S$2.03B: the national benefit that only rich (Freeholders) in
Singapore enjoy. Time abolish freehold titles and recoup the
revenues they owe
---
BT 6Sep07: En bloc sales slow to a trickle, may pick up
later:
"the first seven months of 2007 saw a total of 62 collective sale
transactions worth about $11.86 billion"
[ http://www.sghousing.com/2007/09/06/en-bloc-sales-slow-to-a-trickle-may-pick-up-later/
]
---
ST 2Sept07: Storeys of dust and noise:
"It is a similar story islandwide with about 170 buildings - or
10,000 flats - sold in collective deals since the start of 2006,
according to CB Richard Ellis".
[ http://www.sghousing.com/2007/09/02/storeys-of-dust-and-noise/
]
-> Average no. 'old' flats per collective sale = 10k
flats/(70+62)Dvps= 75.8Units/Development.
---
BT 2Aug07: En bloc sales have peaked, says CapitaLand:
"70 older apartment developments were sold (2006) for S$8.1
billion, according to data from Knight Frank".
[http://www.expatsingapore.com/forum/index.php/topic,5525.msg1313903.html#msg1313903
]
==> Assuming coherent data:
-> Therefore: each collective sale transactions is worth ~
$115.71M (2006), $191.29M (2007); and each 'old' flat costs:
2006= $115.71/75.8 U per dvp= $1.53M per flat; 2007: $2.52M per
flat (65% rise cf 2006). [Or average value per 'old' flat over
19mth period = $1.996M/ flat].
Okay I may have over estimated value of the flats bc maybe
commercial properties were enblocked too (not incl in 10K units
report of ST2Sept), possibly making the total count 25%more: say=
13.3k units, that would still make the 2007 figure = $2.52M / 1.33
= $1.89M per 'old flat'.
-----
Generously assuming that the 2007 $1.89M/flat is value of full 99yr
leasehold(LH) land that the flats stand on, (resulting in exemption
from DC charges payable for lease hold extensions)-
{Note that 99 Leasehold(LH) land is valued at 96% FH value: see SLA
LeaseholdTable: [http://www.sla.gov.sg/faq/land_sales/LeaseholdTable.doc
]}
- Assuming that % land value depreciation is proportionate over
99yrs, (SLA table is illogical!!!); then per unit annual value
depreciation= $1.89M/ 99yr= $19.09K p.a.
-----
1999SPEECH BY LAW MINISTER : "5,560 units (account for) 7% of the
total (freehold) units".
[ http://app9.internet.gov.sg/scripts/minlaw/hq/newswatch/read.cgi?1,1-224
]
-> Therefore total number of strata titled freehold units =
79,429 units.
Singstats: "(1996): 149,114 PTE residential properties (PRPs)
exists in SG; 2006: 233,364PRPs".
[ http://www.singstat.gov.sg/pubn/reference/yos/statsT-construction.pdf]
-> Therefore such properties increase at approx 5.65% p.a. [non-
compound](cf 1996 figures)- So by approx: in 1999 there were~
174,389.00 PRPs.
-> 79,429 as a ratio of 174,389 is 45.5% ~ (I assume that 45.5%
of all strata titles are freehold @1999 and for later calcs).
------
In 2006: 233,364PRPs exists in SG, which suggests the existence of
106,181 freehold units in SG (@45.5% ratio).
Given that each 99LH flat depreciates proportionately @ $19.09k
p.a, govt has lost revenue (p.a.) worth= 106,181 x $19.09k =
$2,026,988,035.8 ($2.03B) by retaining the 45.5% of all private
property is 'freehold' policy.
Key:
cf: compared to
p.a.: per annum.
"collective deal"= "enblock sale"
Private residential properties: PRPs
ERP: electronic road pricing.
DC: development charge. [latest= http://app.sprinter.gov.sg/data/pr/20070831980.pdf
]
DP: Development premium (see knowledge page for details: http://www.sla.gov.sg/faq/differential_premium.pdf
)
------
Potential reasons for possible inaccuracies in $2.03B
calculation:
General:
1. Many big assumptions are made: the 1999 figure of 174,389 PRPs,
45.5% freehold proportion, assuming all collective deals to be of
equal value- these rough values can result in wide margins of
error; however I believe that these calculations serve their
intent, spurring discussion (and accurate calculations) on the long
term consequence of acknowledging freeholds in a land scarce and
human resource dependent country, (with an >$11b annual defence
budget), in accommodating further loss of potential revenue; and
its impact in perpetuating the rich poor divide.
