Freehold Vs. 99-Years Leasehold Properties
The common understanding when it come to the term – Freehold vs 99-years Leasehold is that freehold properties are always the best option as owners can hold on to it “Forever”. For 99-years leasehold properties, it will revert to the state upon the expiry of its lease. Therefore, it may seem like a no-brainer to opt for freehold properties. But, are freehold properties always the best choice? Let us find out…
“Owning the Land Forever”
Firstly, for any properties in Singapore, there is a provision that allow the government to reclaim your land for developmental purposes. The fact that your land is freehold is not going to save it. Therefore, there is no way of saying that you can hold on to your property “forever”, the government has the final say.
“Not Subjected to En-bloc”
On the other hand, especially for freehold condominiums, there is also a possibility of En-bloc development. If a developer decided for an En-bloc attempt and the other residence agreed to it, then you are still going to be moving out.
“Appreciation is Higher, Depreciation is Slower”
This is not entirely true. As a general guide, a leasehold property starts to show a greater depreciation at 21 years of age. However, before this point, a leasehold property could even depreciate slower as compared to its leasehold counterparts! Let us look at this chart:
Looking at this chart, we can see that leasehold condominiums have appreciated by an impressive 60% over the past decade. While a freehold condominium only appreciated by 30%. This is mainly due to freehold properties being sold at a premium of 10% – 15%, which can be more challenging to outperform its leasehold counterpart.
“Higher Market Values”
While this is true, it may be subjective as well. As mentioned earlier, freehold properties are usually priced 10% – 15% higher than its leasehold counterpart, which would make sense that it possesses a higher market value. Therefore, it may be an unfair comparison as the initial value was already higher. In fact, the market values of any property is highly dependent on it’s location! For example, a Leasehold property that have about 80 years of its tenure left, located in the prime area (Orchard) would probably fetch a higher market value compared to a newly built Freehold property located somewhere further (Tampines).
On the other hand, the current market condition plays a part as well. For example, during the recession in the early 2000s caused by SARS and the Dot-Com Bubble, both the freehold and leasehold properties were depressed, and property price was at an all-time-low! While in 2013, when Singapore property prices was at its peak, both freehold and leasehold properties saw its appreciation as well! Therefore, the value of your property is largely determined by its location as well as the market condition, not so much of its tenure.
So… which is the better choice?
To be honest, there are no right answer to this question. It all depends on your personal requirements as well.
Let me list out a few pointers of freehold and leasehold properties, so you can be your own judge.
Now that you have a clearer picture of both freehold and leasehold properties, you should have a clear answer in your mind. If not, just ask yourself what it is you are looking for. If what you are seeking is to house your future generation, do bear in mind that many young people prefer to move out after marriage and do not usually stay with their parents. You might also want to have a change of scene 20 years from now. Also, the premium of 10% – 15% which you are paying for a freehold property can impact affordability.
All in all, the debate for freehold vs leasehold will never end. There is little difference between the two. After doing a detailed research, we would have realised that tenure is not the sole determining factor when it comes price, but rather the location and market condition.