Conservation Status - Good Or Bad?

[tomasulu 2]

Hi,

Recently, URA notified us of their plan to gazette our terrace house as a conservation property. We are encouraged to provide feedback or even object to their proposal.

From a financial standpoint, what, in your view, are the pros and cons of owning a conservation property? I was told different things by people in the know. Some say the value of the property will be limited by lack of enbloc potential, restrictions to maximizing plot ratio, etc. Others think it is a good thing because scarcity of such properties mean the value will only go up in the long run. And that some people like the idea that such properties are protected from any enforced acquisition for public use.

Thanks!

Edited November 9, 2007 by tomasulu

[waileong 0]

Without more details no one can say.

[tomasulu 2]

Without more details no one can say.

what do you want to know? it is a corner terrace in district 15.

if only URA publishes data on transacted psfs of conservation properties relative to properties in the vicinity. it may not tell the whole story but at least that's a start.

[waileong 0]

Location is fundamental information for any property. So is condition. Without such information, how to answer your questions?

To begin with, there's no "enbloc" sale (in the commonly understood sense of the term here) for most landed houses unless they happen to be strata-titled houses. Hence the points raised by your friends are not relevant. Of course, there's no reason why a group of terrace house owners can't band together to sell all their land and their houses together, but the 80% or 90% majority consent rule does apply because it's not strata-titled, there's no MCST, etc.

If your house is a historic Perankan house in beautiful condition (like some along East Coast road), and you can keep it so, then I see no reason why a beautiful house in good condition would not appreciate, conservation status or otherwise. It will always be sought after by expatriates for example, and very few buyers would think of tearing it down to build an ugly modern house in its place.

There's only two things they're not making any more of. One is land. Two is old houses. Anyone can build a new house any time, but you can only find and restore old houses, you can't build them any more.

Whether the rarity is going to be worth more than potential plot ratio increases, I leave you to ponder.

[tomasulu 2]

Location is fundamental information for any property. So is condition. Without such information, how to answer your questions?

To begin with, there's no "enbloc" sale (in the commonly understood sense of the term here) for most landed houses unless they happen to be strata-titled houses. Hence the points raised by your friends are not relevant. Of course, there's no reason why a group of terrace house owners can't band together to sell all their land and their houses together, but the 80% or 90% majority consent rule does apply because it's not strata-titled, there's no MCST, etc.

If your house is a historic Perankan house in beautiful condition (like some along East Coast road), and you can keep it so, then I see no reason why a beautiful house in good condition would not appreciate, conservation status or otherwise. It will always be sought after by expatriates for example, and very few buyers would think of tearing it down to build an ugly modern house in its place.

There's only two things they're not making any more of. One is land. Two is old houses. Anyone can build a new house any time, but you can only find and restore old houses, you can't build them any more.

Whether the rarity is going to be worth more than potential plot ratio increases, I leave you to ponder.

i am not sure the relevance of location when considering the effect of conservation status. unless you are suggesting the impact of a conservation status depends on where the property is located... if that's what you are saying, how is it so?

if a building has historical, design and architectural merits, how does having a conservation status adds to those attributes? it just seems to me that without a conservation tag, the property would appeal to a wider audience and would therefore present a better value to its owner.

the only benefit i can think of is the protection against enforced acquisition for public use. that is, the peace of mind it will present to potential buyers that the merits of the building will be preserved and protected.

Edited November 10, 2007 by tomasulu

[waileong 0]

There are conservation shophouses in Geylang. They'll never appreciate as fast as other conservation properties simply because of the nature of their location.

[Aiky 0]

I'm not an expert by any means. Just sharing my 2 cents.

Apart from the considerations pointed out, conservation houses by definition possess some cultural, historical and aesthetic value. They are also rare, which means fixed supply at any time. Thus, the label in itself should serve as a mark (or advertisement, if you will!) of a property's appeal. The appeal is perhaps to a smaller group, usually more 'atas' or loaded folks who appreciate and willing to pay for conservation status properties. Ang mos in particular like the exotic and beauty of these old houses. I also do think more Singaporeans are coming round to appreciate the beauty and heritage of these old houses. I wld buy one if I had the means.

