(12-02-2011, 06:55 AM)Jon-san Wrote: Anyone here able to enlighten me, how do plot ratios affect enbloc prices and prospects for redevelopment? Also, what is considered to be a high plot ratio? If a piece of land has a plot ratio of 3.0 and it's first development on that land is not fully utilising the full plot ratio, will having a higher plot ratio increase the enbloc sale price of that land? Thanks in advance!
Plot ratios affect what is known as gross floor area. Gross floor area refers to how much floor area the developer can build up within the piece of land. Net lettable area will be a sub-set of gross floor area.
Plot ratios are decided by the government, through the URA Master Plan, which is revised every 5 years. The Master Plan decides what plot ratio each piece of land (1, 2, 2.4, 3, 10 etc.) and what use it can be for (industrial, worship, residential etc.). You can check it here:
http://www.ura.gov.sg/mp08/map.jsf?goToRegion=SIN
Let's look at an example.
Assuming a condo was built 20 years ago. It might have been built on a piece of land that is 10,000 sqft in size, with plot ratio 2. So the gross floor area is 2 X 10,000 = 20,000 sqft. Assuming the developer did not build any other facilities, like swimming pools etc, he can have possibly 20,000 sq ft of lettable area, area that he actually sells.
20 years pass and the government decides to revise the plot ratio of that piece of land to 3. So now, that piece of land is worth more and a new developer can come in, buy it en bloc-style, and redevelop it to a gross floor area of 30,000 sq ft, perhaps introducing more units, bigger units or more facilities etc.
So for the incumbent condo owners, the asset value increase would have come in 2 ways. One, the cyclical appreciation of residential real estate prices, and two, the upward revision of plot ratios.