Analysts say tougher for 60—year leasehold owners to apply for loans

SINGAPORE: Buyers of 60—year leasehold properties might find it a challenge to apply for loans.

While some banks are willing to lend, potential buyers may have to borrow less or pay off these loans faster.

But analysts said banks may have to re—think their home loan strategy as more of such sites make their way into the market.

The land at Jalan Jurong Kechil, which closed tender on November 15, will be the first residential site to have a leasehold that is shorter than the usual 99 years.

It is the first land site put up for sale by the Urban Redevelopment Authority (URA) with a variable lease option of 30, 45 or 60 years.

The land site received a top bid of S$73.8 million by World Class Developments (North), also a subsidiary of SGX—listed firm, Aspial Corporation, for a 60—year lease.

This means potential home buyers of this site may find it tough to get a home loan that will suit their needs.

A check with several Singapore banks revealed that they do offer mortgage loans for properties with a remaining lease of 60 years.

But analysts said buyers may end up paying higher monthly instalments or they have to borrow less.

Five banks that offer such loans include Citibank, UOB, HSBC, OCBC and DBS.

Still, some analysts expect the situation to improve going forward.

Alan Tan, head of Project Advisory at HSR International Realtors, said: There are rare cases where people either sell their units left with 50 or 60 year lease.

"But that’s not common like this one, this is an entire development, so the banks will definitely have to re—look at how their loan structure can be seeing that this is a new development with 60 years tenure, the bank will definitely be able to restructure something for buyers."

Experts said owners of such properties may face further challenges when they want to sell their homes later.

Potential buyers may think twice as bank loans for properties with an even shorter lease will be more scarce.

Nicholas Mak, executive director at SLP International Property Consultants said: "For example, a person buys a 60—year lease hold property and 10 years later wishes to sell it, the next buyer may only be able to get a loan of 20 years or shorter, which means that either the next home buyer comes up with a larger cash downpayment, and take up a smaller mortgage, or that person will also have to be prepared to pay a larger monthly instalment for the mortgage."

Private homes on the Jalan Jurong Kechil site are expected to be popular with long—term home buyers.

But analysts say they may be less appealing to investors looking for a quick flip.

— CNA/lp