Leases for new industrial sites slashed? Will HDB Follow?

[Tayspiderx]

The Government is slashing lease terms for industrial sites sold in the second half of this year in a bid to stem the soaring prices of these sites. As fast-rising costs crimp the bottom line, the Government is also rolling out a bumper supply of industrial land with these shorter leases.

 

The Ministry of Trade and Industry (MTI) said on Monday that all sites to be sold in the industrial Government Land Sales (GLS) programme from next month to December will be capped at 30 years. Previously, industrial sites sold had tenures as long as 60 years.

 

A total of 47.69ha of land - about 1.4 times last year's total - will be put up for sale this year in areas such as Tuas, Ubi, Serangoon and Woodlands.

 

'The tenure reduction increases the Government's flexibility for land redevelopment and would help to make industrial property more affordable for industrialists,' MTI said in a statement.

 

Will HDB play the same card?

[Mustank]

i think unlikely bec repercussion too strong liao

Edited June 12, 2012 by Mustank

[Watwheels]

For commercial property all along 30years is lease hold and 60years is "freehold". There are still some "gradfather time" properties which are 999years freehold left for commercial use but very few left. A lot of ppl dunno about this for commercial properties.

 

What gahment is doing is releasing more supply to saturate the market to cool commercial property prices. The lease hold, freehold T&C remain unchanged.

Edited June 12, 2012 by Watwheels

[PaiKia-Lee]

Buying a 30 year lease factory is throwing money down the drain. Imagine by the time TOP and you move in, u only left 25-26 years. AFter the 25 years up, your S$500,000 cannot be taken back if the government refuses to "enbloc"

[Tayspiderx]

Buying a 30 year lease factory is throwing money down the drain. Imagine by the time TOP and you move in, u only left 25-26 years. AFter the 25 years up, your S$500,000 cannot be taken back if the government refuses to "enbloc"

 

By then they will re-lease the building back to you at market rate, which in the end making cost higher than purchasing it for 60 year

[Sp4wn]

Buying a 30 year lease factory is throwing money down the drain. Imagine by the time TOP and you move in, u only left 25-26 years. AFter the 25 years up, your S$500,000 cannot be taken back if the government refuses to "enbloc"

 

true, but the quantum is normally much lower, and some people just look at it as paying rent instead of truly owning the property. however, most of the deals i close are for FH only ... most investors never bother to look at leasehold unless the yield was at least 10% ... however, yields have dropped significantly over the last year .. which is worrying, because i recently helped negotiate a deal for a substantial amount of space where the return for industrial was under 3%. (buyer was chinese ... didnt even bother to view the unit ... paid cash and completed within 6 weeks ... so far, from what i heard, unit is still vacant, because he isnt in a hurry to find a tenant >< )

[Wyfitms]

true, but the quantum is normally much lower, and some people just look at it as paying rent instead of truly owning the property. however, most of the deals i close are for FH only ... most investors never bother to look at leasehold unless the yield was at least 10% ... however, yields have dropped significantly over the last year .. which is worrying, because i recently helped negotiate a deal for a substantial amount of space where the return for industrial was under 3%. (buyer was chinese ... didnt even bother to view the unit ... paid cash and completed within 6 weeks ... so far, from what i heard, unit is still vacant, because he isnt in a hurry to find a tenant >< )

 

if it's this kind of chinese investor then nothing to worry about. Cos they can hold.

 

Worrying only if local investors starts to buy industrial for under 3%

[Wyfitms]

i think unlikely bec repercussion too strong liao

 

what repercussion? i think govt will offer a shorter LH scheme and pitch it as another innovative way to help make HDB affordable. Of course cannot cut lease by 50% straight away lar.. maybe cut to 79 yrs and offer 10% discount. Then after a few yrs when ppl are used to it, then offer 69 yrs etc

 

They'll prob do it when average 4rm flat cost more than 700K

[SimonTan]

Since its a car forum.

The question is will LTA implement 5 years non-renewable COE?

Pays only 50% of the amount.

Car must scrap after 5 years, which is what most car owners do anyway.

Lowers the entry level, to stem the soaring COE price and can help more lower income buyer to own new cars affordably

[Sp4wn]

if it's this kind of chinese investor then nothing to worry about. Cos they can hold.

 

Worrying only if local investors starts to buy industrial for under 3%

 

Sadly, most of them are ok to buy if under or near 4%... Gone are the 7-8% yields for FH industrial...

[Wyfitms]

Sadly, most of them are ok to buy if under or near 4%... Gone are the 7-8% yields for FH industrial...

 

whether sad or not depends if you are on buyer or seller's side.

 

How abt industrial reits? 7 to 10% distributions?