Location will always affect the price of any property, so one might tackle it as a separate consideration. In the case of conservation houses, I suppose location can serve a multiplier effect. Certain locations, eg the famous Emerald Hill, has ofcourse added glam and visibility given its proximity to orchard rd. Asking prices are astronomical, given the unique combination of location plus uniqueness.

The proof is always in the pudding, and asking prices of conservation houses in the market seem to exceed others.

I don't have the impression that our authorities are wildly designating conservation houses (I cld be wrong ofcourse), which means your property is in the select few To me, being rare can only mean good economics. Your priorities and mileage may differ.

Edited November 11, 2007 by Aiky

[Chunky Monkey 2]

I agree with Aiky. Well articulated. I couldn't have done better.

[tomasulu 2]

There are conservation shophouses in Geylang. They'll never appreciate as fast as other conservation properties simply because of the nature of their location.

i am trying to understand the impact of conservation status, ceteris paribus. say two identical shophouses in geylang, one is a conservation building...

Edited November 11, 2007 by tomasulu

[tomasulu 2]

I'm not an expert by any means. Just sharing my 2 cents.

Apart from the considerations pointed out, conservation houses by definition possess some cultural, historical and aesthetic value. They are also rare, which means fixed supply at any time. Thus, the label in itself should serve as a mark (or advertisement, if you will!) of a property's appeal. The appeal is perhaps to a smaller group, usually more 'atas' or loaded folks who appreciate and willing to pay for conservation status properties. Ang mos in particular like the exotic and beauty of these old houses. I also do think more Singaporeans are coming round to appreciate the beauty and heritage of these old houses. I wld buy one if I had the means.

Location will always affect the price of any property, so one might tackle it as a separate consideration. In the case of conservation houses, I suppose location can serve a multiplier effect. Certain locations, eg the famous Emerald Hill, has ofcourse added glam and visibility given its proximity to orchard rd. Asking prices are astronomical, given the unique combination of location plus uniqueness.

The proof is always in the pudding, and asking prices of conservation houses in the market seem to exceed others.

I don't have the impression that our authorities are wildly designating conservation houses (I cld be wrong ofcourse), which means your property is in the select few To me, being rare can only mean good economics. Your priorities and mileage may differ.

thanks, i guess it makes sense that the conservation cachet would appeal to some. i just hope it would more than make up for the ley-chey factor that will put off others.

Edited November 11, 2007 by tomasulu

[BlueFly 0]

thanks, i guess it makes sense that the conservation cachet would appeal to some. i just hope it would more than make up for the ley-chey factor that will put off others.

Saw this msg too late, i guess, hence my post may be irrelevant.

but can't help to point out that conservation on the property puts a cap on the potential value of the land.

Those who declare that conservation creates n preserves value cite those peranakan houses at Emerald Hill ($5 mio apiece) as an example. But that example is flawed -- have you considered what those properties would fetch if they were not under conservation, given the premium location and Orchard Rd location?? It's a double whammy loss, if I may say!

The value of a property is usually in its location and land, and businesses are willing to pay ever higher prices consistent with the potential return of that location (which includes future zoning and plot ratio upgrade by the govt). Hence when I buy a FH shophouse, for example, I will pass if that property is under conservation status, and go for another across the road that is not under conservation.

After all, if my shop business fails say after 15 yrs at that freehold location, i am pretty sure my land will help me get back my original investment plus a neat capital gain.

So the property status gives me something to fall-back on.

You only hv to think of the Farrer Court owners who got abt $2 mio each from their HDB/HUDB flats. My congrats to them. Capitaland was willing to pay that much because they hv done their calculations and estimated they will make a decent profit when that Farrer Court land is rebuilt and sold in future.

