Tag Archives: Private Residential Property

Buying property as a corporate entity

It is not just individuals and families who buy homes in Singapore. Sometimes, a corporate entity may purchase a residential property for investment purposes. If you and your business partners are considering doing so, here’s what you need to know.

1) You can buy only private property

HDB flats are meant for owner-occupiers (especially families, married couples and senior citizens), HDB tenants and tenants of non-corporate landlords. The HDB does not permit corporate entities to purchase its flats for investment purposes. Condominiums and landed homes, however are legally permitted for corporate entities to purchase.

2) Consensus is compulsory

The corporate entity involved in the purchase should engage a lawyer to draw up a contract which is mutually agreed upon by all buying parties. All parties must then sign the contract and transfer documents individually before the sale of the property can proceed. Details like each party’s share of ownership in the property and the purpose of the property must be determined and stated in the
contract. If the purpose of the purchase is to lease the property, all parties must also sign the tenancy agreement to lease it.

3) Your share of ownership of the property is not necessarily equivalent to your share in the company

It all depends on the contract, whose terms must be discussed thoroughly among all involved parties. You may have a straightforward situation whereby your share in the company reflects your share of ownership of the property, or it could be that your contractual terms are more complex than that. It is vital to determine amongst all relevant parties what works best before drawing up a
contract and signing it. However, a private limited company is seen as a separate legal entity from its shareholders, and the extent of each shareholder’s liability is limited to his stake in the company.

4) Death has no power here

Unlike in a tenancy-in-common or joint tenancy agreement, the death of any of the owners of a residential property held by a corporate entity will not affect the company, property-wise. If a shareholder wants to relinquish his ownership, this is subject to the company’s Memorandum & Articles of Association (M&AA). He can then sell his shares to either his fellow shareholders or to a third party.

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Condo rents falling, but leasing volume up

Average rents in Singapore fell in the first quarter of 2015 despite an increase in leasing activity, revealed CBRE and reported in the media.

In its report, CBRE said lease commencements rose 3.1 percent quarter-on-quarter to 15,229 in Q1 2015. On an annual basis, it was 13.5 percent higher than during the same period last year.

The rise was attributed to a flight to quality as tenants from older developments or HDB flats seized the opportunity to move into newly constructed condominiums at lower rents.

New permanent residents (PRs) could have also contributed to the increase as they rented homes while waiting to fulfill the mandatory three years prior to acquiring resale HDB flats.

However, the increase in rental volume failed to push up rents as it fell across all regions.

The rental index for the Core Central Region (CCR) registered the steepest decline of 1.9 percent quarter-on-quarter, followed by the Outside Central Region (OCR) which saw a drop of 1.8 percent. The Rest of Central Region (RCR) recorded the smallest drop of 1.6 percent.

Joseph Tan, executive director of residential at CBRE, explained that the sharper decline within the CCR and OCR was primarily due to an increased supply of rental properties.

He noted that the CCR, “which traditionally has the highest supply of rental stock, was hit by the shrinking budget of expatriates and the availability of newer accommodation at more attractive rents.”

Meanwhile, an unprecedented number of new condos were built in the OCR.

In Q1 2015, 2,976 new private homes were built which includes those within the OCR like Woodhaven with 337 units and Hedges Park with 501 units.

Tan revealed that most of these apartments were bought for investment and not for occupation by owners.

“Under the present lull market, these owners were more prepared to secure tenants at lower rents rather than leave them vacant,” he said.

As a result, the occupancy rate rose to 92.8 percent, while the number of vacant units fell 7.2 percent.

CBRE said average rent for luxury properties dipped two percent year-on-year to $4.95 psf per month. Prime properties saw rents decline 4.2 percent year-on-year to $4.55 psf per month, while rents for other properties fell six percent to $3.15 psf per month.

Looking ahead, the real estate firm expects leasing volume for the entire year to fall by five to 10 percent from last year, while overall rents are expected to drop by five to seven percent, given the mounting pressure from the growing supply of properties.

CBRE expects the number of new homes completed to reach 22,000 units by end-2015, or up 10.4 percent from 19,921 last year.