Monday, September 26, 2011

Are you living in a 99-year leasehold condo that's nearing 30-year old? (Part 1)

Racing against time - As more 99-year leasehold condo approach the 30-year mark, owners are increasingly looking at collective sale. The question is timing, given developers'weak appetite for lareg sites and the release of a slew of government land sites.

Last month, six owners of units at Chuan Park got together to conduct a poll to gauge fellow owners’ interest in pursuing a collective sale. The 452-unit condominium sits on a 99-year leasehold site and with the lease starting from 1980, this means it is already 31 years old.

One of the reasons given in favour of a collective sale in a letter circulated to the owners is that “it will be increasingly difficult for new buyers to secure a full loan and [use] their CPF to fund a purchase in our estate as our property ages. We will face a possible property-decay situation where our homes, however priced, would have a diminishing pool of buyers”.

The letter also cited the case of The Arcadia, which was reported in May to have failed in its attempt to top up its lease to 99 years without going through a collective sale. This was despite having obtained 100% consent from the owners of the 164-unit condo, who were even willing to foot the bill for the top-up if permission was granted.

Chuan Park’s land area is 402,995sqft and it currently has a plot ratio of 2.1, which means a new development with a maximum gross floor area (GFA) of 846,289.5sqft can be built on the site. It was also estimated that based on the current average market transaction price of $850psf and assuming a 40% premium, the collective-sale price would be around $1,200psf.

The sale price of $1,200psf was probably benchmarked against the average launch price achieved at The Scala, a 468-unit condo across the road from Chuan Park, says a source. Launched by developer Hong Leong Holdings at the end of July last year, the 99-year leasehold condo had 75% of its units snapped up by balloting at an average price of $1,150psf on the first day of its public preview.

The site is located next door to the Lorong Chuan MRT station and has a plot ratio of 2.8, which is higher than the plot ratio of 2.1 of existing condos in the neighbourhood such as Chuan Park, Chiltern Park and Springbloom.

According to sources, about half of the more than 100 respondents registered interest in a collective sale at Chuan Park. “If 25% of the owners based on the number of units, or 20% by share value, express interest in a collective sale, they can call for an EOGM and form a sales committee, which will be the first step in the collective-sale process,” says Ian Loh, associate director of investment at Knight Frank.

Chan Chee Keong, 68, is a retired Singaporean businessman who has lived in Chuan Park for 11 years. He is also chairman of the Management Corporation Strata Title (MCST) at Chuan Park. “As chairman of the MCST, I want to remain neutral and keep an open mind,” says Chan. “When residents approach me to advise them, I tell them this is something they have to decide for themselves; it’s a very personal decision. To be honest, when people ask you if you want to sell [your property], it’s very difficult to answer. Where is the tipping point? What is the price threshold?”

Chan adds, “A lot of people think money is the only consideration [for the owners], but it’s not true. The location is very convenient – it’s near the Serangoon Garden Market, the [Lorong Chuan] MRT station and, for those who drive, the CTE is nearby.”

Quite a few owners at Chuan Park moved into the condo recently after selling their landed homes in the Serangoon Gardens housing estate nearby. “Many adult children moved to the area to be near their parents,” says Chan. “So it doesn’t make sense for the parents to move.” Chan’s son, for instance, recently relocated his young family to within 1km of Chuan Park. Previously, he lived 10km away.

In any collective sale, residents tend to fall into two camps, observes Chan. He understands the position of those in favour of a collective sale. “Their view is that at the current all-time-high market price, it’s perhaps a good time to consider a collective sale, as years down the road, when the lease run low, prices could drop,” he says. “So, both sides have a valid argument.”

Watching the en-bloc attempt at Chuan Park closely are the owners of units at the neighbouring Chiltern Park, a 500-unit condo that was completed in 1995. The 99-year lease on the site starts from 1991, which means it’s in its 20th year.

PS Lee, a 60-year-old businessman, owns two units at Chiltern Park. One is a 1,259sqft, three-bedroom apartment on the ninth floor that he purchased four years ago at $760,000 ($604psf) and uses as his residence. The other is a 915sqft, two-bedroom apartment on the 10th floor that he bought for $720,000 two years ago and rents out at $3,500 a month. “The units have high ceilings and I have unobstructed views of Marina Bay Sands and the city skyline even from the ninth floor,” says Lee.

He reveals that he has received offers of up to $1.2 million for his three-bedroom apartment and more than $900,000 for the two-bedroom unit, but he is not selling. Besides being located across the street from the Lorong Chuan MRT station, Chiltern Park and Chuan Park are also near the Stamford American School, Australian School and the New Tech Park coming up near the MRT station, he notes. “As such, units here are a draw for buyers, both homeowners and investors.”

Some of the residents at Chiltern Park are also considering doing a similar poll to the one conducted at Chuan Park to find out residents’ interest in a collective sale, says Lee. “In district 19, Chiltern Park and Chuan Park are the two condo developments with the greatest en-bloc-sale potential.”
{To be continued}



Anonymous said...

What is a fair price to buy over a unit in chuan park now...based on PSF given the en bloc potential? Caveat shows ave psf around $800plus. Would it make sense to buy now and wait for en bloc? Am quite optimistic of the place. Very good amenities and mrt station just right in front. Am quite surprised by the abundant space available which means new development can optimise land usage much more.

Wave Master said...

Earlier comments posted by me, Wave Master. Only read that you prefer a nick so you could prevent confusion. Appreciate your advice on my above question as I have seen the project a few times and really have a good feel on the project.
Potential I see:
1) Location: amenities and circle line mrt station just right in front.
2) Potential of Circle Line Mrt going through "happening" places like Holland V, MBS, Botanic Gdns, etc
3) Near to CTE
4) NEX Mall
5) Schools: St Gabs Pri Sch, Australian Sch
6) Even with current plot ratio, not maximised yet
7) potential increase of plot ratio given govt's intention to intensify land usage around mrt station.

