Cushman & Wakefield moots revised Leasehold Table

/ EdgeProp
April 25, 2018 9:39 PM SGT
Amid the recent wave of collective sale activities, the spotlight has been thrown onto the Singapore Land Authority’s Leasehold Table, which determines the Differential Premiums (DP) and Upgrading Premiums (UP) that landlords and developers are required to pay for the enhancement of land use and extension of leasehold land tenures.
Cushman & Wakefield (C&W) suggests that the 70-year-old table is outdated and proposes a revised table which reflects a 6% discount rate, rather than the estimated 3% rate that the table is currently derived from. This means that the rate of property depreciation would be significantly slower at the start, but rapidly increase as the balance of tenure reaches zero. That would significantly impact the amount of DP and UP payable. C&W argues that the revision is overdue and property market conditions have altered drastically since its inception.
Pearl Bank Apartments was sold to CapitaLand for $728 million in February (Picture: The Edge Singapore)
Under the revised table, developers will pay lower UP to top up the leases of collective sale sites. Pearl Bank Apartments, which has 51 years remaining, had a UP of $201.4 million. But under the revised table, the UP payable would have been $46.6 million, or 77% lower. Conversely, developers would pay higher for the enhancement of land use. The DP paid to enhance Golden Shoe Car Park’s land use from “transport facilities” to “commercial” was $957.8 million. The property has 64 years left in its tenure. Under the proposed table, the DP payable would have been $1,134.5 million, or 18% higher.