'Open space' loophole to be plugged
By Rachel Chang, The Straits Times, 8 Jan 2013
NATIONAL Development Minister Khaw Boon Wan yesterday vowed to plug a loophole that allows property developers to sell free spaces for profit.
The move comes amid public unhappiness over super-sized, super-priced executive condominium (EC) units with large roof terraces.
Currently, developers are allowed to use outdoor spaces as private or communal roof terraces, and do not have to pay development charges on them.
This policy is intended to encourage them to build communal spaces for residents and promote greenery, said Mr Khaw in a blog post.
However, some developers have been packaging "outdoor space open to the sky" as part of swanky units in the form of rooftop terraces and private enclosed spaces, he noted. By including this as part of penthouse units instead of building communal outdoor space, developers are effectively "selling off free space to make an additional profit for themselves", he said. He has asked the Urban Redevelopment Authority (URA) to "review this policy and have it fixed".
Recently, EC project CityLife @Tampines sold a 4,349 sq ft "presidential" penthouse for $2.05 million. It includes a 1,600 sq ft rooftop terrace, for which the developers paid no development charge. ECs are a public-private housing hybrid meant for the "sandwiched class" - those over the income ceiling for an HDB flat who cannot afford private property. They come with subsidies and an income ceiling of $12,000.
In a blog headlined "Who gets short-changed?", Mr Khaw acknowledged public indignation at million-dollar EC units as understandable, as they were "deviations" from what was intended.
Initially, he said, he was baffled that developers would "short-change" themselves in selling such units: "Why not sell more normal-sized EC units at a higher price per sq ft (psf) and make more profit? The space for one super penthouse, for example, can be used to build two or three normal-sized EC units."
CityLife's penthouse was $470 psf, compared with $770 psf on average for the whole project.
He then realised it was because they could profit from the free outdoor space. While this is "not improper under current rules", he lamented the way it shrank communal space for all residents.
Buyers may also be disappointed later that the outdoor space they have paid for cannot be covered up or enclosed, he said.
A URA spokesman confirmed that the new guidelines on private roof terraces and enclosed spaces will apply to all non-landed private developments, not just ECs. She did not say when the new rules could be expected.
Developers and analysts were taken aback. "Because of one or two penthouses, the rules will be changed to restrict the creativity of all property developments," said boutique developer EL Development's managing director Lim Yew Soon. "There are buyers who want these rooftop spaces for small gardens or for jacuzzis. You cannot just throw away the whole basket because of one bad egg."
SLP International executive director of research and consultancy Nicholas Mak said that whether developers will stop the practice of including large roof terraces in their units depends on URA also restricting the size of outdoor space allowed per unit.
Slapping a charge on outdoor space without restricting the size allowed may just make developers boost prices to maintain their profit margins, he noted.
EC penthouse buyer Jaime Chong, 33, whose 2,013 sq ft unit in the Topiary at Fernvale will come with a 301 sq ft roof terrace, said she did not mind paying for space the developer got for free, as it could be made liveable by installing a retractable awning.
"My agent says they usually allow the removable type, and we can make it into a cosy corner."
Keeping sight of purpose of ECs
Editorial, The Straits Times, 8 Jan 2013
Editorial, The Straits Times, 8 Jan 2013
PUBLIC dissatisfaction is mounting over the direction the executive condominium (EC) option in state housing has taken. The purpose of meeting a specific middle-class need has, in some cases, morphed into commercial objectives that foment market distortions.
One school of thought contends that initiatives over the decades - privatised HUDC flats and ECs; and the Design, Build and Sell Scheme - have "adulterated" the intent of public housing and pushed up prices in both state and private sectors. Regardless whether this assertion can be supported or not, price inflation is a matter of general concern and needs to be closely monitored. While a growing store of value in property is good for citizens, it would be a concern to first-time home buyers if it starts to race away from relative ratios in income levels and mortgage years that typically cover entire working lives.
Public housing allows lower-income and middle-income workers to have access to affordable homes. State subsidies are justified on this basis. However, when prices at the top end hit $2 million, this purpose is subverted and resentment is bound to arise. This is fed by the perception that "millionaire" beneficiaries do not need a helping hand - buyers who are clearly able to afford private property and developers who use oversized units and expensive frills as a marketing strategy.
