LEASEHOLD VALUATION IN SINGAPORE

Abstract

The subject of valuation of leasehold properties has received much attention over the past years in the United Kingdom. Studies have shown that the conventional leasehold valuation methods are flawed with unacceptable conceptual and theoretical weaknesses, and have concluded that the Dual-Rate and the Single-Rate conventional valuation methods should be abandoned except in very limited circumstances. The future will see more frequent use of modern approaches like the Real Value and the Discounted Cash Flow Approach to replace the traditional techniques. These modern approaches are conceptually and mathematically more superior. The local scene, however, has not seen much progress in the area of leasehold valuations. It is the aim of this dissertation to review the current local practice and to recommend appropriate treatment of valuing leasehold properties in an era of rapidly changing circumstances. In the analysis, it is found that local valuers are still entrenched in the use of Market Comparison Approach for valuing leasehold properties. Such practice should be discouraged as it is difficult to establish comparability especially amongst commercial properties in the light of complex lease-rollover and drastic variations in market expectations. Instead, the modern approaches should be adopted, but with appropriate adaptions to account for the differences in market practices between the U.K. and Singapore. If this is to happen, more indepth studies into the various inputs required for the valuation model must be done to ensure reliable results.