Even if it doesn't go through this round, is it right to say that the possiblity is still very high and will definitely go en bloc...just a matter of time.

I look forward to your expert opinion.

Thanks much!

The Folks @PropTalk said...

Hi Wave Master,

Cool nick, by the way!

The wife and I cannot argue with the potential that is Chuan Park. Matter of fact, we were looking at the development ourselves couple of years back (i.e. when the MRT station outside was still under construction). However, we were unable to reach a concensus with the seller on price.

If you are buying to wait for en-bloc, we reckon that you need to factor in the following considerations in addition to the current psf price:

1. How long the en-bloc wait is? With the new 5-year "develop and sell" rule imposed on developers and the continual release of land under the GLS especially in the Outer Central Region (i.e. outside of the city area), developers' appetites for collective sale are dampened especially given the current economic climate. So it may be awhile yet before Chuan Park will find a willing buyer.

2. The large site that is Chuan Park can also be a bane for en-bloc consideration these days, given the new rulings. The bigger the land, the longer it is expected for the developer to rebuilt and sell all new units completely within 5 years.

3. Should you buy into Chuan Park now and (by a stroke of good luck) the development goes en-bloc within the next 4 years, you will have to make enough to cover not just your sunk-in costs, but also the seller's stamp duty (SSD) that is payable for any apartment that is bought and resold within 4 years. So you will have to make a judgement call on whether the ultimate en-bloc price for Chuan Park (if it happens) will enable you to make a decent enough profit after deducting all your costs.

Hope the above helps. Should you require more details or have more specific questions on buying into Chuan Park, you may wish to speak with our "consulting arm", whom may be able to provide you with a structured report and analysis of the development. :)


Wave Master said...

What are your estimates of the en-bloc price for each unit? The estimates are that it should fetch approx $1.6 to $1.8M for 2 br and $2 to $2.2M for 3 br. Hence, eg, 3br asking $1.5M now...even after factoring SSD, there seems to be a good chance to still make ard $300K to $500K?
Also, with the remarkable sales at WaterTown, it shows the strong underlying demand even from local buyers. Scala, the project beside Chuan Park had also very strong demand.
How much do you guys charge for your "consultation"?

The Folks @PropTalk said...

Hi Wave Master,

At least for the next 6 - 18 months, the wife and I reckon the en-bloc price for each unit to be zero - we will be very surprised if Chuan Park gets sold collectively during this period. And how much it will eventually fetch will depend on a whole host of factors (economic, market conditions, govt policies, developers' appetite etc) so we wouldnt even dare to warrant a guess now.

With Scala and in some way Watertown, the dynamics are slightly different. Both are built on GLS sites (read: developers do not have to go through the hassles of protracted nego with unit owners and no demolition work needed) and also not bounded by the new ABSD rules. Scala was launched when the market was red-hot and with Watertown, there is the added attraction of the integrated mall and waterfront.

Finally, you can check out our "SG PropConsult" page for the types of consultation that we can undertake and our fees.

Anonymous said...

So funny, your comments! En bloc price for each unit = $0!!!!!

Haha. But some much more measured underlying thoughts in your funny comments.

Wave Master said...

Thanks for your insight. I would factor it into my consideration. Of course, time shall reveal our analysis here.
Personally, I am pretty confident that the site would go en bloc. What differs is only the time horizon and the price. Any area around MRT station cannot be wasted (given our land scarcity).
Govt policy on new immigrants may be slowed down now but, overall, it will still go on. Simply, S'pore can't do without increase in population. It's not just for property, it is for the basic economic fundamentals of S'pore.
The strong demand for WaterTown may be for different reasons BUT what is sure is, it shows that there is a strong local buyers market with cash to invest when they see the value. It is not just based on foreign demand as we have thought.
Hence, it is based on these premise that I am looking at Chuan Park as a very good En Bloc potential. Anyway, it is also due to the market uncertainty now that I thought would be a good time to come in. Otherwise, the price may even be higher than what it is now as valuation for en bloc pricing would be adjusted up accordingly.
My two cetns worth of thought.

Anonymous said...

Comparing Chuan park n Chiltern , I will consider Chiltern. Chiltern is 10 years newer and site is so much better then Chuan pk. Suppose Chiltern will go for en bloc, Springbloom, the scala and Chuan park will be partially blocked ad to certain angle will be totally blocked . The city view, Sands, Flyer and fireworks will be blocked.

Giving Tree said...

Hello Wave Master - am wondering if you've bought a unit at Chuan Park? Am thinking of getting a 710 sqft place there...

Anonymous said...

Checked out Chiltern Park. It's newer but really, it looks more like a hostel or a cramped HDB flat to me, espcially from the corridor area. No offense, but this was what i felt when i went for a viewing there.

Chuan Park, whilst older, is so much more spacious and windy. Facilities are well maintained, the swimming pool and tennis courts.

Guess beauty lies in the eyes of the beholder. For me, Chuan Park is a very comfortable and convenient place to stay. If en bloc happens, take it as a bonus. To me, it's just a matter of time. But in the meantime, good place to stay and easy to rent out.

This after comparing Chiltern Park, Springbloom and Braddell View/Heights.

Anonymous said...

Anyone looked at Thomson View before?

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Anonymous said...

Hi what is the current reference to en bloc?

Anonymous said...

Can Chuan Park go for en bloc? understand there have been some talk already?

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