Wednesday, July 2, 2008

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99-yr Leasehold Condos are PERISHABLE PRODUCTS

Posted by: Anonymous in the Singapore Property Forum , 02-07-2008

It's been mentioned by others before, but I thought I'd revisit the wisdom (or lack thereof?) of committing your whole life savings to purchasing a 99-yr private property at current prices.

Now, if you need a home to stay in, and you can still save cash despite servicing a private property mortgage, you're fine. But, lots of Singporeans are simply paying for the condo lifestyle without sufficient cash savings, and relying on the assumption that they can downgrade or sell the investment property when they retire and live off the capital gains.

If you buy a 99yr LH property from the developer, by the time you retire and pay off the mortgage, the condo will have 75yrs left. If you bought the unit 2nd hand, then the lease would even less.... 60yrs for example. Not only is the lease shorter, its also much more run down, and the architectural style will also be outdated, severely weakening its desirability and corresponding price.


You got to get rid of them FAST. Time works against you. What would the market value be then? Are you so sure you can make capital gains? Can it cover the $500,000 (or more) in interest that you would have paid? It might even be a loss. Can you count on government topping up leases in future? Not necessarily. Enbloc? With new condos already maxing out plot-ratios, will it still be profitable for future developer to enbloc? You might be stuck with a worthless property and no retirement plan.

May also want to read:
History of Singapore Property 1960 to 2008
Buy or Not Buy: How to decide amid mixed market signals
When to Buy, When Not to by
Property Price Index Graph Plotter & Online Property Valuation
Your Property Investment Determines Your Financial Success in Your Life
HDB Resales: West Sees Highest Price Increase


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The blogger here has been affectionately named by close allies as "Smart Buyer" but really, he's not smart. Smart Buyer just believes that being prudent is smart. That's the essence of the message of this blog and Smart Buyer hopes it'll benefit other property buyers.

Smart Buyer :)