Possible Overestimate:
1. 45.5% being freehold is minister's 1999 figure, may have
decreased by 2007 given possibly more 99yr LH devps.
2. The 2007 $1.89M per unit figure is 65% increase over 2006 due to
enbloc fever and current strong economy property prices, such
sentiments may not be sustained. A figure 65% less then $2.03b
would have resulted if 2006 figures were instead used.
3. $1.89M/ unit fig may be an over estimate of property value as
developers usually offer 30+% above individual valuation to obtain
80% consensus towards a collective deal. Over confidence in the
economy may also cause developers to bid generously to cash in on
the rising economy.
Possible Underestimate:
1. The actual land value of a 99yr lease hold property may be more
as developers still have to pay top up lease (DP charges) to 99yr
for the lease shortfall and to increase land use intensity. The
'collective sale transaction price' probably doesn't include such
extra costs to the developer.
2. $1.89M/ unit would underestimate the value of good class
bungalows, in view of their min floor areas of >1,399
sqMtrs.
[ http://realty-united.blogspot.com/2007/03/demand-for-gcbs-set-to-stay-high.html]-
The $2.03b fig would thus be an under estimate if GCBs were
under-represented in the '10k units' sold.
3. GCBs number 2,000 to 2,500 across the island: the majority of
which I'm sure are FH and would yield lots of $ for leasehold
extensions, however their proportion cf 233K current PRPs is not
that great.
4. If the 10K fig was indeed accurate
[http://www.sghousing.com/2007/09/02/storeys-of-dust-and-noise/ ],
making the 25% reduction unnecessary: then the $2.03b deficit would
likewise be corrected to $2.7B.
Discussion:
- As the focus of this study is limited to residential properties,
the revenue loss from commercial and industrial properties though
significant is unascertained.
- The SG gov sells state land and bases its DC charges upon it's
lease hold table which states that LH land at 99 yrs is to be
valued at 96% of FH land, if SG gov stays true to justice, then it
should seriously consider the consequence of such inequalities
existing in our society. Is an excess of priviledge being given to
those living in FH properties? Why retain the 'FH' concept instead
of the LH one akin to ERP- pay per use...
- Should a distinct group of Singaporeans be excused from paying
leasehold extensions in perpetuity, enjoying for little such status
and luxury, in oblivion of the fact that in 2006 $11b was spent on
national security to directly safeguard their properties.
- Does the $2b (or more) loss revenue result in cutbacks in
healthcare, education, or social spending?
- Can the $2b+ defer compulsory annuities, increasing GST further
and other budget cutbacks.
- One way out of this situation is to give current FH 2
options:
1) Agree to immediate raise of property tax from current base (of
4-10%) to 33.3%(*) plus base rate (shouldn't exceed 4%).
2) Accept conversion to a 104.17yr leasehold with immediate
effect.
*The basis of (1)"33.3%" being that annual(rental) value of a
property is often in excess of 0.96% of the original property value
[this is a gross estimate subject to further debate].
- from my research into the FH/ LH system, it was adopted almost
whole sale from UK laws, which seem to be currently giving
significant legislative problems. Singapore has in fact been
studied by UK for solutions. (see p25>"7.Termination and
insolvency"
[http://www.parliament.uk/commons/lib/research/rp2001/rp01-115.pdf]
), UK parliamentary sittings do seem excessively nebulous, & we
had better not follow a country with growing illiteracy! [url:
http://groups.google.com.sg/group/soc.culture.singapore/msg/165db64f8eeceb4d?hl=en&
]
- for some u'standing of nebulous LH/FH issues in UK:
[http://www.lease-advice.org/levamain.htm#Introduction].
- So instead of perpetuating the increasing rich-poor divide with
stupid legislature, creating more bodies/tribunals e.g.
[http://en.wikipedia.org/wiki/Leasehold_valuation_tribunal] just
crap FHs and let LH/ property tax returns earn some revenue!
- Make the fat cats work!
Next: Estate duties, LH extensions... I'll ramble my miseries if I
have to...
Updates, correspondence via pls http://moral-governance.blogspot.com/
-----
Other Bibliography:
- UK crap!: The origins of residential leasehold reform [ http://www.communities.gov.uk/housing/buyingselling/residentialleasehold/origins/
]
Notice:
The author disclaims all legally enforceable liability with regard
to the use of presented information.
Any form of use of this production requires explicit written
agreement by the author.