Tag Archives: Far East Organization

Developers offering fewer indirect discounts

Once popular with private homebuyers, indirect discounts like furniture vouchers and cash rebates have become less prevalent, reported The Business Times.

In fact, only three percent of some 3,850 non-landed private homes sold by developers since 25 May had indirect discounts, with an average discount of 1.7 percent of the transacted price. The units were from 18 of the 132 projects that saw sales since 25 May, according to an analysis of developers’ new sales data.

Notably, legislative amendments requiring developers to submit detailed transaction data to the Controller of Housing every week took effect on 25 May this year. The said data is then published by the Urban Redevelopment Authority (URA).

Aside from the transacted prices of units, developers are also required to declare the value of benefits given to buyers, such as rental guarantees, cash rebates, furniture vouchers, and the absorption of legal fees or stamp duties, which would otherwise conceal the actual value of the units sold.

“There was a season when discounts, rebates and other perks were dangled as carrots to attract buyers. However, these may be relatively passé today,” said Tan Tee Khoon, managing director of KF Property Network, a Knight Frank subsidiary.

This is because developers may find it pointless to give out cash rebates now that such data has become public information, said Savills research head Alan Cheong., As such, developers who need to urgently clear their stock in order to meet the Additional Buyer’s Stamp Duty (ABSD) and Qualifying Certificate (QC) requirements are more likely to lower prices directly.

The QC rule requires developers to pay extension fees for condominium units sold within two years of the project’s completion. Since December 2011, housing developers were also required to develop residential sites acquired and sell all the units within five years to qualify for an ABSD remission on land cost.

Projects offering indirect discounts since May to qualify for the remission of ABSD include The Venue Residences, Jewel @ Buangkok, Pollen & Bleu and The Glades. Those unaffected by ABSD or QC include Keppel Land’s Corals at Keppel Bay, City Developments Ltd’s D’Nest and Coco Palms, and Far East Organization’s The Seawind.

Homes sold as leasehold tenures on freehold sites

Owners of The Shore Residences may be unaware that they are part of a small group to have bought units sold with leasehold tenures, though the developer owns a freehold land title.

The 408-unit condominium in Marine Parade got its temporary occupation permit in January.

Its developer Far East Organization in 2009 took the rare step of selling units with a 103-year lease even though the land is freehold – a scarce commodity in Singapore.

Experts say the move allows a developer to retain the freehold land for redevelopment later, rather than selling away the title.

Far East acquired the site of The Shore Residences through a collective sale of the former Rose Garden, which was freehold, for $169.8 million – or $423 per sq ft (psf) per plot ratio (ppr) – in August 2006.

The unusual approach to lease tenures is not the first such instance here, property consultants said, but it is not common.

Experts estimated that freehold homes could command a premium of about 15 to 20 per cent over similar leasehold units, so developers who sell such homes do not get the land’s full value. The units are more affordable, as a result.

And as younger buyers become more receptive to properties with shorter leases, these units are attractive because their lower prices mean a higher rental yield compared with freehold units.

But buying such a property could become thorny, noted Century 21 chief executive Ku Swee Yong, as any eventual en bloc sale requires the land owner’s consent. Even if the green light is given, he is not obliged to extend the tenure, and the fees required to do so would be at his discretion.

Such a development strategy is preferred by family-owned businesses, who are less concerned with delivering results to shareholders, as opposed to listed firms. They can possess freehold land through collective sales or inheritance.

“Developers which are not listed, including those which are family-controlled, would have more flexibility in adopting the practice of selling leasehold tenures while retaining a freehold reversionary interest,” said Mr Ong Teck Hui, national director of research and consultancy at Jones Lang LaSalle.

Far East – owned by the Ng family – for instance, has also developed the 103-year leasehold Greenwood Mews in Greenwood Avenue and Cabana in Sunrise Terrace, which are similar cases. The firm is believed to be the first to develop leasehold properties on freehold sites that it owns.

Freehold sites are a precious resource in land-scarce Singapore, so carving out shorter leases for sale would ensure that ownership of these “legacy parcels” is retained, noted Ms Chia Siew Chuin, director of research and advisory at Colliers International.

Similarly, the State holds land in trust for Singapore, and sells it on a 99-year lease to developers. This recycles land resources for future uses as the country evolves, added Ms Chia.

While there are no conclusive records on the number of leasehold properties on freehold land – or which was the first to be built – Knight Frank data showed that one such shophouse in 48 Arab Street started its 99-year lease as far back as March 1952.

Similar properties that have been in the spotlight include the 99-year leasehold Spring Grove condo in Grange Road, which sits on the former residence of the American ambassador. Sim Lian Group’s 99-year leasehold Rochelle at Newton in Keng Lee Road, which is on freehold land owned by the Chui Huay Lim Club, is a similar case.

Mr Lee Liat Yeang, partner at Rodyk & Davidson, noted that while there are no rules on how short a property’s tenure should be, developers sell homes at new launches with at least a 60-year lease to meet financing requirements. “In today’s context, where pricing determines successful take-up, a 99-year lease is universally accepted and provides an affordable entry price for buyers,” added Mr Donald Han, managing director of Chesterton Singapore.

Souce – STProperty