Sunday Times: Freehold better than leasehold?
Freehold better than leasehold?
Price gap may vanish in boom but will appear as property ages; experts say younger set more open to leasehold homes
By Joyce Teo
Far East Organization is selling its latest project, The Shore Residences, on a 103-year lease even though it sits on freehold land as it wants to partake in the site's redevelopment potential. Experts say the move means the developer cannot yet get the full value for the property. If The Shore Residences were sold as a freehold project, Far East would price it higher, they say.
Leasehold homes may have become more popular in recent years, but there is still a price gap between freehold and 99-year leasehold homes. This gap may disappear during good times, but it will appear as the property ages.
Property experts reckon that freehold homes typically command a premium of about 10 per cent, or up to 15 per cent at times, over leasehold homes, assuming a like-for-like comparison.
In a prime location where freehold homes are plentiful, a lone leasehold property will usually fetch less than its freehold neighbors. Because of the price difference, a leasehold condominium unit will fetch a higher yield than a freehold one. For those looking to invest in a rental property, it would make sense to go for a leasehold property.
Tenants do not care whether a property is freehold or leasehold, and during boom times, buyers can be equally indifferent. 'In a bull market, developers would be able to launch any project regardless of the tenure,' said Ngee Ann Polytechnic real estate lecturer Nicholas Mak.
'The price difference between an older freehold project and a newly launched leasehold project can be negligible on a per sq ft basis.' The difference becomes apparent only later on. 'When times are good, there is marginal price differential between leasehold and freehold new launches,' said Colliers International's director of research and advisory, Ms Tay Huey Ying. 'But as the property ages and the lease shortens, the price gap will widen. 'Financing becomes tougher as the lease runs down and that affects prices, she said.
'Your freehold interest is for perpetuity versus an interest that diminishes with time,' she said. Time, however, can be extended. There is life after 99 years as the Government is prepared to top up or renew the lease if there are redevelopment or upgrading plans, according to property experts.
The only problem is that it is not 100 per cent guaranteed, Ms Tay pointed out. 'There is still uncertainty as the Government may not top up the lease if it has other plans for the site,' she said.
In new prime areas where there is residential space such as Marina Bay and Sentosa Cove, buyers simply have no choice but to accept leasehold as the norm. All the new residential developments there have 99-year leases, and some of them still managed to fetch eye-popping prices.
When the first condo project in Marina Bay - The Sail @ Marina Bay - was first released in late 2004 at $900 psf, some said it was crazy to pay so much for a 99-year leasehold condo. But confirmed plans for an integrated resort in the area quickly erased any reservations associated with the tenure. Sub-sale deals of units at this condo later reached prices of more than $2,000 psf.
Singaporeans used to have a serious obsession with freehold homes, experts said. But today, the younger generation is more receptive to leasehold properties as they tend to take a shorter-term view, said Ms Tay.
'They are more willing to pay a higher price for a leasehold property in a good location than a lower price for a freehold property that is located farther away,' she said. Also, there are some people who are simply not bothered by a 99-year leasehold title, said Mr Mak.
Buyers from China, for instance, do not mind 99-year leasehold properties as they are used to shorter leases of 70 years back home, experts said.
Freehold Better than Leasehold
Maximise your Office Space the Efficient and Affordable Way
Growing your business can come with pain and top of that list of most business owners lists is moving to a new premises. Moving to a new premise can be disruptive and costly to the business. Worst of all, a messy and disorganized moving operation can cost service disruption leading to negative word of mouth and leaving the reputation of a company in a bad name.
Perhaps if the move to a larger office can be put off, it would not be such a bad idea. Here are some top tips you may wish to know or at least think about it before you made the big decision to move your office.
Ready to move? Still pondering if that is really necessary? Try the above, alternatively look around for office furniture that offer very helpful storage systems. We will share pictures of some innovative storage systems in our blog at a later date.
Why Real Estate Investors Fail Miserably
Is it true that 95% real estate investors fail? Well, this number was not proven empirically so the number may not stand. However, what we know is true, overwhelming majority of would be "real estate investors" would never do even a single deal. Many just wonder why it is so difficult for them just to do one thing - finding that best property at the best price. Oh right one other thing, price of that property would hold or rather must appreciate. Sounds familiar?