Suggestions that have come from concerned citizens include capping the unit size in ECs and requiring a minimum number of flats to be built in a project. However, as National Development Minister Khaw Boon Wan has pointed out, developers of super-sized units are remaining within current Urban Redevelopment Authority (URA) rules.
They do this by tapping the "free space" given to encourage the building of sky terraces for common use. But when for marketing reasons, this space is increasingly carved out for selected units "with larger private roof terraces and 'private enclosed space', communal space in the development that benefits all residents will correspondingly shrink", as Mr Khaw observed. His direction to URA to review this practice is a timely one.
EC penthouses and "skysuites" that put many suburban private developments in the shade might represent a small portion of the output, but they can create a host of problems if left untended.
The eligibility for EC units - including a monthly household income ceiling - has been tightly framed. But those who can comfortably afford $2 million will raise questions of financial parity among applicants that can prove troublesome to tackle. Far better for EC developers to stick to the fundamental purpose of building affordable and not sumptuous homes.
Developers fear URA will charge for outdoor space
By Rachel Chang And Esther Teo, The Straits Times, 9 Jan 2013
By Rachel Chang And Esther Teo, The Straits Times, 9 Jan 2013
THE Government's intention to fix a loophole that allows property developers to sell off free outdoor open spaces for profit has got them worried.
They fear the Urban Redevelopment Authority (URA) will now slap a charge on such spaces if they are sold as private roof terraces or ground-level private enclosed spaces.
Instead, they hope the URA review will - at most - restrict the size of such areas.
After all, they argue, it was overly big roof terraces in subsidised executive condominiums (ECs) that aroused public indignation, and not roof terraces per se, which are popular with buyers and a fixture of penthouse units.
"Developers have been operating like this for so long. To suddenly make us pay a charge on outdoor space would be chaos," Mr Teo Hong Lim, executive chairman of Roxy-Pacific Holdings, said yesterday.
Mr Terence Teo, investment manager at developer Tong Eng Brothers, said a levy for outdoor space would mean a hefty increase in costs for developers. This could cause them to exclude roof terraces in their penthouse units altogether.
"I wouldn't want it to be a case where developers end up taking away such spaces completely in the design of units because of the charge, as people enjoy them," he said.
In a blog post on Monday, National Development Minister Khaw Boon Wan noted unhappiness over huge EC units.
While he did not name developments, a 4,349 sq ft EC penthouse at CityLife@Tampines featuring a 1,600 sq ft roof terrace was recently sold for $2.05 million.
He noted that at present, "outdoors space open to the sky" is not counted as part of a project's gross floor area. This is to encourage developers to build communal open spaces for residents and encourage greenery.
But developers have been packaging this space into units and this has become an easy way for them to increase the saleable area of an apartment at low cost.
Mr Khaw has asked the URA to "review this policy and have it fixed".
The URA declined to say when the results of its policy review would be ready, nor whether the change would involve restricting the size of roof terraces, or charging developers for outdoor space.
Analysts said that if private roof terraces were to be taxed and at the same charges as, say, balcony space currently is, the CityLife@Tampines presidential penthouse would cost about $470,000 more for the developer. But they added that any charge was likely to be less than that levied on balcony space, as that is covered, and lease terms of ECs are 99 years, while these charges apply to freehold private apartments.
Developers said that in the past few months, URA has discouraged them from submitting plans which have large roof terraces or private enclosed spaces.
But they are concerned that the review may result in their having to pay for outdoor space.
"To be fair to most developers, we do not price the roof terrace at the same price per sq ft (psf) as indoor areas," said one developer, who declined to be named. "So, it's not fair to charge us for the outdoor space."
While analysts said that new restrictions in whatever form might mean that a 1,600 sq ft roof terrace becomes a thing of the past, they do not see private roof terraces going the way of planter boxes or bay windows.
In 2009, in response to developers including big planter boxes or bay windows to increase saleable space, the Government included them as part of the project's allowable gross floor area. They are now rarely seen in new developments.
Roof terraces, meanwhile, remain popular with buyers like engineer Ram Ramesh, 45. He recently bought a private penthouse in Pasir Ris that comes with a 500 sq ft roof terrace.
"It gives me extra space that opens up to the sky and provides fresh air," he said.
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