Friday, January 18, 2013

A home buyer's lament: Here's some relief?


The wife and I came across an article in the Forum page of our de facto English newspaper ("So many questions, so few answers") from a certain Mr Tan who happens to be an enthusiastic first-time home buyer. He claimed that the numerous doubts and anomalies he had after viewing several new and completed projects could not be explained clearly even by experienced real estate agents. He went on to list the questions that he is stilling seeking answers to.

While maintaining that we are no real estate experts (and thus not dispensing professional advice here), we like to have a crack at Mr Tan's questions:

1. What constitutes part of total floor area and what does not?
Technically speaking, everything that is shown on the floor plan of an apartment/house will form a part of the total floor area. The obvious ones are open roof terraces and private enclosed spaces. But areas labeled as "RC ledge", "A/C ledge", "void", "void over staircases", "flat roof of houses (no access except for maintenance)" etc are generally included as part of the total floor area as well. The wife and I have previously came across a new project in the Holland area (recently TOPed) where a planter box located on the outer wall of the master bathroom toilet was included as part of the total area, despite the fact that one has no access whatsoever to this planter box!

The areas that generally do not constitute as part of the total area are what we termed as "common areas", e.g. the walkway outside your apartment, the lift landings (unless your apartment has a private lift, in which case the lift landing is also part of your total area) etc.

2. Is it true that unusable space constitutes 20 - 35% of a unit's total floor area (jumbo penthouses excluded)?
Although this differs between projects, but 10 - 20% of unusable space is a realistic ballpark.   

3. Why are secondary market units valued at a hefty discount to primary market ones?
The can be due to various factors: age and condition of the older development, pedigree of older development versus new, and in some cases, the perception of owners in the older development as to how much they can move prices of their units up vis-a-vis the price of neighboring new development. But the primary reason is due to the obscene bids that developers have made for land parcels over the last 2 - 3 years, coupled with increase in construction costs. As such, their break-even price is much higher now resulting in higher selling prices for new projects.

4. Can small office, home office (SOHO) units with commercial titles like those at Southbank and The Central be purchased for residential use? Is office-cum-residential use allowed?
This is best explained by URA on their website, which has this to say:

Increasingly, we are seeing more developments marketed as “SOHO” in the property market. “SOHO” is essentially a marketing term used by property developments to refer to Small Office, Home Office.  Many would-be buyers are unsure whether “SOHO” units are approved for office or home use, or both.

URA does not recognize “SOHO” as a planning term and does not specifically approve a development for “SOHO” use. Rather, developments being marketed as SOHO today are approved either as Office or Residential but not for both uses.

We have noticed that some office developments are being marketed as residential apartments by calling themselves “SOHO”.  This is misleading and inappropriate as the office development may not fully meet the guidelines and various technical agencies’ requirements for Residential use (eg. provision of sufficient parking facilities).  Similarly, home buyers should not be misled by the term ‘SOHO’ to think that they can convert the residential unit to a pure office.

Residential homeowners or tenants who want to conduct selected small-scale businesses from homes can make use of the existing Home Office Scheme. This is not to be confused with “SOHO” as these units under the Home Office Scheme are still approved and used primarily for Residential purposes. To ensure that the home office uses do not disturb the neighbors, applicants under the Home Office Scheme must meet the stipulated conditions and performance criteria.  For example, there is a limit on the number of employees and type of business uses that can be conducted within the homes. More details on the Home Office Scheme can be found at http://edanet.ura.gov.sg/dcd/homeoffice/HOMainPage/HOindex.jsp.

Would-be property buyers should be cautious and are advised to check the approved use of the property before committing to any purchases.

5. Some formerly freehold estates that went en bloc are now being sold as new 99-year leasehold condos. Are there any implications to buyers - legal or otherwise?
We are talking about the likes of The Shore Residences in Katong (formerly Rose Garden), which is sold on 103-year lease but resides on a freehold site.

Realistically speaking, this is no difference to buying a leasehold property. The only major implication to buyers (that the wife and I can think of) is that, at the end of the 103-year lease, the land owner can rightfully "take back" the land and do whatever with it as they please, with the buyers/owners having little/no recourse. This is the same right the government has over owners of units in 99-year leasehold developments when the lease is up.

6. Why are new developments prohibited from enclosing balconies and having covered structures built on top of open roof terraces whereas old estates aren't?
This has to do with not changing the facade of the estate. Imagine what a brand new development will look like if every owner decides to have their own ways with their balconies and roof terraces? So a rule is generally put in place at new developments prohibiting any additions/alterations that will alter the facade of the estate. But these rules will generally be relaxed as the estate gets older, although we are unsure if there is a stipulated number of years before this happens.

7. What is the difference between unit size, gross floor area and strata floor area?
This is one that we are not exactly sure (so we stand corrected) but we believe the terms are used interchangeably these days to mean one and the same thing. However, Gross Floor Area is typically referred to in formal and legal documents while Strata Floor Area is used when determining share-values of the unit concerned.

8. Why is photography disallowed in showflats?
This question is best left to the developers, but we reckon they do not want people to just go to their showflats to "steal ideas" without the slightest intention of buying.


There you have it! So if Mr Tan happens to read our blog, hope the above helped in some small ways towards explaining your numerous doubts and anomalies ...


Have a good weekend, everyone!


5 comments:

Anonymous said...

1)Why are secondary market units valued at a hefty discount to primary market ones?

When you buy from a developer you never ask about valuation. You assume valuation will match. Valuers don't want to offend developers. They want future business so they will support the selling price quoted by developer. It's like the ratings agency scandal in the U.S.


2)Can small office, home office (SOHO) units with commercial titles like those at Southbank and The Central be purchased for residential use?

SOHOs come with either residential or commercial title(not both). Most Far East SOHOs are the former.Commercial SOHOs should be used strictly as offices.But many are being rented out for residential use. This should not be so.


3)Some formerly freehold estates that went en bloc are now being sold as new 99-year leasehold condos. Are there any implications to buyers - legal or otherwise?

These condos will find it tough to go enbloc. After say 25 years, residents must seek Far East's consent if they want to go en bloc. The new developer must pay Far East to top up the lease back to 99 years. See how cunning Far East is?


4)Why is photography disallowed in showflats?

The main reason is so that if developers change certain items in the actual unit buyers won't have proof (photos) that the showflat showed otherwise.

Dunus said...

There is a difference between Gross Floor Area (GFA) and Strata Area (SA). GFA is mainly a term used by the Consutlants, eg. Architect, when submitting plans to URA/BCA. The computation of GFA is always measured from the outer line of the brickwall, whereas Strata Area is usually measured by the centre line of the brickwall (in-between units). Strata Area is the area that Developer sells to you (stated in S&P).

As such, there is a subtle difference between GFA and Strata Area, GFA is always smaller by 1.5 to 2%.

Anonymous said...

Waste of time with all these lame cooling measures ... Like QE1 , QE2 .... 7 times, you think that will work? Get straight to the crux of the matter, PROFIT! Just slam a Property transaction capital gain tax flat across the board, hefty and painful for those churning within a year, slowly cutting it down to the an acceptable pain threshold at the fifth year. THAT will work. No need to test and test and test Seven times. All it goes to show by the earlier six lame attempts are either no real intention to want to cool (bias developers) or ostrich mentality (hoping for an external event to save and take the blame).

Cost Of Home Renovations said...

I would like to thank you for the efforts you have made in writing this article.

BLF Bhumi said...

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