 

I'm sure there are some around for sale. Otherwise how would the reits acquire and still be yield accretive?

[Jrage]

i think unlikely bec repercussion too strong liao

 

they already started... on the studio units where units are not given full 99 yr lease..

However, response is not good. I think they will re-look into it soon.

 

Aniway, not many hdb flats goes beyond 40 yrs and not been enbloc. Given our current flats are fabricated, i dun think it will last the full 99yrs. So it just a matter of how the gov put it across , eventually, hdb will have shorter lease.

 

As a hdb flat owner, will have to mindful that owner has no say as in whether or not to enbloc, just like those staying in rocher and siglap, if gov wants the land back, they want the land back. There is no voting to ask you if you want move or not. They could only make the deal sweeter by giving a better replacement location. You still need to top-up if you want to stay in similar size unit.

Unlike HDB, pte condo will provide you a "vote" to say if you want to move or not. Having said that , your vote may not be significate since the only % of "yes" vote is required for an enbloc.

How much you are paid during the enbloc will depends on 1) how much the development need topup to re-development the land i.e. your remaining lease tenure. 2) how much the developer can charge for the new development. If you are do an enbloc for LH apartment, then you probably get the shorter end of the stick. As your enbloc proceed will probably not cover your cost to re-purchase similar unit during the same period of time.

Thus, i think getting LH as your primary pty i.e. where you going to stay, may not be a good idea too. As you will have comprise in terms of size of the unit , or the location when you enbloc your unit. LH for investment , is okay.

Edited June 12, 2012 by Jrage

[Tigerwoods]

Since its a car forum.

The question is will LTA implement 5 years non-renewable COE?

Pays only 50% of the amount.

Car must scrap after 5 years, which is what most car owners do anyway.

Lowers the entry level, to stem the soaring COE price and can help more lower income buyer to own new cars affordably

No. they will introduce 5 year COE bidding and no more 10 years.

After 5 years if you want to drive your car for the next 5 years, you bid again.

 

By then the 5 Year COE will be $100k hahahahaha....

[Hotamp]

Buying a 30 year lease factory is throwing money down the drain. Imagine by the time TOP and you move in, u only left 25-26 years. AFter the 25 years up, your S$500,000 cannot be taken back if the government refuses to "enbloc"

 

I think the move is to curb speculation into commercial properties as now residential properties are less desirable due to the cooling measures. Those SMEs which need the space for their own use will probably benefit as one of the bros has pointed out, with shorter lease, the purchasing cost will probably be lower, thus the mortgage payment is like paying rent on your own property....tough luck for the cash rich investors.

 

who knows maybe when the economy heads south, they will probably come out with a new ruling to jump start property investments again....such is life.

[Sp4wn]

whether sad or not depends if you are on buyer or seller's side.

 

How abt industrial reits? 7 to 10% distributions?

 

I'm sure there are some around for sale. Otherwise how would the reits acquire and still be yield accretive?

 

I'm on the seller's side and I feel bad for the buyer :P But then again .. many are cash rich ...

 

Reits all normally buy leasehold properties, so they are able to get higher yields (if you look at some of the "good deals", its basically the current owner who needs the cash and is willing to rent back at a yield of 10% for 3 years. but who knows if they will default as well?

 

I think the move is to curb speculation into commercial properties as now residential properties are less desirable due to the cooling measures. Those SMEs which need the space for their own use will probably benefit as one of the bros has pointed out, with shorter lease, the purchasing cost will probably be lower, thus the mortgage payment is like paying rent on your own property....tough luck for the cash rich investors.

 

who knows maybe when the economy heads south, they will probably come out with a new ruling to jump start property investments again....such is life.

 

hard to say. yesterday they announced *some* religious activities can be now be carried out in B1 industrial properties ... which means demand will go up for industrial (and I can say this because I normally get 1-2 calls per week from churches or religious groups looking to rent / buy and I've always had to turn them away due to zoning. This will only cause industrial prices to spike in the short term though.

 

lastly, commercial is as strong as ever if you ask me. sellers all have the same, "buy if you like my price attitude, get lost if you dont". i think a lot more people have been burnt by stocks and have moved into real estate (but thats my assumption, of course)

[Yattokame]

true, but the quantum is normally much lower, and some people just look at it as paying rent instead of truly owning the property. however, most of the deals i close are for FH only ... most investors never bother to look at leasehold unless the yield was at least 10% ... however, yields have dropped significantly over the last year .. which is worrying, because i recently helped negotiate a deal for a substantial amount of space where the return for industrial was under 3%. (buyer was chinese ... didnt even bother to view the unit ... paid cash and completed within 6 weeks ... so far, from what i heard, unit is still vacant, because he isnt in a hurry to find a tenant >< )

 

 

smells like washing black money