Buying a 99-year landed property

Generally, the value of 99-year leasehold properties would decline as their balance leasehold tenures shrink. However, the median price of

99-year terrace houses in the first nine months of this year rose to a record S$1,214 per square foot (PSF) on land area, as an analysis by List Sothe­ by’s International Realty (List SIR) using URA Realis data shows.

The latest median price reflects a 1.53 per cent increase from S$1.053 PSF for  2021, up by 1.32 per cent from 2020.

The newest price is above the pre-Covid median price of S$1.007 psf in 2019.

The median price gap between 99-year and freehold terrace houses has risen to $715 psf in the first nine months of this year. As this price gap widens, 99-year terrace houses have become an attractive option. In particular, Intermedi­ate terrace houses are the entry-level for con­dominium and HOB(Housing Board►dwellers looking to upgrade to landed property. The Covid outbreak accentu­ated the need for more extensive living space, with work-from-home made mandatory for most office workers. Students were also required to do home·based learning.

Budget-Friendly Vs Similar-Sized Freehold ones

• More livable space spread across in 3 and a half storeys compared to Condo.
• For multi-generational families who need a larger living space than an apartment or condo unit could provide. Still, their budget may be too small to buy a freehold landed house.
• Growing families prefer much larger areas than con­dominiums can provide and see value for money in getting a much bigger home at a rela­tively affordable price.
• Attractive especially for young professionals getting their first landed.

With or without a pandemic, there has al­ways been a segment of property buyers drawn to 99-year terrace houses.

These group of buyers would probably prioritise the quality of life in terms of liveable space over investment considerations

Compared with freehold terrace houses, 99-year terrace houses are priced more attractively to meet functional needs. For example. If a buyer needs a home with four or five bedrooms,

“For example, Buying a 99-year landed property  terrace house ln Park Villas in the Hougang ar­ea with a floor area of 2,800 sq ft could cost about SS2.3 million, but the same value can only fetch a unit of below 1,600sq ft in nearby The Florence Residences Condo.”

Some buyers are attracted to the low cost of psf of floor area for such landed homes.”(Park Villas is a conventional landed project on a site with a 99-year leasehold tenure starting May, 1994.

He compares a 99-year leasehold terrace house with a 99-year condo and a free­ hold terrace house; a 99-year terrace house is still more affordable,

Mindful if the balance lease on the site can meet one’s needs

For retirees, a shorter balance lease of 30 or 40 years could meet their needs till age 95.

But for a young family, it is suggested to look for a leasehold property with  60 years balance lease.

Financial complications and procedures

A short-balance lease does have implications for funding the property purchase.

• Buyers can’t use CPF savings to buy a private residen­tial property if it is land is left with a remaining lease of 20 years or less at the time of purchase.

• In excess of 20 years of bal­ance leases, CPF savings that can be used (for purchase).

• Median age (Using IWAA Calculation) of the owner and youngest owner in the case of a joint purchase.

• The Property should outlive the Youngest owner till age 95, allowing them to age in place.

If this condition is met:

the owner(s) can use their CPF Ordinary Account (OA) savings for up to 100 per cent of the property purchase price or the property valuation price at the time of purchase, whichever is lower.

If this condition is met:

the owner(s) can still use their CPF OA savings, but at a pro-rated amount. Potential buyers may ascertain the amount of CPF OA savings one can operate utilising a housing usage calculator on the CPF website.

For the banks to grant a housing loan for private residential property, the property should have a tenure of at least 30 years at loan maturity.

The maximum tenure for the housing loan may be reduced for older leases.­

Lease Decay for 99-year lease

There are other issues for a property with a leasehold tenure that is running down.

With owners buying a 99-year landed property, it will be challenging to find buyers as the lease run downs. Due to economic downturns, pric­es could deteriorate faster than freehold ones.

Similarly, there is still a strong preference for freehold properties among landed homebuyers, so it may be more challenging to sell a 99-year leasehold land­ed property, especially when the market is weak or the leasehold has depreciated substantially.

The bright side of 99-year landed property terrace houses

• The rental yield would also be higher, com­pared with that for a freehold property,
• Should the owners eventually decide to lease it out due to the lower purchase price or outlay.
• New pool of buyers or users could emerge for retirement.

An example would be retirees who have a shorter time frame and are looking for ample living space to house their multi­ generation family for a sometime-but not long-term basis without overstretching their finances.

Short-tenured terrace houses can also make ideal rental properties if the owners (or buyers) are willing to spruce them up.

Another finding from the analysis is that buyers with HDB addresses make up a higher proportion of those who picked up 99-year ter­ race houses than those who bought freehold/999-year leasehold terrace houses.

Such a trend may indicate price resistance set­ting in the prediction that prices for 99-year terrace houses could remain at cur­rent levels for the rest of this year.

Prior to this, there is the cooling measures to could be addressed to this.

At buycondo.sg, we have help home Owners and Home Buyers to Secure 99 year lease tenure landed properties.

They Emerged as a Happy Family living in a spacious property.