There are many reasons most people find it difficult to becoming a successful real estate investors. Here, I'll present some of biggest and most common obstacles for most would be real estate investors that are driving down the success rate and discourage a lot of people from even starting real estate investing.
Well, that’s my take on real estate investing. Too many people are focusing on the wrong things and are being their own worst enemy.
What do you think… why do so many people fail in real estate? Comments.
10 Tips on Small Space Living
Is your small space starting to get cramped, a little frustrated? Maybe you are moving to a new city and your lovely new home will only be a fraction of the size of the room you used to stay? Feeling a little freaked out? Maybe we can help.
1. Declutter — In a small space clutter take up space and make the home look messy and make you feel your home is smaller than it already is. A nice comfortable environment helps to calm nerves and make you relax. So get up a declutter. Get rid of those things that you have not used for more than 6 months. Get it under control and take back your space, no excuses. Yes, 6 months is the guide. You decide.
2. Organised — Yes, once you have got control of space, next get things organized Spend some money to get good shelving, storage. Spend sometime setting up a system to help you get your stuffs organized. This is one investment you would not regret. It will keep you on track and your home feeling cozy not crazy.
3. Make my furniture work for me — Double duty furniture is a must when you have a small space. Take advantage of every inch you can afford. Choose benches that can store, a lamp post that can double up as hanger.
4. Colour me bad — Already living in a cave? How would a cave-like bedroom feel and look in for example dark blue color? Yes, simple thing but many aren't aware. Just be careful of the color you choose if you have a small space. General rule is that the lighter the color tone, the brighter the bigger one would perceived the space to be. Talk to your friendly DIY store staffs. They would be able to get you some advice.
5. Mirror Mirror on the wall — Yes, have mirror on the wall. No kidding. It will help make the space look big. In additional, make use of the wall for shelving, storage and not just the floor. Make good use of the wall it's yours and most of the time is it not being used anyway.
6. No elephant please — Here's a handy tip: use light furniture. Furniture that are for example make of plastic acrylics, a table with smaller legs, will visually be light. The effect is seeing more space without feeling cramped. Brilliant?
7. Spend time outside your home — Here is the truth: no matter how perfectly designed your tiny home is, you still need to get out and spend time outside. Make a point to use public parks, library, cafe or any place that will help you get away from the feeling of living in a cabin.
8. Clean up — Fancy living in a cave full of cobweb? Yes get up and keep the space clean.
What do you think? Any other tips to share?
Top 10 Trends Influencing Workplace Design
As part of our efforts to keep clients informed, we continuously develop and follow new research in workplace design. We study behavioral science, organizational design, change management, performance metrics, demographics and technological advances – always with an eye toward how they affect the workplace. This helps us understand how business is evolving and prepares us to answer the question that all of our clients ask: “What are the latest workplace trends?” Here are our top 10 recent favorites:
1. Top talent is shrinking.
Many large countries — including the US, China, Japan, Germany and Italy — will face talent shortages as their workforces age and experience declining growth rates. In the United States, the labor force is expected to grow only 0.7 percent between 2010 and 2020. Skills predicted to be in demand include management, legal, sales/marketing, operations and technical computer proficiency.
This talent shortage will challenge organizations to find and keep the best people. They will need to engage employees with workplaces that support their wants and needs.
Creating vibrant offices is one tactic to recruit and retain talent. Providing flexibility and choices for where, when and how work happens is also critical for attracting the best and brightest people.
2. Employee engagement matters.
Engaged employees can boost a company’s bottom line by up to 20 percent. These employees are emotionally invested in and focused on creating value for their organizations. In a survey across 142 countries, however, only 13 percent of employees reported feeling engaged in their jobs.
Disengaged workers — those who are negative or even hostile to their organizations — outnumber engaged employees by nearly two to one. Companies with disengaged employees experience 30 to 50 percent more turnover.
The workplace can engage employees by acting as a communication tool that aids in celebrating individual or team contributions, broadcasting organizational goals or objectives, and providing spaces for effective collaboration. Involving employees in the design or retrofit of a workplace also provides a wonderful opportunity for engagement.
