S$2.03B: the national benefit that only rich (Freeholders) in Singapore enjoy. Time abolish freehold titles and recoup the revenues they oweÂ…
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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/ ]
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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.
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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'.
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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.
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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).
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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 )
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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/
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Other Bibliography:
- UK crap!: The origins of residential leasehold reform [ http://www.communities.gov.uk/housing/buyingselling/residentialleasehold/origins/ ]
Notice:
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Any form of use of this production requires explicit written agreement by the author.
Is it a sin to be rich ?Originally posted by dragg:tell me something that is against the rich.