach the Chinatown MRT. " When Pearl Bank was bought by CapitaLand in 2018, SY's decision was proven to be a good one. While he doesn't want to disclose the figures, SY does point out that - compared to two of his brothers and a sister who bought newer properties — his was the one that saw the best gains. (We did our own snooping around though: CapitaLand purchased Pearl Bank Apartments for $728 million, and the various units — which ranged from 1,323 sq ft to 3,339 sq ft, received between $1.8 million to $4.9 million for the sale.) SY even briefly considered buying a unit in the redeveloped One Pearl Bank, but unfortunately his living situation had changed, and he needed to be closer to his children. Nonetheless, he considers it one of his best decisions; and his sale proceeds more than covered the cost of his current resale condo. 3. Needing the size for a production studio as well as a home GT works in product design and prototyping, and his clients have ranged from toy companies to packaging firms. As he runs his own business, he wanted a home that was also versatile enough to act as his office and his showroom: "This is practical for me as I also meet clients in my home, and I have a gallery to show them my process and end-results," GT says. "So I made my needs plain to my agent from day one, and it was agreed we would probably be looking at leasehold, as I needed a lot of space but the budget was very fixed." When the agent showed him a 1,180 plus sq ft unit in Lakeshore, GT said he felt something "jump" in his mind. Despite viewing three other projects, he said: "I didn't find the others appealing because of cost, maintenance, or a layout that would take too much work to reno." For the Lakeshore unit, GT already had a clear idea in his mind: he would merge two of the bedrooms into a bedroom or office, and use the study space as a separate gallery from the living room, thus separating his work by theme. "When I already have such a strong impression I guess it's hard to let go," GT says, "And what sealed the deal was the price, which was exactly within budget." GT says the unit was about $1.6 million, which would be a minimal stretch after the sale of his previous two-bedder. GT says the lease is 99-years from 2002, which he doesn't feel is very old at all (most Singaporeans feel a condo is getting old when it nears 25). GT is open to the idea of upgrading again to a larger unit — but for now, he enjoys living so close to the convenience of Jurong East. [[nid:718256]] This article was first published in Stackedhomes.
AsiaOne
24-05-2025
- Business
- AsiaOne
Looking to buy Singapore property in 2025? Here's what's different (and what could catch you off guard), Money News
The 2025 property market is going to be unique, for several reasons: a pivot to the Core Central Region (CCR), a tight supply of resale homes, and an uncertain economy are at the top of these. Besides this, we'll also see the outcome of cooling measures implemented over many years: will a 60 per cent Additional Buyers Stamp Duty (ABSD) prevent affluent foreigners from rushing into Singapore's "safe haven" property market, as has occurred in the past? Whatever the outcome, one thing is clear — the average homebuyer in 2025 may see fewer options in the near term: 1. Ageing and property replacement costs This is really a combination of two factors, and it stems from the effects of age and the Total Debt Servicing Ratio (TDSR). The TDSR restricts total monthly loan repayments to 55 per cent of the borrowers' income, inclusive of other debt obligations. So if they have a combined income of $12,000 a month, this restricts them to a total loan repayment of $6,600 (assuming they have no other loans). There is another element to this, though: the loan tenure. The longer the loan tenure, the lower the monthly repayments — and hence the more likely it is that a borrower will pass the TDSR. Conversely, a shorter loan tenure means higher monthly repayments, and a higher risk of failing to meet the TDSR. Keep in mind that if the loan tenure exceeds the retirement age of 65, the maximum loan quantum falls to 55 per cent. As a 45 per cent down payment is usually not viable, this leaves borrowers having to settle for a shorter loan tenure (e.g., an upgrader aged 50 years will probably have to settle for a 15-year loan tenure). Let's consider this scenario: You and your spouse buy your first home, an HDB flat, at the age of 35. Fifteen years later, at age 50, you decide to upgrade to a private condo. Let's say your intended new home costs $2.1 million. At this stage, you earn a combined monthly income of $12,000. As mentioned above, this gives you a TDSR limit of $6,600. Now here's the issue: because you're already 50 years old, the maximum loan tenure you can take is just 15 years (as they cannot afford a 45 per cent down payment). At a four per cent floor rate for the mortgage (required by MAS when assessing loan eligibility), a 15-year loan with monthly repayments of $6,600 can support a maximum loan of only around $878,000. (Note: This maximum loan amount is not exact, and may vary slightly depending on the methods of the bank you go to) Suppose you sell their flat for $600,000, and we assume it's fully paid off (no more outstanding flat loan or other costs). That gives you a total budget of $1.478 million (i.e., total $878,000 loan + $600,000 from sale proceeds). But with your dream condo costing $2.1 million, you still face a shortfall of $622,000; money they must pay in cash or from their CPF savings. Our couple could possibly have made it when they were younger, but it's less viable for them now. Those who can still upgrade at a later age would likely need (1) a huge windfall, like selling their flat for $1 million or more, (2) above-average income, or (3) huge savings for bigger down payments; possibly a combination of all three. Lacking these, our couple may decide to simply not upgrade and hold on to their existing flat. Given Singapore's ageing demographic, this may be a factor that constrains the number of resale units entering the market. 2. Most upcoming new launches are in less family-friendly areas The next batch of new launches will mainly be in the Core Central Region (CCR). Around 14 of the roughly 22 remaining launches are in this region; and already we've seen some projects like Aurea, One Marina Gardens, The Collective at One Sophia, and so forth. While these locations are prestigious, they're typically associated with offices or sometimes high-end malls and entertainment; less so with family-friendly heartland living. One Marina Gardens, for instance, doesn't have any primary schools within one kilometre. According to realtors we've spoken to, this is one of the most critical considerations among buyers. It's also been said, by buyers on the ground, that prime-area malls are not as superior to heartland malls these days. Barring some luxury brands (which are not everyday needs anyway), everything you can find in a CCR mall can probably also be found in Tampines Central, Waterway Point, Clementi Mall, etc. Decentralisation has eroded the importance of the CCR, while other amenities, such as coffee shops or food and market centres, may better serve homeowners in an everyday capacity. While the government does intend to make CCR locations more balanced, it's not as if they can build a lot of schools or markets there overnight. But unless you go for resale, where there are few sellers, there's not much choice in the near term. The CCR is where the new launches are going to be. 3. On the resale HDB front, time is needed for more supply to kick in The number of flats reaching their Minimum Occupancy Period (MOP) this year is phenomenally low — about 6,974 units in 2025, as opposed to 30,920 units in 2022. While HDB is ramping up construction (an intended 50,000 new flats released between 2025 to 2027), this doesn't provide immediate relief. Those flats still have to be built and lived in for five more years before they join the resale market. With fewer people willing to let go of their flat right now (see point 1), it is unsurprising that buyers feel constrained. For those who don't have the option to just sigh and join the BTO queue, 2025 is shaping up to be a rather frustrating year. What can buyers do about all these? It's time to recognise that, in the face of these constraints, an ideal property may not be possible — it's now a matter of trade-offs. You may need to settle for a smaller two-bedder instead of a three-bedder, for example, if age prevents you from taking a bigger loan. There may also have to be a compromise on location. We saw a good example of this way back in 2018, when Parc Esta was launched: part of the reason for brisk sales was its one-stop proximity to Paya Lebar Quarter (PLQ). In the same way, you might want to consider a project that's much cheaper, despite being just a few minutes away by bus, MRT, etc. For those looking at resale options, a final consideration is not to take too long. Resale buyers don't have much of an advantage in this market; and waiting even a week or two can result in having to come back with a much higher offer. [[nid:717982]] This article was first published in Stackedhomes.