3. More people are working remotely and not at their desks.
At any given time, about one-third of all knowledge workers in private and public sectors are working remotely. Only 30 to 40 percent of employees with assigned spaces are actually using them.
Mobility is crucial to today’s workforce. In addition to their offices, employees are working in airplanes, in hotels, at client sites and at home. They need to be supported with technology and business processes that allow them to work effectively wherever they are.
In the workplace, mobility may require more “unassigned” or touchdown space for individuals who are out of the office for a significant portion of the day. Organizations also need flexible space for employees who might be visiting from another floor, building or campus.
4. Flexible work boosts engagement and satisfaction.
Flexible work – allowing employees to work when, how and where they choose – generally receives a positive response. Thirty percent of employees with easy access to flexible work arrangements report feeling very engaged in their jobs. Compare this to the 19 percent engagement among those with moderate flexibility and the 10 percent engagement among those with little access to flexibility. Sixty percent of employees with high access to flexibility are very satisfied with their jobs, compared with 44 percent of those with moderate access and only 22 percent of those with low access.
5. Activity-based work settings are on the rise.
Because the nature of today’s work is so complex and unpredictable, a single, all-purpose workstation doesn’t cut it for most knowledge workers. Workplace designers need to provide a variety of “activity settings,” or purpose-built areas for specific activities accessible to all.
Activity settings might include impromptu meeting areas, formal meeting spaces, project rooms, individual work spaces or break areas that make up for the shortcomings of exclusively cellular or open-plan environments. One size does not fit all.
6. Buildings can help or hinder productivity.
Buildings can improve overall productivity and performance by as much as 12.5 percent or reduce them by as much as 17 percent. That’s a 30 percent swing between employee performance in the best and worst buildings.
Interestingly, the same factors that enable productivity can inhibit it. Some background noise, for example, can boost productivity for routine or administrative tasks. Yet that same noise can be highly distracting when employees are conducting research or writing tasks. Lighting is generally viewed as positive, except when it causes glare. That said, the most common building-related culprits for hindering productivity include issues with thermal comfort or air quality, lack of natural light, noise, spaces that feel crowded and poor ergonomics.
7. Lighting matters.
Better workplace lighting (both natural daylight and artificial light) has been linked to a 15 percent reduction in absenteeism in office environments. Other studies have reported productivity increases ranging from 2.8 to 20 percent attributed to optimum lighting levels.
The presence of ample daylight and windows, as well as opportunities for active and passive contact with nature, sensory change and variability, all have a positive impact on people’s well-being.
8. Acoustics are vital.
Office acoustics contribute to performance and well-being in the workplace. To support complex knowledge work, many people seek out quiet places. The ability to have planned or spontaneous interactions without disturbing others is important for teamwork and relationship development.
In environments with white noise, or sound masking, employees report improvements of up to 38 percent for the performance of simple tasks and 27 percent for complex tasks. Sound masking is not the only way to reduce unwanted noise. Office layout, flooring materials, walls, ceilings and behavioral protocols all can make a difference.
9. People are the most important metric.
A 2 to 5 percent increase in staff performance can cover the total cost of providing for their workplace accommodation. Financial losses due to absenteeism and “presenteeism” (a loss of workplace productivity from employee health problems or personal issues) account for 4 percent of operating costs.
Though the design and construction of buildings comes with a significant cost, this pales in comparison to the cost of compensating employees who are not engaged, healthy and performing at high levels.
10. Change management works.
Benchmarking studies by research company Prosci have found that workplace projects with an effective change management component are six times more likely to meet their objectives and succeed.
If you were given a new piece of software with no instructions on how to use it, would you be able to get the best out of your investment? Probably not. The same goes for a new workplace. When employees are experiencing new furniture, adjusting to a renovated office or moving into a different building, they need help learning how their new “tool” is supposed to work. The better they understand their space, the technologies that support it and the policies and protocols for how to use and behave in it, the more likely they are to get the most out of their work experience.
If there is one macro-trend that encompasses all of the trends listed here, it would be the growing emphasis on people. Workplace design and strategy can play a huge role in helping to maximize the comfort and performance of occupants. Engaging with employees on how the workplace can best support them is a great way to start.