Twenty yrs time, when the popn is projected to be 6.5 mio, one can imagine what land values wld be like. Conservation property prices wld go up too but the rise will be limited by the expected return businesses can get from that location whereas the non-conserved 2-storey FH shophouse across the road will fetch maybe 10 times the value of the conservation house, because maybe a shrewd developer found he cld build a 30-storey building on that land given the high plot ratio, pay that price, and still get a decent return on his investment. Owners there will hv a strong incentive to cash in on a collective sale, only if all agree as that area is not strata-titled. And why not, if i could get $10 mio for my property when i paid only say $1-2 mio now?

Yes, the conservation house in theory should be worth $10 mio too -- given same land size and location as the one across the road -- but which business cld justify that cost as returns wld not cover operating / interest cost. Hence conservation puts a cap on the potential mkt value of the property.

by the same token, if i hv $3 mio to invest, i wld put that money in a condo apt at The Sail or Marina Bay Residence rather than a fh SD at Seletar or East Coast, altho emotionally I wld lean towards the fh SD, but money-wise, i wld put my money on the Sail.

that's because there's no more space for another condo at the bay, and those sites have a White Site status, meaning those 2 sites cld be redeveloped into hotels, shops or office buildings, adding further to its potential value.

In short, when u buy or invest, much safer to consider not the current price but the future potential value of the site/location.

self-interest thus dictates i wld not agree to hv my property gazetted for conservation status. Sure, i support conservation -- as long as it is other peoples' properties, hehehe.

p.s

btw, can you imagine what another 2 mio increase in population (from 4.5 mio currently) translates to?

assuming a condo project size is 200 units, 2 mio ppl more means another 10,000 new condo projects!!! already 50 or so new condo projects to meet demand over the last 2-3 yrs have created so much rise in prices, i can't imagine what the 2 mio pop increase and new demand will do to land and condo prices.

sure, not all will live in private condos, say only 10% of the 2 mio increase. That still translates to 2,000 new condos projects (note the distinction, not 200 apt units but condo developments) and where to get the land? Thus if the economy remains buoyant and the property mkt continues to grow, prices can only go up, sad to say.

so thank you, but give me only non-conserved properties please, probably in the guillermard/geylang/katong/rochor/jln besar area, preferably fh too !

Edited May 20, 2008 by BlueFly

[waileong 0]

While you have made some astute observations, I disagree that the value of a property depends on the location and land.

In your examples, you have cited potential appreciation when developers obtain permission for increased plot ratio or alternative uses for the land.

However, plot ratios cannot increase indefinitely, and zoning basically depends on the whims of the govt of the day, ie if the govt wants to create a financial hub in Jurong, and you happen to own land in Jurong, then lucky you.

The current batch of enbloc millionaires are lucky because they bought properties at a time when land was cheap and plentiful, so they had big apartments in low-rise condos which developers find economic to redevelop into apartments half the size that sell for twice the price.

But if you buy into one of the teeny weeny 1,000 sf condos today at $1000 psf, what makes you think that in 20 years time someone will want to pay double what you paid to live in a 500 sf condo? There's a limit to how small a condo can go for people to buy.

In other words, I think that holding out for potential appreciation based on some developer possibly acquiring your teeny weeny condo in future is not a good bet.

Yes, I know that condos easily top 60 stories in Hong Kong, so there is still the possibility that someone may acquire your 30-storey condo to rebuild a 60-storey one, without making the individual condos smaller. But I think the appreciation from that is much lesser than what our parents' generation are getting from their old condos.

On the other hand, a conservation property, esp. ones in good condition like Emerald Hill peranakan houses, will always be in high demand. You know how much GCB's go for, how much they've appreciated over the years. I believe good quality conservation properties will appreciate faster, in percentage terms, taking location and size into account of course.

The reason is simply their rarity and authenticity.

Anyone with money can buy land in Nassim area and build a bungalow. But one cannot build another authentic antique Peranakan house. And antiques, as one knows, appreciate in value as they increase in rarity.

So over time, the value of a well-preserved Peranakan house is going to be higher and higher as their numbers get less and less.