Geylang Plot action a Wake Up Call for Property Owners
Thousands of condominium or apartment unit owners in this city, for example, may find themselves with leases of less than 50 years in the next decade, making these assets extremely unattractive based on existing buyer attitudes.
The Singapore Land Authority (SLA) affirmed on Tuesday that, as a general policy, no compensation will be paid to the owners of the private terrace houses that is located at Geylang Lorong 3 — a 2ha plot of land that will become the first residential plot to be returned to the state after its lease expires in 2020. Aside from Geylang Lorong 3, the state has granted no additional 60-year private residential leases.
According to the SLA, the next big private housing estate impacted by lease expiration will be Fuyong Estate in 2046.
There are 13 condos and mixed-use complexes in Singapore, constructed between 1972 and 1977, with leases that will expire in fewer than 60 years. In other words, by 2027, they will have fewer than 50 years remaining on their lease – the time at which private property prices in general would collapse, according to property experts.
According to Urban Redevelopment Authority data compiled by associate professor Sing Tien Foo from the Department of Real Estate at the National University of Singapore School of Design and Architecture, there are 48 such 99-year lease tenure developments on the island that are more than 30 years old, the youngest of which Cardiff Court and Katong Park Towers were built in 1987.
The 288-unit People’s Park Complex (constructed in 1972), as well as the 752-unit Neptune Court and the 280-unit Pearl Bank Apartment (finished in 1975 and 1976, respectively), are among the oldest projects.
As remaining tenures shorten, property owners must reduce their asking prices, and purchasers will find it more difficult to get bank loans. According to the experts, the scenario in which a surplus of private residential units with relatively short leases would come into the market in the future years is unusual for a young nation like Singapore.
While Singapore is also facing a situation in which public flat leases will begin to expire, the impact on the private residential market may be more acute, given that many people view private property purchases as an investment, and prospective buyers are less interested in units with low resale value.
Owners of private houses with expiring leases have few options: either rent out the apartments or sell at a loss. A collective sale is the ideal situation, although such a chance may not always be accessible. Pearl Bank, for example, attempted three en bloc sales in 2007, 2008, and 2011, all of which failed.
Investment Opportunities at Geylang
The NoMa condominium is not the only Geylang new condo that is built that was formerly occupied by landed estates. Since its launched, it has sold more than 95 percent of its units, with just one remaining apartment of four bedrooms.
A residential development on the land is permitted with a plot ratio of 2.8.
As of Friday afternoon, 46 of the 50 available apartments had been sold. A one-bedroom apartment costs about $700,000, while a four-bedroom home costs over $2 million.
According to Macly Group, which bills itself as a pioneer for shoebox flats, the strong demand is unsurprising given that NoMa is a freehold building with an excellent location on Guillemard Road.
Guillemard Edge and Cassia Edge are two of the developer’s projects in Geylang.
When finished in 2023, the condo will be located on the outskirts of Geylang’s red-light district and will contain one- to four-bedroom units.
Another two developments, Mori and Gems Ville, are scheduled to open in the second half of 2021 and early 2022, respectively.
In recent years, a number of such sites have been purchased by real estate developers for the purpose of constructing boutique-style condominiums.
The freehold La Brisa condominium, for example, is located nearby on Lorong 28 Geylang and contains 84 apartments.
They said that as a result of this move, real estate developers may target additional freehold landed homes in the future to construct higher flats with more units.
Some of the landed properties in the area may therefore demand a greater price.