Prices of leasehold landed properties rarely go up?

“From my observation, the worst property investment is buying 99 year leasehold Landed Property as the value rarely goes up. In fact the value might go down if the property is over 15 years old.”

In April 2007, I happened to find a 99-year leasehold terrace house in a neighborhood district.

Since it’s for own stay, instead of my usual rule of buying at 15% discount, it was bought at the market price of $735,000. I thought it’s a reasonable price for a 7-year-old house with more than 3,000 sq ft in floor area. (Now, help me understand why an HDB’s DBSS 5-room flat can market at $880,000!)

I just checked the last transacted price. It is now close to $1.6 million. That’s more than 115% increase in just 4 years!

Now this collection of terrace houses is so popular that I have property agents calling every other night to ask for any intention to sell.

I don’t know how this housing loan ‘expert’ did his observation. Or should I count this good luck or the reward of my diligent research?

The morale of this story is: there is no such thing as ‘conventional wisdom’. It’s only people’s believes that are getting in the way of their imaginations.

Jim Rogers said in his book A Gift to My Children: A Father’s Lessons for Life and Investing,

Most perceived wisdom is a misconception and wildly inaccurate.

Rely on your own intelligence … Do not let others do your thinking for you.

During my search for landed residential properties in 2006 and 2007, I came across some 99-leasehold houses with 20 to 40 years left in their lease. Well-situated at the heart of Bedok and Upper Bukit Timah, they were only selling from $200,000 to $400,000 (lower than the price of HDB 3-room flats).

Bank mortgages were approved on a case-by-case basis.

Many were bought by retirees to enjoy gardening in their retirement . Some investors renovated these terrace or semi-detached houses, and rented them to expatriates from a few thousand to over $10,000 per month.

Do you see the selling points of such properties here? People looking for value-for-money landed living get what they want while niche investors enjoy their returns.

The prices of these short-lease houses have also increased since then.

Seeing things not for what they are but for what they might be creates opportunities. (Carolyn Kepcher, Carolyn 101: Business Lessons from The Apprentice’s Straight Shooter)

Foreigners see 99-year a very long and reasonable tenure. In Hong Kong, 60-year leasehold private properties are the common norm while properties in China usually come with a 70-year lease.

Afterall, how many of us can live up to 99 years? And you won’t start buying until you are close to 30, right?

How long will you stay in the same flat? 20 years? 30 years?

Afterall, you definitely need a major upgrade for a property over 30 years, regardless of its tenure, isn’t it?