High Time URA Curb the Use of SOHO

Finally the Urban Redevelopment Authority (URA) has decided to curb the use of SOHO by developers. This has to come sooner or later after the URA clamped down on developers and real estate salespersons selling loft space in industrial strata units.

Why is this important?

First of all, in Singapore, SOHO is never classified as a type of land use by URA. Our broad categories of land use are residential, commercial, industrial, hotel and institutional use. It is a pure marketing term.

Second, the term has been abused by developers and real estate salespersons that a lot of buyers think that the residential home can be used as an office. But that is not true. You have to apply to the authorities to use your home as an office. And you might not get approval.

Third, such units are always marketed at a higher price than residential units. Why is that so? The rationale used is that SOHO is a mix of residential and commercial so it can be priced higher than residential. But if it cannot be used as an office, the price paid is not justified.


But why now, you may ask.

My guess is that the URA is trying to "clean up" its residential price index. It has been "polluted" by some developers marketing their residential homes as "SOHO-styled" units and at higher prices than normal.


Overall this is a good step forward for the real estate industry. With the Council of Estate Agents (CEA) set up to regulate the "cowboy" industry, URA has also to get its act right. In fact, when I was training the real estate salespersons, many of them do not understand what is SOHO. With this, I hope the market will be less confused over such marketing terms.

But then again, developers are creative. Soon new marketing terms will appear. Like for example, the developer who introduced dual key concept now calls it TRIO to differentiate its products from the competitors.

Retirement Village - Will We See NIMBY?

I read with interest an article on Sunday Times, 10 November 2013 - Ageing Singapore to Get First Retirement Village.

Before I touch on the social aspects, let's look at the economics part first.

This site at Jalan Jurong Kechil was put up for sale on 19 September 2012 and sold to World Class Developments for $482 psf ppr on a 60-year lease. 23 developers submitted bids for the site. (Source: http://www.ura.gov.sg/uol/media-room/news/2012/nov/pr12-129.aspx)

The site is significant for two reasons:

• It is offered on 30, 45 or 60-year lease
• Developers can choose to build either condominiums or retirement homes

Now if the successful bidder chooses to build condominiums, it will be the first time residential homes are sold on 60-year lease. If the homes sell well, it means that buyers are accepting a shorter lease for homes and the Government can offer 60-year lease for residential homes in the future.

If the developer builds retirement homes, it will be the first such project in Singapore. It will be an untested segment but still the developer stands to reap the benefits of being a first-mover. My comments to The Straits Times on 16 November 2012 was such - see text in red below.

Why did the developer choose to build a retirement village?

Several reasons can be put forth.

• The current property market sentiment is not favourable for 60-year lease residential homes.

If you go to www.onemap.sg and search for The Hillford or google for The Hillford, you will find property agents marketing it as a condominium and not as retirement homes. It could be that there is little interest from prospective buyers.

• The indicative price may be a tad high

At $482 psf ppr, a condominium is likely to have a breakeven price of $800 psf and a selling price of $1,000 psf or higher. 

• Minimum size of 70 sqm for residential homes imposed by URA

The minimum size requirement for residential homes might not be extended to retirement housing. Hence by minting shoebox units in a retirement village, the developer might get better returns.

• Limited support from banks

Banks might not be willing to lend up to 30 years or 80% of the selling price for a 60-year lease project.

• Increasing numbers of retirees 

These retirees might be looking to widen their social circle and find similar minded friends to participate in activities together.

So these reasons (especially the market sentiment) might have convinced the developer to go for retirement homes. But to make this project successful, it is not enough to design the units and surroundings to be elderly friendly. It has to be a holistic environment suitable for ageing like medical care in the development, activities corners/places for the active agers. I went to a retirement village in Johor. There is a hospital outside the village and lush greenery and spaces and activities for the residents in the village. To maintain the serene environment, they even have a rule that residents who get complained about three times will be asked to leave the retirement village.

Well, a place for some of our ageing baby boomers to enjoy life is always welcomed. But will we get letters to the forum page complaining about a retirement village in their neighbourhood - the "Not in My Backyard" syndrome? It remains to be seen.

Developers keen on shorter lease site

Top bid of $73.8 million received for 60-year lease

By Cheryl Lim

A RESIDENTIAL site that comes with a shorter-than-normal lease has attracted a surprising 23 bids.

It was the best response for a site in recent years but fell short of the 32 offers received for a Westwood Avenue residential plot in December 2009.

The 1.02ha site in a private estate in Upper Bukit Timah's Jalan Jurong Kechil neighbourhood was offered for sale with a variable lease option of 30, 45 or 60 years.

It can be developed into a condominium, flats or retirement housing.

The top bid of $73.8 million for a 60-year lease came from the Aspial Corporation subsidiary World Class Developments. This translates to a price of $482 per sq ft per plot ratio (psf ppr).

Bigger developers were noticeably absent from the tender exercise while smaller players like Chip Eng Seng and Roxy Pacific Holdings were in the fray.

The lowest bid came from Kwan House with $23.3 million. It was also the only developer to tender for a 45-year lease. No bids were received for a 30-year lease.

Despite the shorter-than-usual lease, analysts expect that completed units could go for a selling price of $900 to $1,100 psf.

These prices are still lower than 99-year leasehold properties in the vicinity.

ERA Realty key executive officer Eugene Lim noted that one-bedroom apartments at the nearby Suites at Bukit Timah are going for $1,600 psf.

Mr Ong Teck Hui, national director for research and consultancy for Jones Lang LaSalle, said most buyers are less keen on properties with shorter leases because of concerns over long-term value depreciation.

But many analysts agreed that the strong interest from developers indicates market confidence that homes with shorter leases will still sell.

This site has been on the market for a couple of years. It was released in 2006 with a 30-year lease, and earmarked by the Government for retirement homes.

But the site failed to find any takers because developers said the lease was too short for a viable project.

The Jalan Jurong Kechil site was then made available for tender through the reserve list system earlier this year. It was put up for public tender after a developer committed to bid at least $24 million. This is the first time the Government had made land available with the development option of retirement homes.

In the event the site is developed for retirement housing, analysts say it will be an an untested segment of the real estate market.

DWG's senior manager of training, research and consultancy, Mr Lee Sze Teck, said a firm taking the risk on retirement homes now might reap benefits later.

"They could have a first-mover advantage in this retirement home property segment," he said.

Mr Nicholas Mak, SLP International's head of research, noted that the developer could face problems if buyers cannot find banks prepared to finance shorter leases of up to 60 years.