This is one of the most common questions people ask when they buy private properties in Singapore.
Singaporeans, especially the older generations, have very strong preference in freehold properties, as compared to leasehold projects.
Their reasons are:
1) The value of freehold properties appreciates in the long-term while prices of leasehold properties drop once they age.
2) There is not much value of a leasehold property once the tenure is almost up.
3) You can’t borrow from the bank to finance an old leasehold property. Your next buyer will have the same problem when you sell it in the future.
4) Buy old freehold properties to wait for en bloc.
I don’t know whether you agree with the above. But I am not someone who likes to follow ‘conventional wisdom’.
As the saying goes, even a dead clock is right twice a day.
Rather than taking any folk’s advice, from my past experience in property investment, you can only find out the truth with two methods:
1) Finding every fact you can on your own; and
2) Seeking multiple perspectives on the same story.
And over the years, I’ve learned the following facts about freehold and leasehold:
1) Property prices rise during boom times and vice versa, regardless of their tenure.
When the market is good, whether the project is freehold or leasehold will be selling like hot cakes. This is especially true in a new launch. The psf price of a newly launched leasehold project can go higher than that of an old freehold project nearby.
Once the property ages, the value of both leasehold and freehold development depreciates if they lack maintenance.
During the bad times of 2002 to 2005, I personally viewed countless freehold projects selling at very depressed prices. They look rundown and all have difficulties finding buyers.
Who said old leasehold properties are 30 to 40% lower than the value of freehold properties in the same area?
I found that only three factors determine the value of properties: economy, location and upkeep of the development.
2) The return of leasehold properties is higher than freehold properties.
If you’re looking for good rental returns, always buy leasehold projects at good locations.
Tenants don’t care whether your flat is 99-year, 999-year or freehold. Their concerns are always location, ambience, resident profile, etc.
Leasehold means cheaper purchase price, lower down payment, less stamp duty, smaller monthly installment, etc. The ROI is thus much higher than freehold properties.
You can buy more properties if they’re leasehold. Or you can use the higher rental return generated by leasehold properties to buy your next purchase earlier.
Personally, I think freehold properties somehow mean: developers bought the land at higher prices from the government, so they also expect you to pay higher psf to cover their cost!
That’s why all the properties I bought are all with 99-year leasehold!
Enlightening ..
Thanks!
Thanks!
What do you think about LH on FH land? Is it worth it to buy?
Depending on price, location and quality of project. Doesn’t matter whether it’s leasehold, freehold or leasehold on freehold land.
Depending on price, location and quality of project. Doesn’t matter whether it’s leasehold, freehold or leasehold on freehold land.
for the Shore residences case, After 30 years later, the condo is already old, the lease is 70 years left. 1. How about the price of the shore at that time compare to other condo FH for example Seaview.Because at that time, owner difficult to sell that condo… bank dont want to give loan.
2. And what will owner do if FEO dont want to top up the lease period or FEO reject other developer to enbloc that condo? all the trump card is hel by FEO. they can enbloc ( maybe with cheap price ?) or not act until the lease periode over and the land will back to them.
Thanks
Nobody can predict what will happen. But I think Far East will keep some unsold units for rent for the next 10 to 15 years or longer. As soon as they are the owner with the most units, they will have majority voting power for any decision concerning upgrade, enbloc, etc.
Nobody can predict what will happen. But I think Far East will keep some unsold units for rent for the next 10 to 15 years or longer. As soon as they are the owner with the most units, they will have majority voting power for any decision concerning upgrade, enbloc, etc.
Thank u Sir….
You’re most welcome : )
very one sided opinion rather than a balance view. Dangerous thought that you have which may throughly mislead the uninitiated. For those whom are inexperience in purchasing a private property, you will really need to weigh the pro’s and con’s of leasehold and freehold, its not that simple.
very one sided opinion rather than a balance view. Dangerous thought that you have which may throughly mislead the uninitiated. For those whom are inexperience in purchasing a private property, you will really need to weigh the pro’s and con’s of leasehold and freehold, its not that simple.
You’re right that my views are different from those you find in the papers or publications. I don’t give “safe” advice because I’m only interested in winning formula of property investment.
But I’ve personally practised what I preached in my blog. After investing for a few years, I’m lucky to achieve an average of 92% profit in 4 properties and 118% paper profit in another one.
I know this is trivial in the eyes of a pro in this field. In the next phase (when it’s the right time to buy again), I hope I’ve learned more and can reach a higher target this time.
Kindly enlighten me any great idea from your experience.
Hi, is the logic the same for commercial/industrial property? and is the demanad greater for B1 or B2 cat for industrial property? Been thinking of getting a unit for own use but in case want to rent out future. Please enlighten, Thanks.
Sorry I am not an expert in commercial properties and may not be the best person to answer this question. Some shophouses and industriall buildings come with 30-year lease. If the property has less than 15 years in the lease, you (or your next buyer) may have difficulty getting financing from the bank.
Hi Propertysoul,
What is the oldest leashold private property u will consider investing, assuming a 99 year lease?
Will a property that TOP before 2000 be appealing?
For investment, the lease and TOP don’t matter much to me. My tebants don’t care about these as well. It’s the location, maintenance and resident profile that are most important.